Samwise Quick Reference Handbook
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Has there been a market where we have traded sideways on 40-60 RSI on the hourly for a few weeks? my bet is on the market not moving significantly until end of march or so with a lot of cash in the side.
If it has happened, it will have occured at a time when I wasn’t paying attention. Maybe during the melt-up period.
Hourly is a very very short-term time-frame. Just to give you a sense, from a timing perspective, in the overwhelming majority of past cases, the NASDAQ-100 rebound will have already started. We’re talking 1-2 day time-frame here. I doubt the QQQ will trade sideways for weeks. Its volatility profile is too high for that anyways.
Now could it continue to trade in a wide range from $540 down to $500 or something, sure. That can happen. But in terms of an oversold bounce not occurring and the stock just trading along the oversold line, I personally haven’t seen it.
I’ve seen it in the other direction where the QQQ will remain overbought for several weeks on the hourly. But not oversold.
What’s the plan for Stark today ?
Still evaluating. We may take a 5% position in Tesla in both Stark and Frey.
It might be a good opportunity for nice long swing. But I don’t see TSLA as a position the long term like several years, perhaps only for the term of the swing.
P.S. that why I question the position for the long term portfolio as, in this perspective, this would not fit all the rules.
You’re right. So if we added a Tesla to our long-term portfolios, we would probably swing trade it. But when I say swing trade, I mean over several months or even a year. There are certainly times when Tesla needs to be sold given how green it is.
For example, the last time I wanted to buy Tesla, it was at 200 to share. It then rally to 470 and like two months.
We would’ve probably closed that position closer to around 420. Up 100% on the stock we probably close it.
So it will be kind of a mix.
Good, I like this.
TSLA is nearing two gaps at 275-255 and then 239-218.
Good morning Sam.. are you seeing broader market indicators suggesting a 2022esque sadistic downturn into recession?
I think recession talk always comes up in every sell-off and fear of a bear market always enters the discussion. I don’t see any evidence of that in this sell-off so far. It looks normal at this point. Probably still on the smaller side from a correction point of view. Definitely nowhere near the type of action we’d see in a bear market.
I cut loss from NVDA Apr call option yesterday. Glad I did. How’s NVDA today after earning Sam ?
Nvidia is set up to run at any minute now for the near-term. Second instance of oversold conditions as we outlined in the post.
Nvidia is lower in sympathy with the market.
Wow, I really don’t know what will break NVDA out of its 120 – 150 cycles. It has been doing this for the last 9 months. What’s your stand on this ?
we need the market to start rallying again. Here’s what happened to Nvidia. It surged higher than it should have in June and sustained a serious correction from $140 down to $90 a share. That’s a massive sell-off. While the QQq made new highs after the August correction, NVDA merely returned to its highs. But then the QQQ stalled in December and has been trading sideways. Once that ends and we begin a new rally, Nvidia will be in a better environment which will open up the potential for a breakout run.
It needs a positive environment.
what’s your take on the tariffs as an impact to NVDA?
Not concerned. No one who needs Nvidia’s chipset will be deterred from buying them due to tariffs. You got to think about Nvidia’s core customers, their needs and general demand.
There might be a marginal impact on the edges and some demand might be delayed. At worst, I can see *SOME* customs on the margins delaying purchases. But core customers aren’t going to just stop buying chipsets and discontinue operations due to tariffs.
Just like when Apple had shifted toward more of a consumer staples company. For so long, Apple was beaten to death in any recession discussions because a lot of very misinformed market participants believed that people would cease buying iPhones in a recession. Studies found that this is absolutely not the case. People view thier phones as an absolute necessity.
Sort of the same thing here but even stronger. The type of customer who buys Nvidia chipsets aren’t going to be deterred by tariffs.
Sam,
I know you launch main portfolios during corrections. I wanted to ask you. What are your cues that tell you hey this is the moment to launch a portfolio. And if you launched a portfolio during a correction that turned out to be the start of a bear market would the hedges you buy on a recovery rally/bounce be on par /sufficient with what we have been doing so far?
I agree that the market will always be bullish on the long term and like you mentioned everyone always panics during a sell off. I also think its important to understand the bear case.
Also was the visit to ATH enough in your view to get us out of this consolidation or does this sell off sort of invalidate that?
So this is a very complicated question that requires literally chapters of information to kind of fully answer.
But I’ll do the best I can in a short note. So we generally don’t start buying in a new portfolio until the NASDAQ 100 has fallen 10%. If you look at Stark and Frey for example, we bought positions in there at down 7% and we’re still sitting at 30% in cash. And that was a special circumstance we don’t normally do that.
