Samwise Model Portfolios
The portfolios below are separated by launch dates. Each portfolio is entirely independent and has no bearing on any other model portfolio. We launch entirely new portfolios during each market correction as an illustrative tool for new subscribers who weren't present during...
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Hi Sam,
What are your thoughts on NVDA ($127 as of now)? It already went through a correction before the free fall triggered by the Fed. I was wondering if it could also present another opportunity for the Targaryan portfolio.
So we’re going to want to wait until the end of this correction to do any buying there. Nviida will be an opportunity as soon as the market bottoms out for sure.
Are you waiting for correction before Trump inauguration day ?
I’m trading leveraged ETFs when you make trades in the Baratheon portfolio because 10 000$ is too much for me to risk. Would it work if I buy at the same time you do? Or is it better to just wait for the bottom?
I’m thinking the idea is the same as options, buy when it’s low and sell on the bounce but just wanted to check with you..
So I can just say that making QQQ or leveraged ETF trades in general requires a lot less precision and it’s aways going performing better on timing as there is no time element. So in general, the underlying works as a trade.
The only exception would be in vertical calls. becuase in vertical calls, there are strategies where we do’t need the underlying to move up at all. It could just stay put and we make money.
But in open ended option plays, trading the underlying is the same general result but at a far lower leverage. So likely a lower return.
Could it be that the rebound was the move up from 512 to 521 on the qqq yesterday? Time wise im not sure if there is a way to execute a trade even if we want to.
No. It’s still oversold. The QQQ has to come way out of oversold territory up to around a 50-RSI. That’s where it will peak when it rebounds.
Sam,
Do you see QQQ drop further to $500? Trying to figure how to handle the Feb $500 call trade. tia
It’s possible we could get down there, but I think we’re more likely to see a rebound now. Things have gotten very over-extended to the downside. We’re at the half-way point of the correction. And with Christmas coming up next week, I think we rebound from here.
If we get down there, then we’re going to add to our position.
My thoughts too, thx, Sam????
Could it be possible we are in a 3-4% correction that is slightly exaggerated and that we see another leg up per our initial outlook followed by a correction later in Jan/Feb? Seems with the new admin there could be some positive sentiment going in
Yes. That is a distinct possibility. This pull-back ended up going for 5.5%. That’s only mildly past the 3-4% pull-back we normally see after a segment. Not a major difference per.
So it could be we’re on a final segment. But I don’t think that’s the most likely scenario right now. Most likely where we’re at is the market is rebounding off of extremely oversold conditions ahead of a second leg lower.
Rebound on inflation data at 8:30 am. Could it be a bull trap? You said there could be massive rebounds during a correction. Is this one of those?
There will be massive rebounds. Corrections seldom ever go in a straight line. When they do, it’s usually one and done kinda of like how the September correction went. Just one leg down and we start rallying again.
(@9:45) From its Dec 16 high to today’s opening low, QQQ is down -5.44%. This would classify this event as an ongoing correction more than a segment low, right ?
It’s a correction no matter what now. What constitutes a correction is 5%. Also you don’t get the $VIX up 70% in a non-correction situation with the dow down 6.5% and the SPY down 5%. So this is correction already.
I greatly prefer SPY than DIA, as there’s way more volume on its options.
Yeah its volume is better. But the Dow is just more oversold is the issue. The dow doesn’t reach oversold daily all that often and when it does, it’s typically up massively after that.
So we’re seeing a good rebound as of 11:00 am ET. Is the sense that this rebound will continue for a day or two and then we get another leg down? Apart from Christmas seasonality and the fact that we think there is a bit more to go in this correction percentage wise, why might that be the case?
Mid-line on the RSI. Generally, when we get this oversold, the SPY/DIA/QQQ will rebound to the mid-line on the RSI.
Understood, why wouldn’t it just keep going up from there?
It could. That’s one distinct possibility. But at a 5.5% correction, we probably. haven’t gone down far enough yet. That would be on the extreme low end of the spectrum especially for a high volatility rally that has lasted as long as this one has. Also, the selling we saw just two days ago was fairly aggressive. So while it could happen, I think we’re more likely to see a larger correction.
That means either retest of the highs or a straight second leg lower after this one ends.
