What is a Short Squeeze?
A short squeeze is forced buying from short sellers who are already in the marketplace. A short seller is someone who is trying to profit from a stock going down. When buying a stock, the worst thing that can ever happen is that you lose 100%… but in short selling, you have unlimited risk. Stock can go up hundreds or thousands of percentage points – especially if the stock is getting squeezed by forced buying from short sellers. The GameStop Squeeze Short squeezes became in fashion earlier this year in January, with the WallStreetBets Community focusing first on GameStop. GameStop had a short float, a short interest of 140% of the outstanding shares. Due to naked short selling, hedge funds were shorting the stock on the stock without even borrowing it. When the WallStreetBets community recognized that, they all started buying. Their buying caused the stock to go up, resulting in some of the shorts starting to get squeezed. When that happens, you get a virtuous cycle of buying. That’s how we were able to see GameStop go from the price of about $20 to $500 in a matter of days. Other Notable Short Squeezes We also saw short squeezes come into a lot of other stocks – $AMC $SNDL $BBBY $BB. There’s been a constant rotation of these mini short squeezes we’ve been seeing. GameStop itself has had three major squeezes, AMC had two major squeezes. My team and I now are paying attention to stocks that have high short floats. Anything with a short float above 20% is in squeeze territory. Some of those layers of probability also apply. If we’re seeing the heavy volume along with momentum coming in, that could be the beginning of a squeeze. Risks in Short Squeezes Being too late A lot of these companies are not necessarily the best companies out there, fundamentally speaking, and it’s probably why they had really large short interests. Once the forced buying is done, there’s a real risk that the stock can go right back down to its more fair, fundamental value. We want to make sure to get in on the ground floor of that squeeze – getting involved early – before it’s gone up a couple hundred percentage points, and when the technical setup was still there. If not, you risk buying in too late at too high a price and losing the very next day. Secondaries (Capital Raises) An IPO, initial public offering, is when a company’s shares first become available to the public. They can always add on more shares to that IPO by doing a secondary. A secondary offering is when a company decides to utilize their stock price to raise additional funds for the company’s operation by offering out additional stock. Now, let’s think about what secondary offerings mean from the perspective of supply and demand. Demand is coming into the stock, and some of that demand might be from the short squeeze. You also have a limited number of stock supply, which is what we call the stock’s float. Now, when you do a secondary offering, the overall stock float will increase. If you’ve got the same amount of demand, and all of a sudden, you’ve got much larger supply because the float is increased, that stock will most likely go down. AMC’s Secondary Offering That is exactly what happened to AMC. Many people don’t realize that a secondary offering actually caused the top of AMC. AMC had that crazy short squeeze on June 2. It was actually the second short squeeze in the name. In one day, it went from about $35 to $70+. Then they announced a secondary offering the next morning, and the stock went all the way back down to $38. Something to keep in mind regarding a lot of these companies…why were they so heavily shorted to begin with? They’re usually strapped for cash, don’t have strong balance sheets, and possibly even lose money year over year.
Continue Reading -->Probability in the Stock Market
Finding the risk/reward probability of a trade is simple math. But most people don’t talk about the other side of the formula: probability of success. Probability is very dynamic and not as straightforward as risk/reward. In this video, Derrick will walk you through what he calls the seven “layers of probability” – all of the factors that will increase the probability of a successful trade. Get all of these layers in order and you can improve your chances of success.
Continue Reading -->5 Things You Should Know Before You Trade
If you’re just getting started in the trading business, it can all feel overwhelming. There’s a lot to learn, and much of it comes with time and experience. But Derrick Oldensmith has a few tips that he’s discovered over his more than 10 years of trading. Check out the video below to learn the 5 things you should know before you start trading and use Derrick’s experience to your advantage.
Continue Reading -->Options In Play – Earnings On The Radar Week Of 12/10/21
Risk-off action is hitting the market right now and it is creating higher volatility around earnings. With the calendar getting lighter for earnings, the names scheduled could get more attention now.
Continue Reading -->Scott Redler’s Dog Bytes: What’s Next After the Storm?
