Playing the bounce in a downtrending market

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• 0:05Speaker 00

  Hey everybody, it's Michael Martin. So, I wanted to share a screen with you today. Don't really do this that much. But it's an interesting thing to look at the psychology of what's going on with some of the chipmakers in the semis right now. So, today is Monday, and I want to show you what happened on Friday, right? They all, after getting sold off during the week. This is SanDisk. You could see that we actually opened higher, and then gave it all back, and put in a new low, and then closed at that low on a Friday. Look at Nvidia. Don't say Navidea, it's Nvidia, right? So, big rally, about 1%, gave it all back, and then closed at the low on a Friday. That means nobody was stepping in, thinking that there was value at these levels.

• 0:50Speaker 00

  Intel, a name that I had been in back after this, you know, Cup and Handle. I got in around over here. I got knocked out here on the second, because I wanted to see follow-through, and the new high put in. Again, opened higher, was trading up last night. That would have been Thursday. Today is Friday, even though you're watching this on Monday. And it sold off. Again, put in, closing down near the lows. Micron. Micron, you're probably not in, because it's channeling. But what we would look for here is, you know, if it consolidates near the low end, I think once it takes out at 100, it'll definitely challenge 9. So, let's go AMD. Same type of a deal.

• 1:34Speaker 00

  After putting in a high, you see a complete reversal. If this thing trades below 600, you have to be out if you're long. But again, it opened up on Friday, and then spent the day selling off, and then closed at the low for the week. When you see this happen, obviously, there's no strength here. So, be very, very careful if you're trying to play the dead cat bounce, or whatever you want to, however you want to say it. I don't know that we're any near, anywhere near a capitulative kind of sale. But you have to be super proactive, almost like a scalper, if you're going to try to play some type of a bounce, right? And you would use, right, if it bounces, like in this case, if you were long, you'd

• 2:17Speaker 00

  have to, you'd have to, it really didn't rally up all that much, it closed up, so you'd have to use like the previous day's close, or the previous day's low, as your exit. Because you don't want to be taking home and putting in weekly lows while you're long. You see what I'm saying? So, there's nothing wrong with trying to trade an oversold situation. For those of you that are watching the screen all day, I don't have the energy or the time to do this. But you would use that little nub, right? These are open high-low close, because I think it's a lot cleaner to see how it, there was strength, and then all of a sudden, there wasn't. It's not as clear on the candles, although candles look pretty. So, what does that mean?

• 2:59Speaker 00

  If you kind of got in at the open, you almost lost right away, and what is that? So, the close was 62068, and the open was 626. So, you know, had about 1% on the notional value of this instrument to kind of give before you would have gotten out, and you would have position sized, so that $6 would have been, you know, multiplied by the shares, would have been how much money you were actually risking, right? So, if you had like, you're risking, say, $2,000 a day, whatever it might be, you might buy 50 to 100 shares, times that 6, and that would be 600 of the 2K. If you got knocked out, you'd still have 1,400 for the rest of the day, that kind of a deal.

• 3:44Speaker 00

  So, you would try to position size around, what did you want that $6 to mean to you as part of your overall daily limit, right? If you were, you know, if your daily limit is 500, right, then you'd have to look at the ATR and see like, okay, well, I got to be super tight with my stops. I totally understand that. I think there's wisdom there. But all of these looked weak, right? I held through here, because my basis was very low, thinking this was washed out. This looked like it was improving. It slightly improved, then it opened up. Then when we failed, I was like, uh-uh. Why? Well, I needed to see, I wanted to see it at least challenge these highs. And what were those highs?

• 4:24Speaker 00

  2744 and 2693, effectively the same price. And look at this. This was 26. So, it was substantially, you know, the way I look at it, and you could look at the bottom too. There wasn't any real big volume spike. Here, you can see, if we put on volume moving average, you can see we have above-average volume. I don't have it on this chart. But that's exactly what you want to see when you're putting in new highs, and you're only going to see that after the fact. Well, coming into this, I knew where my stop was going to be, if we were going to fail and reverse lower. I don't want to own stock if it's going to behave weakly. It has to do exactly what I want it to do, or else, you know, we're just not a good fit for dating.