We may sell at mid-line or create a spread by selling a covered call against it. We’ll have to see how the rebound unfolds.
What site do you use for your technical analysis? I know you’ve mentioned it once before.
I use thinkorswim for monitoring the market, but my numbers are always a little off from yours. For example, I have an RSI study on TOS (RSI 14, 70, 30, CLOSE, WILDERS, no) that currently says 48 for QQQ. Any idea how I could adjust this to be more in-line with what you’re seeing or do you think it best to switch?
http://www.stockcharts.com. they should pay me lol. It’s an excellent tool I’ve been subscribed to stock charts.com for at least 20 years. It’s fairly chart and worth it.
Might be worth looking into. With this site up and running they might consider making you an affiliate, maybe even giving you a personalized discount code or something for promotion.
I read your comment a closer over email. I caught something. So the reason the think or swim numbers are different likely has to do with time frame. The QQQ is at a 48-RSI on the daily timeframe. You have to make sure the RSI relates to the hourly time frame.
Okay, I’ll check the study settings. I do look at it on the hourly chart when I’m comparing and noticed that the RSI changes depending on the chart time frame I’m viewing, but there may be something I can change in the settings to make sure it’s centered around sixty minute data. Thanks for the follow-up.
Some platforms do hourly RSI from 9:00 – 9h59, 10:00 – 10:59 (my trading platform is like this), while others do 9:30 – 10:29, 10:30 – 11:29 (Yahoo Finance does this). Yahoo Finance for example was showing RSI=50.14 at 11:30, while your graph showed only 48.
Sam, I looked into this and there are two variables that may be different. If you happen to know or it’s not a bother to check, can you let me know:
What price does your RSI use to calculate? Mine defaults to the close price, but high, low, H+L/2, open, and several others are also options.
What average type does your RSI use? The one I chose is Wilders, but there are simpler options like Simple, Exponential, Weighted, etc.
(@11:43) The QQQ RSI is at 48. Should we auto execute a closing sell at 50.0 RSI ?
As the Baratheon portfolio is concerned, we’re going to remain long at the moment. The mid-line RSI is not a hard and fast rule. In fact, the 50-RSI thing is a necessary condition. It’s something that MUST occur before we even think about exiting. Now that has occurred, we have to consider the other factors.
Remember, in MOST cases, the QQQ goes from oversold to overbought. That’s the majority rule. Unforuatnely, in corrections that hasn’t been the case. The 50-RSI level has been the top point in corrections.
But here, the aggressiveness of the buying pressure and the overall circumstances with the Dow becoming oversold on the daily, the $VIX falling back under its b-band, Christmas next week and the $NYMO reaching -100, I think this rebound might go a little further.
We also haven’t reached the 50-retracement mark yet either. So we’re not at the sell point yet.
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That being said, if I couldn’t sit at my desk at all times ready to trade, I personally would just close out the trade in the Baratheon Portfolio with the QQQ up at $523.55. The option is at $35.28 mark which is just under our original target of $36-$39. That’s a 20% return in a day.
Those are the considerations.
Suppose we get a 2nd leg down, would you start the new portfolios? Or would the correction have to go a certain distance?
Once we feel like the correction is ending, that’s when we’d buy. So yeah our expectation is that we’re launching two new portofios during this correction period. We just need confidence that all of the indications for a bottom are in.
So once you confirm that a bottom is in, are you intending to make several trades on the same day or will this be a series of trades spread out over several days in case you didn’t get the bottom in the initial trade?
I just realized that if this marks the beginning of a correction, it shares similarities with the one in July, except for the potential second higher leg following the colossal sell-off. During the correction, there are days when the market takes the stairs up but uses the elevator to come down.
Hey Sam,
I’m relatively new to trading options. I’ve always simply chosen ATM strikes and expect that if the share price moves up, the contract price should go up. I was looking through the QQQ and NVDA options chains and I noticed something peculiar.
The NVDA Feb 21 140C contracts seemed to be trading at a lower value and were not moving as much even though the share price was quite up. It seems like something (not just theta) skewed the values of the contracts higher than I would expect. In the morning, the contract was valued at $8.10 when shares were about $132.60. In the afternoon, shares climbed and dropped, and when shares were at $133.80, the contracts were valued at the same price earlier in the day, $8.10!
