Samwise Quick Reference Handbook
To streamline our daily blogs and conserve space, we’ve organized key resources into a convenient, collapsible dropdown menu below. A sort of Quick Reference Handbook if you will -- as our friends in aviation might call it. By clicking the menu below, you’ll have qu...
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Hey Sam, I’ve noticed Apple being on a downward trend/spiral recently. Wondering if that’s on your watch list of stocks to jump on anytime soon?
Opposite lol. It’s on my shit list haha. At least as the long-term common stock portfolios are concerned, we’re thinking about dumping Apple for now. We may buy it back in the next correction. I’m just not happy with how it’s performing relative to the market which opens up a lot of risk in the common stock portfolios specifically. So we may be dumping it soon.
Hey Sam Wiess:
In times past you have mentioned that when the QQQ fails to break beyond a certain line of resistance, then it is a sign that soon it will lead to a reversal and the longer it hangs out at the resistance line, the higher the chance that it reverses.
In this case we seem to be stuck in the low 530’s so I guess I am confused why this time around you suggest it is a sign that it will continue to increase.
Is it because of what you mentioned above where we typically expect to go past the prior high following a major correction?
Thanks for your insights! ????
It’s mainly because it’s consolidating above resistance. If it were trading at $525-$530, that would be a whole different can of worms. It’s more that it’s consolidate north of resistance and seems to bounce back up at every attempt to take it below $530. It’s holding support rather than pushing up against resistance. The next resistance line is at $540.
And then you have to consider the totality of the circumstances. What we’ve seen in past rallies with the market always tending to make new highs. How far the market has rallied.
But even consolidating above resistance could be negative. It really just depends on the overall circumstances.
For example, this same consolidation happening at day 97 of the rally and with previous all-time highs at $510 would look a whole hell of a lot negative than positive.
If the previous all-time highs were at $510, the QQQ has rallied 34% and the rally has extended to day 97 while the QQQ sits there and consolidates at $530-$534 over a period of two weeks, it would look more toppy. Just because the total rally would be ripe for a top.
If the QQQ had pushed right past $500, traded at $500-$503 and clearly struggle to hold that major point of support, also negative. This same consolidating at $500 would look really bad.
Context does have a role to play.
That makes sense to me. Thanks for breaking down your thoughts on the matter and taking the time to answer my question!
Hi Sam, how’s the weekly dojis is showing that there are 20-point slow grind left in the rally?
You discussed on the hourly & daily charts but no weekly.
So i assume the hourly & daily are saying the same thing as the weekly rite
So yeah you’re right. I got sidetracked. So here’s what we see normally on the weekly chart. During an intermediate-term rally, you tend to see large white candlesticks one after another. Maybe 1 small red week in between here and there. But for the most part, you get the market opening each week at new highs and closing the week right near its highs of the week. The next week, the same thing happens. We open right near where we closed the previous week, push up $10-$20 on the QQQ, and close out at the highs of the week.
For the meat of the rally, that’s all we see. One week after another. Big white candlesticks.
Once we get 2/3 or 3/4ths of the way through the rally, then you start to see the emergence of dojis. Situations where the market opens the week flat, drops hard. Recovers. Rallies hard. Reverses. Then we close out the week where we opened. Basically the market goes nowhere and we have a bit of a trading range.
So for example, suppose last week we closed out at $530. What we might see near the end of a long intermediate-term rally is the market open new $530, fall to al ow of $520, rally to a high of $540 and then close out the week at $530 where it opened.
You still might also get a big white candlestick here and there. But you start to see more and more dojis as the rally matures. It doesn’t mean we’re at a top, but it does mean we’re nearing the very end of the rally and there might be a little more upside ahead.
Take a look at the attachment.
Sam, can you explain the reasoning for selling NVDL and abandoning the covered calls and switching to NVDA? I’m a little confused by that one. Thanks.
So I’m not sure whether we’re going to do that just yet. It’s something worth considering. Here’s why. As rallies mature, it’s smart to go from an aggressive position to a more conservative positon. Something that allows us to participate on the upside but that will significantly reduce losses on a correction.
The QQQ has rallied 33%. It’s due for a correction. Even if it continues to rally, the upside is very limited. From everyting we know, the upside is limited.
The Covid rally is a huge exception and that exception was driven by a lot of volatilty. We didn’t see what we’re seeing here. The QQQ sustained SEVEN (7) near correction sized pull-backs. In some cases, it pulled back 10%. We just didn’t classify these pull-backs as corrections because they were so short-lived. All of those pullbacks resolved themselves within 5-10 sessions total.
We’re not seeing that here at all. In fact, we’re seeing the exact OPPOSITE. The pull-backs in this rally have been SMALLER than previous runs. If you look at the segmented rally chart, the pull-backs we’ve seen have been among the smallest pull-backs.
So let’s consider the strategy of closing out our NVDL positions and buying Nvidia instead. We’d also sell covered calls against Nvidia because there is very limited upside.
Going in this direction, when teh correction does happen, we’re a position that loses far less value. Then we could sell the Nvidia position, close out the covered call we sold and then get back into NVDL for the next big move up.
So why buy Nvidia at all and not just go to cash? Well by purchasing Nvidia, we hedge against some rare outlier event where the market just continues running. If buy Nvidia common — after selling NVDL for example — and sell the $160 Nviida calls for $10.00 or thereabouts, then we get to participate in upside capped at $170. We make $25.00 minimum from where we are right now. It allows us to hedge out FOMO risk.
Then if the QQQ sustains a correction from $170 and Nviida then falls back to $140, we close out the covered calls (having made probably $10.00 in the process) the NVLD will be devalued worse than it is right now and we hop back into NVLD.
It’s a smart move no matter how you look at it. At least for our portoflios, I don’t see much downside in making that transitional trade. If we can avoid holding NVDL in corrections, we’ll be golden.
So that’s a strategy we might take.
Notice that our strategy only works with all parts playing a role here. All positions in the portfolio plays a key role.
We can even chart it out and determine exactly what we miss out on opportunity wise if NVDL continues to rise and what we gain by holding Nvidia instead of NvLD in the next correction. Then we balance out it and determine whether it’s worth it.
I can tell right now that even without the math, that’s it’s worth it for our portfolios. Still, at this point, we haven’t quite made that determination yet.
The only plan we have atm is what you’re seeing on the trade watch.