• 5:08Speaker 00

  And, so, you know, you can't make money on all of them. Made a little money there. I was a little, I don't get disappointed, but what I was hoping it would do is move up trade, and then maybe range kind of in here, like between 121 and 127, before it decisively moved to 130 again on volume, and then going back to making a four, you know, a three or a four-month high, and then consolidate again, and then this is an all-time high, blah, blah, blah. But it didn't work out. Who knows? Maybe it's going to make a Cup and Handle over here, and we'll have to look at it. But right now, if you're going to try to trade any kind of bounce or weakness, you

• 5:49Speaker 00

  have to use a super stop, a super tight stop, because when you see things making new lows on a Friday, it means even the value players, who would almost buy things on fundamentals, weren't even stepping up. And that was across the board. That's why I just put a few up here, but you can see, you know, weekly low for Nvidia, weekly low for SanDisk, or at least equal to the weekly low. Micron. Just was a crappy market the past couple of weeks, so you're probably not in here, because it's trading flat. You know, it's range-bound. You don't want to be long or short anything when it's range-bound, because it's, it just is a market of indecision. And AMD, same kind of a deal.

• 6:34Speaker 00

  After putting in a high, there was no follow-through. So, that's what you really want to look for as a confirmation. You don't have to overlay any indicators. What you want to see as price action traders is confirmation of the move by price. MACD can't help you. The fucking price doesn't go where you need it to go. I don't need MACD to tell me that. You see? And this ended up being down 2% on the day, right? So, then, you know, you'd want to put up the ATR and kind of see what that is. You know, are we within model? Is this typical behavior? But, you know, here we have Monday, Tuesday, Wednesday, Thursday, and Friday, and almost all across the sector. I think there'll be a time to come back to this.

• 7:16Speaker 00

  But if you're going to try to nibble on the weakness, because there is value, or you think you can jump in front of some of these trades, make sure you use a very tight stop, and make sure you have that all calculated out. That's the kind of stuff we do, you know, in the cohort. Check this out. Another thing that you can do, and I want to talk about this probably tomorrow, but you can get a good view on how things are going by looking, and I don't have any conflict of interest. I just use bar charts. They say, as long as you clearly show everybody its bar chart, you can use this. I don't have an account, I don't get referral fees, they are not paying me for this, I have no conflicts to disclose. I just use it because you can replicate this on your own, at home, at no charge to yourself.

• 8:00Speaker 00

  You might have a, another service, and that's fine. But if you look here, these are across all US exchanges for Friday, October 9. And you can see, again, they'll have junky penny stocks and things under 20 bucks, and then have some of these bigger ones. Here's one, that's under $10, who knows what they do. And this is a list of everything that's making a new 52-week high for this session, which was Friday the 9th. And if you scroll down, you can see there's just one page. So, that me, and I know this page, the most they'll have is 100 names on a page. So, this has 100 or fewer names. You'd have to count it. I'm not going to do that.

• 8:42Speaker 00

  Here, making new 52-week highs, right? This is how much percent it is above the 52-week low in the green, and this tells you how far off, as a percentage of the share price, is it from that very own 52-week high. So, if you're buying pullbacks, you might be like, I want to look at names and buy them when there's, when they pull back 5% from the 52-week high. And so, you could see this CVI might be meeting your criteria. This could be another one, Global Energy, that kind of a deal, although it's, it's a penny stock at $4. Anyway, then you can screen these things. Look, some of them don't have any volume, but then you could click here and screen for volume, so that you can do that.

• 9:25Speaker 00

  You can also click on here and get share prices, right? Just realize that institutions typically aren't buying a lot of stocks that are under $20 a share, because they're still paying commissions. The interesting thing though, is if you click on lows, and you scroll down, you'll see the same type of a thing. This is how far it is away percentage-wise from its 52-week high, and this is what the bounce is, right? How high is it removed percentage-wise off of that very 52-week low that it's making, right? So, this is how you can look at, you know, playing the bounce. Now, if you scroll to the bottom, you can see, this is 100 names, but there's three pages, there's 252. So, I like to look at this just to get an idea of breadth, right?

• 10:10Speaker 00

  Because if you're looking at indices saying, hey, well, market's making all-time highs, to me, that could be a little misleading when you're doing your analysis, because there might only be a handful of names that are really surging, that have an undue influence as components of a particular index. So, yes, you can trade the indices long and stay with the trends there, but just realize that what's going on in the market in general is not necessarily as healthy. Okay? So, a couple little tricks, but, you know, just make sure you know what you're doing as you're putting on your risk, and know where you're getting out before you get in, because the, in these types of markets like this, they can turn very, very quickly.

• 10:52Speaker 00

  And we got earnings coming out, and it'll be, my hunch is that it's going to be very, very volatile. So, anyway, thanks all very much for being here, and I'll see you tomorrow.