Furthermore, I noticed the shares were up over 3%, meanwhile the 140Cs were up only 5% meanwhile other contracts near it, both above and below had higher gains.
Looking through the NVDA Feb 21 options chain after hours, the ask price for 130C and 131C are the same price, $13.90. This implies that one of the contracts are either over valued or under valued. I don’t think it was an issue about liquidity, there were a few thousand volume throughout the day. This makes me think that you could buy a contract that is under or over valued, or sell a contract that is under or over valued. Ideally we should buy an undervalued contract and sell an over valued contract, but I’m not sure if there’s anything we can do to control the price. My predicament is, if a contract we are holding is currently under priced, we should wait to sell til it calibrates back to “fair value” if we can, but what if the share price begins to fall in that moment? The contract price would drop even lower!
Here are my questions:
1. Do you know what causes this to happen and what we can do to avoid this?
2. How can we take advantage of situations like this if they occur?
3. Do you deliberately choose options that seem cheaper than they should be? If so, how do you determine that it’s actually cheaper?
Sam, you keep mentioning a 10% correction, but back on August 5th, you noted that QQQ was down 16% ($80) from its all-time high. If you believe there’s a possibility of a larger correction this time, would it typically exceed 10%? Could QQQ drop by $100 in this scenario? I also want to say that I was impressed by your analysis on August 5th and how you determined that QQQ had reached the bottom. Kudos!
If the bottom of the correction were to play out like today, we would have missed the timing since it was such a short window. In that event, would you still enter anyway once you confirmed an uptrend?
A lack of a Santa Claus Rally would be concerning not only from a seasonal perspective, but it would allow breadth divergences to deepen.
If the stock market cannot rectify recent breadth divergences in the next few weeks, it would suggest our concerns about a more difficult 2025 could come to fruition.
I personally would like him to make the trade even if the window is short, rather than try and wait for a better opportunity with a longer window for the subscribers, which might not happen.
We’ll make the trade quickly. With a broad range of trade notification including SMS/texting, I think we’re going to speed things up. I’ve moved far slower than what I typically do when just naturally trying and it does impact execution of the strategy. So we’ll need to move a lot faster. I’ll send trade watches a warnings, but sometimes we’ll have to quickly make trades. On Friday morning, we really should have purchase the SPY. Not the DIA as the bid/ask spread was way too wide on Friday morning. The DIA was the most oversold and hence has the lowest overall risk of further downside, but the SPY is a close second being at 36 on the daily.
Sam, have you looked into platforms like eToro or Zulutrade which allow your followers to copy your actions in real time? I think your subscribers can get their trades either auto executed or they need to manually approve the copied trades.
How confident are of a 2nd leg down as part of the correction?
Relatively high confidence. So technically speaking, we have reached a point where the correction could have already ended. But if that happens, this would be one of the lowest corrections in 15-years. The extreme low end of the curve is 5%. We eclipsed 5%.
But the times when we’ve had 5% corrections were either under very low volatility environments like during a melt-up rally or after a smaller rally.
As this rally has gone for over 20%, chances are we get a regular correction of 8-12%. What’s more, corrections typically last 20-sessions. If we bottomed already, it would be a 2-day correction. That’s not very likely.
As I mentioned, however, it’s always possible that this is just a larger “near-term” pull-back — not a correction at all — and we could see a retest of the highs. If that’s the case, we get a big correction in January anyway.
So I think overall, the chances we head lower one way or the other is really high.
Hello Sam,
the beta of nvidia and quantum stocks being high, if the QQQ correction is between 8% and 12% is it possible to see NVIDIA and quantum stocks make -20% to -40%?
Krach is coming soon ?
Since the end of November, I’ve noticed that US REITs have dropped by 10% (data centers, healthcare) to 40% (offices, industrial cannabis, etc.).
In my experience, REITs always react ahead of rate policies (hikes or inflation) and macroeconomic stress, such as recessions. This was the case recently in November and December 2021, and again in July 2023… we all know what followed.
Something to keep an eye on!
Be cautious with your portfolios.