SPX futures are +10. The Oscillator is -75. Last Friday, the index held the 4500 area again. It’s not a great setup. We’ll see if the early strength holds or fades. The 50 day is 4570 with bigger resistance at 4610ish.Now let’s dig into some of the big ETF’s I’m watching: On Friday, SPY held the $450 area again. We’ll see if today’s early strength holds, or fades. $456ish is pivot resistance and big resistance is above at the $460 area. A strong close below $450 opens the door for another leg lower. QQQ is showing some relative weakness this morning after it gave signals to take down risk the past few weeks. We’ll see if it stays below $383.34 and how it handles Friday’s low of $378.90. The 100 day is below near $374. We’ll see if it pulls SPY down or reverses higher to relieve some pressure.IWM’s breakout failure resulted in a move down to the $212 area. It’s up small this morning. The longer it stays below the $220 area, the higher the probability it breaks to the downside with $209 as the key area. That would be bad for the macro condition of the market.Semis were trying to hold up. This morning they are showing some relative weakness. If SOXL breaks and closes below the $59-$60 area, it won’t be good for tech. My XBI call options haven’t worked because this sector has been down for 20+ days. The ASH Hematology conference starts this weekend, but hasn’t been a driver. We’ll see if that changes soon.Positions Disclosure as of 12/5/2021 at 8:06 a.m. ET
Continue Reading -->Breaking the Market Trend
The market looked like it would roll over bearish last week, and it did. So now the SPY is testing the 20 ma and Sami thinks that it won’t hold like it has in the past. Find out what he’s predicting the market will do in the coming days. In this video, Sami explains: – How to find a head and shoulders pattern in QQQ – Which stocks are unaffected by the market selloff – Where CIEN could go if it takes off upward – Why he changed his sentiment on OLMA – What the next few weeks could look like for EH
Continue Reading -->Tesla Is Hated!
Markets took a big hit late last week as the Omicrom COVID-19 variant sent shivers down traders’ spines. HOWEVER… are traders scared? Judging by our survey results, only a little, aside from Tesla (TSLA) – where sentiment is very negative. (scroll down to see the numbers there Traders Keep Backing Away from Stocks We’ve been running our survey for 8 weeks, and we have our most negative reading for the SPX so far – just 56% of traders are bullish. This means that traders barely reacted to last week’s selloff. Bitcoin Gets the Ugly Stick Bitcoin sentiment actually rose slightly this week.This is pretty interesting considering that on Saturday, Bitcoin collapsed and almost broke $40,000. And as you might expect, the downtrend has traders more wary of Bitcoin. Apple Still a Fan Favorite Apple has been one of the strongest stocks in the market but optimism towards the iPhone maker has been headed downhill fast. Just 53% of traders said they are bullish on Apple for the next 30 days. Tesla Sentiment Collapses Traders have been cautious on Tesla (TSLA), but now they’re outright bearish. Just 36% of traders are bullish on Tesla for the next 30 day:Why all the hate? We suspect it’s simply a case of opinion following price. The stock is well off the November highs, and dipped below $1,000 this morning: Gold All Over the Place Gold sentiment remains remarkably volatile. And for now, Traders are pretty much deadlocked. Traders Still Against Oil Crude oil prices are well off the October highs, which took a hit on sentiment in November. However, bullishness rose to 60% in this week’s survey.Save On Your Alpha Team SubscriptionWant to save $100 on Scott Redler’s Alpha Team VTF® service? Click here.