Under normal circumstances, we need one of two things in order to be confident to buy. Either the NASDAQ 100 needs to reach over sold conditions on the daily chart or it needs to be down at least 10%. And if it’s down 10%, we generally wait for over sold on top of that.
This is very important because if you buy at down 10%, there’s a very high probability that the NASDAQ 100 will bounce 5% before it ever continues lower in a bear market.
Now it’s important to note that not every correction require an immediate hedge. Corrections that occur before the market has returned back to its all-time highs after a previous bear market, can wait until you have seen an intermediate term rally before hedging.
That is because in most markets, we generally see the market rise at least 50% above its prior all-time highs before sustaining another bear market.
So in the early parts of a new bull cycle, we wait to hedge until after a full blown intermediate term rally. This ensures that we are very well protected, and that we are able to produce a big profit.
However, in situations like we’re in today, where the QQQ has now made New all-time highs that are roughly 25% above the previous bull market’s highs, that’s where we will want to start hedging on the overall bounce of a correction.
So for example, if we were to launch a new portfolio during this sell off, we would do so once the QQQ had reached a 30-RSI, with the $VIX over bought, with the New York McClean oscillator at -100 or worse and with the QQQ down 10%.
Under those circumstances, bear market or not, the markets is going to rebound big time first. Go look at the financial crisis or the Covid crash or the 2022 bear market and that holds true.
It will be during that 5 to 6% rebound that we will put on hedges. And that’s only during a correction where we feel the risk is high for a bear market.
Chapter 5 covers a lot of these issues. I ended up putting a stop to content because I’ve been spending all of my effort on development. But now the development is pretty much concluding here. I’m gonna start focusing back my attention onto content. So I will finish up chapter 5 that’s where I left off.
But there’s already a lot of content that speaks to this issue in chapter 5.
I had to use Siri for this because I’m away from the desk at the moment. So there might be a bunch of typos in this comment. Please forgive me.
When I get back, I will answer the other elements of your question.
I respect the hustle and effort you put into your answers Sam!
What’s your take on TSLA ? Does it continue to go down because of the general market ?
Yes. And right now it’s actually performing better than it normally would. The QQQ is down 2% and TSLA is down 2.76%. Normally, Tesla would be down way way more than that with QQQ down 2%. So we may be nearing the end of it.
you might not know this but you sent an earlier notification to sell the QQQ positions, which was sort of confusing. is the amazon alert valid or no?
I’m sorry which alert? Amazon? So we sold positions yesterday. Not today. I think Android alerts are coming in really really late. We’ve sold nothing today nor do we plan to sell anything today at all. today we’re buying assets.
ok gotcha thanks
these android delays are making me feel bullish for apple. Calls?
Chris, if you look at the notifications page on the app, it will list all of the current notifications in chronological order. you can visit that page at any time and you can see precisely what was sent and when.
So the last time we closed/sold a position was yesterday at 11:58 AM EST. we close out HALF of our QQQ $540-$550 call-spread in both Targaryen & Baratheon at $3.80. we just bought back both positions here at $2.50. So we saved $1.30 on each.
IF you’re confused or if there’s a delayed push notification, just look at the notification page on the app. It will list it all in chronological order by date and time.
What is the new total of QQQ spreads that holds Baratheon and Targaryan, respectively?
We returned to 10 and 5 respectively. So we originally at full allocation, had 10 contracts in baratheon and then reduced to 5. In targaryen, we had 5 and reduced to 2. So we reduced by 50% in baratheon and 60% in targaryen. we bought back those positions $1.30 cheaper.
By trading those positions, we essentially produced $650 in profits in Baratheon and $390 in profits in Targaryen. Now consider this. We’re down about $730 in Targaryen on our Tesla trade (offset $390 of that with the QQQ trade around). We’re down about $1,000 on Tesla in Baratheon and off-set $650 of that b making those QQQ revolving trades.
That’s why they’re so critically important.
Because our portfolio is now essentially long down near $508 on the QQQ and at around $300 on Tesla.
Sam, for those scaling into a position just now what do you think is the lowest we could go either on this leg or on future legs down before we see a bounces (bearish or bullish)
I meant on the qqq or nvda and I’m wondering what the lowest hourly RSI you’ve seen is just curious.
also wondering
We’ve seen some dramatically low RSI’s. But in the end when that happens, we just get a massive snapback rally. Like open up a chart of the QQQ and look at the 20-RSi set-ups. In 80-90% it’s immediate. It’s an easy trade.
