Finally, A Pullback
A down week, and that's healthy
I have been VERY cautious with my girlfriend’s money the past couple weeks. I shared the charts and how I thought that this parabolic market was terrifying. I had gone very cash-heavy, and moved up a lot of my stop loses.
Well, on Friday a lot of the market came crashing down, and even though I was prepared for it, I still got smoked a little.
A Week in Review
The below chart is the QQQ 0.00%↑ index from the past 4 months. It tells a really important story.
The story is, we’re at the very least pausing the rally for a bit.
There are all sorts of indicators that show, 1) the market was overbought, and 2) it was a pretty weak rally to begin with.
If you look at the bottom of the chart, each of those green and red lines indicate the volume traded that day. There are 2 important things here. First of all, back when the rally started, volume died. We didn’t see any good volume until, well, the crash on Friday.
This indicates that the rally was weak, and it’s why the rally crashed off so hard.
Also, we cleared out of the channel we’d been in since 2022. There was bearish divergence on the RSI as well. We were way overbought and the momentum was weak. It was bound to crash down.
Space X
There was another catalyst, in my opinion, for the crash.
Next week, Space X will have it’s IPO. It’s essentially hoping for a 1.75 trillion dollar market cap. That’s a massive amount of liquidity. Bitcoin crashed to 60,000 as well. For me, it seems like some players are moving cash off the board to be able to play into the Space X IPO.
I mean, is it a coincidence that about 1.75 trillion fell off the board of the stock market on Friday?
Ok, My Week in Trades
Seeing this coming, I was very cash heavy and decided not to take any trades this week.
But, as a result of Friday’s crash I did end up having some stocks sell on their stop loses - although all for profits.
ORCL 0.00%↑ - I was stopped out at $215.
WYFI 0.00%↑ - I was stopped out at $24.5. Sold my 4 shares.
$SFTBY - I was stopped out here as well at $22.71. Sold my remaining 5 shares.
All of the above trades had stop losses in profit. So they were wins.
Profit / Loss / Cash
Despite being very cautious with the market I still had a bit of big loss this week.
I was down 5.18%, which is almost exactly the same as the QQQ 0.00%↑ was down. So I actually take that as a win.
I know a lot of accounts that were down 10-12% this week, so I feel like this is a bit of a victory. Especially with stocks like EOSE 0.00%↑ being down 20% on the week.
As a result, I basically have no open positions.
I have equity in IREN 0.00%↑, $davv, FIG 0.00%↑, MVST 0.00%↑, NVO 0.00%↑, RBLX 0.00%↑, SMR 0.00%↑, and ZETA 0.00%↑.
And I have put sale positions in NIO 0.00%↑, SOFI 0.00%↑, and SPCE 0.00%↑.
Our liquidation price is $3,789 and $2,500 of that is in cash.
So, What’s the Play?
First of all, I don’t like the volume at which the market came down on Friday. I also don’t like that it kept dropping after hours. The QQQ still has an RSI on the weekly charts at 65+.
So while I see some relief from the rally, I’m not quite sure I feel confident in spending money yet. I do want to see where things open on Monday.
That said, I’ll be looking to slowly enter the market again by selling a couple puts.
There are a couple stocks I’m hoping to sell puts on this week including SATL 0.00%↑, UUUU 0.00%↑, and DLO 0.00%↑. I will likely just step into the market with a put sale on one of these, and then dip a bit more if the market comes down some more.
Lots of Cash - Let the Fun Begin
I’m feeling kind of proud of myself for the patience. It would have been really easy to chase the past couple weeks.
But while I have a lot of cash, it still really doesn’t feel smart to deploy it so quickly.
The QQQ 0.00%↑ is at $700. The following support levels I see are:
Fib Channel 0.5 is about $650
Trendline is about $645
Volume is at about $625
Therefore, I feel like this could keep dropping to around about the $650 level. If it reaches there, I’ll likely start deploying cash and buying equity rather than just selling puts.
But until then, more patience.
Not financial advice