Continue Reading -->Markets in Turmoil? 12 Charts You Need to See
Thanks to the Omicrom COVID-19 variant, the bull market got stopped in its tracks, and the S&P 500 Index is now 4.3% off the highs. 4.3%. That’s a mere drop in the bucket after such a a big move for stocks in 2021, right? But… a look below the surface of a major index like the S&P 500 shows that markets are in far worse shape than you might think. In fact… we can credibly say we have “markets in turmoil!” Because if you’ve been in the wrong stocks or cryptos, you’re down a heck of a lot more than 4.3%. That means risk management and stock selection are key right now. So let’s go through the charts you need to see.The Apple EffectAs the #1 weighting in the S&P 500 — and by virtue of its ability to impact other stocks — Apple (AAPL) is essentially holding up the stock market.The S&P 500 is helpful for judging the performance of large cap stocks, but it can never tell the whole picture of the market.Just 10 stocks account for 30% of the movement of the S&P 500. And they’re mostly big cap tech stocks… with Apple at #1. Apple is a consistent fan favorite in our sentiment polls and has been remarkably strong, even in the face of a rumored iPhone production cut.VIX Approaching January Highs The VIX is known as the market’s fear gauge, and just hit levels not seen since January. What does this mean in plain English? Well, the VIX uses prices of various S&P 500 options to measure traders’ expectations of volatility. So traders expect rocky times ahead. Will they be right? We’ll see. Helpful Link: Our Primer on the VIXSmall Caps Spanked! You just saw that big caps are holding up fairly well. But what about small caps? Well… it ain’t pretty:IWM is 12% off the highs for some major relative weakness as countless small stocks are 20%+ off the highs. Now let’s dig into one of the more speculative areas of the market… crypto currencies.Bitcoin & DogeCoin Are Crashing Bitcoin is getting SMASHED, and as of Saturday morning, it’s 32% off the November 9 high. Interestingly, that high came right around a few interesting news events. In early November, New York City Mayor Eric Adams said he wanted his first three paychecks t be paid in Bitcoin. And on November 17, we learned that Crypto.com paid a whopping $700 million for naming rights to the Los Angeles Lakers’ Staples Center. Of course, this came amid an alt coin craze led by Dogecoin, which itself is diving:Did they top tick the crypto currency market? We’ll see. But needless to say, the downturn in the crypto currency market is emblematic of a risk-off environment. So as you might guess..Meme Stocks Get DESTROYED AMC Theaters (AMC), the King of meme stocks, is now 37% off its highs. Other names in the meme stock universe like GameStop (GME), Camber Energy (CEI), and Vinco Ventures (BBIG) posted big declines. Again – another sign that speculative money is coming out of the market.Travel Stocks Take BIG Hits As you might expect with increased COVID-19 fears, travel stocks are down big. The US Global Jets ETF (JETS), which tracks airline stocks, is down 20% in the past month: The cruise liners like Carnival Cruise Line (CCL) are in even worse shape. Now let’s talk about… salads?The Stench of Sweetgreen Salad chain Sweetgreen (SG) looked like one of the hottest IPOs of 2021. On November 18, its IPO priced at $28 a share. The stock then opened at $52 and immediately hit a high of $56.20 for a 101% first day gain. Now? Sweetgreen closed at $24.82 Friday, 56% off the highs: Talk about your pop and drops…Energy Is Surprisingly Resilient Oil prices are well off the highs, but the energy sector hasn’t been all that bad. XLE is only 5.6% off its highs, even with crude oil down 20% from the October peak.Fun fact: XLE is the #1 performing major ETF in 2021, up 45.5% year-to-date.Need Help in the Market? Pick up Scott Redler’s FREE eBook and learn how he manages risk in his real money trading:
Continue Reading -->2021 Holiday Gift Guide | The Ultimate Gift Guide for Traders
There are gift guides for just about any hobby or profession out there… but traders are especially hard to buy for. Do you buy stocks if you have no idea what they’d want to trade? What about a new computer, or yet another coffee mug? But you don’t have to know anything about the market to get the trader in your life the perfect gift. We have exactly what they need to be a better trader and get the trading tips and tricks they really need. For the Active Investor: Power Plays newsletter Power Plays is a perfect option for the busy bee who doesn’t want to spend a lot of time researching and analyzing, for the hobby trader that is only in the market during their free time, or for anyone who wants actionable ideas without all of the fuss. Once a week, Scott Redler will send out an email with his latest big investment idea, along with his thoughts on current conditions and where he thinks the name is heading. And at the end of each week, Scott will