But in like that 10-15-20% of cases, it may take a while for the QQQ to get going. when it does, it’s typically off to the races big time.
This setup is looking juicy, thank you for helping with scaling in and out
Thank you for pointing out the link to chapter 5.3 for market bottom. if it takes longer to fully bottom intermediate term are we continuing with may expiry or could we extend that potentially?
So those are just too totally different time frames right? Because we’re so overextended on the hourly we are due a bounce. I cannot imagine any scenario where we don’t see a huge rebound between tomorrow and next week.
Corrections aren’t just one legged things. We get a big down leg ,a rebound, a second big down leg maybe another rebound and maybe a final third down leg. It doesn’t just go straight down in one distinct line
From an hourly perspective, we are on the outside boundaries in terms of timing.
We’ve seen near-term rallies delayed before of course. This isn’t anything special. But when there is a delay, it’s not by these large margin of weeks.
We’re going to see a big rally that goes from low point to high point of like $15-$18 on the QQQ.
When that happens, we will reduce pretty significantly.
Then when the QQQ pushes down again, if it does push down again, we will buy different positions maybe June or something else.
The key is to be in a really good spot when the rally starts.
The whole reason I pointed out the intermediate term at all is because of the potential of the market bottoming completely given the 30 RSI.
Just by touching down near the 30 RSI, the QQQ has a 50% probability of having bottomed for the intermediate term.
That is only potentially relevant to our short term trade if the QQQ ends up going on a larger rally than we expect due to the intermediate indicators intersecting with the hourly.
But as of right now, what we’re doing is looking to reduce positions when the Q’s rebounds. We are waiting for a 2 to 3 day long big snapback rally where Tesla probably rebounds $30 or more.
And that can all occur within the context of a correction.
For example, we can see Tesla rebound to 325 peak and then sustain another sell off.
We could see the QQQ rebound to 520 peak and then fall 30 or 40 dollars in a two legged sell-off.
So far this is a one legged 40 point sell-off. We haven’t had an oversold bounce yet that would separate two different legs.
We’re not gonna be holding these position that long. Chances are we will reduce pretty heavily on the snap back and and wait for the full blown correction to unfold.
Once the Vix pushes overbought and the in NYMO goes to -100 then we’ll get fully invested and hold those positions for the intermediate term in our trading portfolios
We haven’t seen sub 33-rsi on the daily for the QQQ since August 5th and April 19th, in which the QQQ had an ensuing 20%+ rally over the following few months in each instance. Would you expect a similar rally given the current circumstances?
No. the last time was August. We’re talking daily time-frame here. Not hourly. Once we get a 30-RSI set-up on the daily chart, we tend to see a 10%+ rally. that’s what it’s good for. And not only that, what we’ve seen historically is that the QQQ Bottoms THE VERY DAY it reaches a 30-RSI in 50% of all past cases. If one were to buy the QQQ on the day it hits a 30-RSI, they make a profit in 100% of all past cases. The only exception were two instances in 2008 financial crisis.
https://sam-weiss.com/investing-basics/chapter-5-3/
when will the rally start? you mentioned it could start at any time the last couple of days?
So on a near-term time-frame, we’re in an atypical case. The QQQ is overshooting. But it doesn’t mean the snap-back rally goes away. It will happen and it will be substantial. In all corrections/bear markets/sell-off, we get big snap back rallies. Sometimes it’s a bit delayed. In most cases, it happens right when we reach oversold on the hourly. So it’s a bit delayed here, but it’s still going to happen. Once this oversold leg ends, we’re see a big snap back rally and then from there we ether see another leg lower or that’s that for the correction.
The new openAI model might just be a trigger in either direction
LOL lol! everything is down slightly and Berkshire is up 1%
Does the 5% sell-off today change your outlook in any way? I remember you saying the other day that we were just facing 1-2% sell-offs and a bear market would be like 4-6% sell-offs in a day. I know it’s just one day and that we’re expecting a rally of some sort, just wanted to check in and see at what point that changes. A simple answer would suffice.I understand the value of DCA in these scenarios. This is obviously more simple with common stock, but with options, it seems almost a little silly to be buying spreads that are more and more out of the money. If we weren’t needing to DCA, we’d be buying different spreads, so I’d like to know if there’s another reason aside from the obvious DCA position? Is it allocation and portfolio limitations with Targaryen and Baratheon that factor into that, or would this always be the strategy? If not the allocation, then it seems like you could also argue for buying the most optimal spread at the time and allowing the profits to even out in the long run?