write up a summary of all of the names he likes. Subscribers get his best ideas in just minutes a week. Right now, you can get a year of Power Plays for only $1,196.25 (25% off). The only thing you’ll need to worry about is how to fit it under the tree. For the Robinhood Trader who wants to improve their skills: Path to Profits course + 1 month of Redler Report Scott Redler has been trading for more than 20 years through the dot-com boom, the 2003-2007 recovery, the 2008 crash, the bull market off the 2009 bottom, and the COVID-19 market conditions. He has a lot to teach a beginner trader about what trading in real life looks like (hint: it’s not like a highlight reel). That’s why he created the Path to Profits course. Path to Profits includes a 2+ hour video course, 179-page course guide, and a fast track to profitability based on Scott’s unique trading method. You’ll learn all of the strategies, indicators and guidelines that Scott uses in his own trading every day. Want to add a bonus to your gift? Try adding on a month of the Redler Report, Scott’s newsletter, and get daily trade ideas, analysis and game plans directly from Scott himself. The Redler Report is sent out every morning, but it also includes 2 daily videos with hardcore market analysis and access to Scott’s private Twitter feed for real-time trade updates. The Path to Profits course with a month of the Redler Report is available for only $224! For the Active Swing Trader: Swing Trading course + 1 month of Strategic Swing Trader newsletter Wouldn’t it be great to focus on trading during market hours and not worry about scanning and charting? Sami Abusaad’s Strategic Swing Trader lets you do just that. If you can set aside a small amount of time before the market opens, you can get everything you need for the day from the SST course! Sami’s designed the SST strategy around his own lifestyle – since he also day trades, he doesn’t have time during the day to focus on finding new swing trades. He’ll teach you how to start each day with high probability trade ideas so you can set your trades and forget them. But if you want to take those swing trades a step further, try adding a month of the SST newsletter along with the course. You’ll get a list of 3-6 names that Sami’s watching every day before the market opens, including specific entry and exit levels, PLUS live, interactive strategy sessions every Monday after the close and daily “earnings play” updates throughout every Earnings Season. This bundle will give you Sami’s exact trading system, daily trade ideas and updates, and access to Sami’s expertise through coaching. If you have a swing trader in your life, this gift will take their trades to the next level in 2022! For the Experienced, Active Trader: Alpha Team VTF Trading can be lonely at times, but not if you’re part of a supportive and welcoming community. That’s why we have services like the Alpha Team Virtual Trading Floor! Trade in the room with pro traders Scott Redler and Dan Darrow, as well as hundreds of other room members all throughout the day. Trading is a team sport, and when you join a pack like the Alpha Team, your odds of thriving will skyrocket. The Alpha Team is active every day during the market open, although Scott and Dan often put in extra hours to make sure room members get the info they need. The room was specifically created for active traders and investors that follow the market closely each day, and it’s currently host to professional traders, financial advisors, hedge fund managers and individual investors from around the world. A month in the Alpha Team room is only $195, perfect for anyone who wants to test it out, but an annual subscription is also available for $1,995, allowing committed traders to save $345 on the total 12 month value. For the Active Options Trader: Actionable Options course + 1 month of Options in Play newsletter Trading options isn’t easy. But T3 Live’s pro trader Dan Darrow makes it much easier with the Actionable Options Course and Options in Play program. Dan removed 99% of confusing options theory and kept the 1% that really matters to create the Actionable Options Program. The course has 3 hours of video training and a nearly 300-page guide with easy-to-understand strategies, fundamentals and pricing mechanics to guide your trading. Add on a month of the Options in Play newsletter to get highly reliable options trade ideas directly from Dan. The newsletter goes out every evening after the market close and includes two new trades complete with a full breakdown and detailed chart. Dan also sends out intraday alerts with updates and analysis so you’ll know exactly when
Continue Reading -->Options In Play – Earnings On The Radar Week Of 12/03/21
The last few days of November and the beginning of December will be a busy stretch for Software companies. Many top-tier stocks will be reporting earnings as the market looks to stabilize.
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