So I’m happy with the spreads we’re buying across the board. With the QQQ, it’s 10% out of the money which is solid. The QQQ rebounds $20, those will go up massively from where they are today. Same for Tesla.
If we get to a point where I think it’s too far to produce a return, then we’ll go to a different spread. We did look today and I was still happier with the QQQ $540-$550 call-spread than with the $535-$545 fore example or $520-$535. I looked at a few. I was good with this one for sure.
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In terms of outlook, here’s what I’ll say about that. It’s very very easy to get drawn into the bearishness that surrounds a sell-off like this. But so far, this is still on the SMALL END of a correction. Not even a bear market. Still on the small end of a regular correction right?
And we see these things happen ALL the time and in 95% of the cases, the market bottoms and we skyrocket to new highs. 5% of the time we enter a bear market.
What we’ll do is play the 10% rally that’s coming and then assess whether we want to hold our positions or go to cash after that rebound.
Outlook wise it’s suspend judgement until the market takes additional steps. Like we won’t know that we’re in a bear market until we’re in a bear market.
That’s because there’s no identifiable features of a bear market sell-off that differs in any way than a bear market. The selling just accelerates and we get further legs lower.
But then we get rebounds. And the more oversold we are, the stronger those rebounds are. As I illustrated yesterday, you could have trade the entire 2022 bear market all the way to the lows with massive rebounds and rallies happening the entire time — the largest of which was 26%! The QQQ rebounded 26% one time from $260 up to $330 a share.
As the trading portfolio is concerned, we just ensure that we’re in position to produce a return each of those rebounds and to then be sufficiently in cash on each leg lower if that makes sense.
Like the actions we took yesterday are critical to ensuring that. We’ll continue to do that when needed.
Long-term portfolios, we need not do anything at all. The portfolios are hedged out to take on a bear market if it comes.
Outlook wise, I’m more or less in the “this is a standard correction” camp because that’s correct 95% of the time. Look at the 30-RSI table. That’s most all happening outside of a bear market and in a normal correction. In every single one of those instances, people out there were raising the bear market banner. In every single instance.
For now, until the market says otherwise, this is a standard correction.
Do you have any worry about TSLA trading contrarian to the QQQ (and rest of the market) and not significantly participating in the ensuing QQQ bounce / rebound? Like, market particpants staying out of TSLA for a little bit after the 40% drop?
Not really. Even if Tesla doesn’t participate in the rally, it’s going to have its own rally. It will just go its own way eventually.
I’ve been through this so many times so I’ve gotten a sense of what to expect
Whenever we’re in the middle of a sell off and the selling continues relentlessly, there is a feeling that it’s never going to end, but it always does.
If you look at Tesla, it has been on a down trend for a very long time. And this leg down has been very consistent with all of the previous legs that we’ve seen in this sell off from 470 that to where it is now.
Tesla has sold off about 200 points now. Each of the rebounds have been pretty explosive. Eventually, it’s gonna get to a point where it ultimately bottoms and then goes on like a 100-point run.
Right now we’re not in it for the hundred point run, we’re just in it for the short term bounce. What we will probably do is try to transition slow slowly toward June options so that we have a position when it does decide to go on a big run.
I think that Tesla will go on a pretty substantial rally when the market ultimately bottoms for the intermediate term.
But it could be a few weeks before we get to that point.
What we might very well do is this. When the QQQ has its first rebound passed the midpoint, we’ll probably unload 75% of our position. Then when we have an inevitable second leg lower, we may transition to June call spread. That’s probably how we’ll do it.
So why is a second leg lower inevitable? Is it that the correction (roughly 8% currently) hasn’t run its course yet?
So whenever you have a major leg down like we’ve seen, it’s rarely in isolation. Chance are after a rebound to the midline, there will be another leg lower. It could test the lows or make new lows. But there. should be some further selling after a big rebound.
Hey, Sam, I have been curious about utilizing QQQM as opposed to QQQ. What is your opinion on it? Would there be any pros or cons to using one over the other?
And that tags along with my question of leverage ETFs
Are there any major differences between like NVDL, NVDX, or NVDU if you use the same amount of capital? I haven’t found a good answer on this with my own research.
Thanks!
I’ve only researched the NVDL and found that it has performed really well. I don’t know much about the QQQM. I haven’t checked its tracking to the QQQ. They’re both by Invesco. So I assume it’s well capitalized and well managed. But I just don’t know as much about it.