Dear — Jeff Bishop here,
This week, the outperformance difference by the Russell (+5.2%) over the Nasdaq Composite (-1.1%), as of yesterday's close, is the largest we've seen since 1986, according to Dow Jones Market Data.
Nevertheless, after Monday's sudden selloff in tech following Pfizer's vaccine news, we're already seeing signs of a rebound.
Yesterday, things flowed out of travel and leisure stocks like Carnival (CCL), Expedia (EXPE), and Wynn Resorts (WYNN)— and went straight back into Zoom (ZM), Teladoc Health (TDOC), and Peloton (PTON).
That said, today we'll be looking for a confirmation on whether tech's bounceback will continue.
In this issue of All-Access, we'll share an example of how to avoid the pain of being a short-seller— as well 3 small-caps we continue to like.
And once again, don't forget to join RagingBull's only 8-figure trader, Kyle Dennis for the opening bell. Enter the trading chat room.
Yesterday's chart of the day is REV. The stock has been in play for a couple of days now.
For those of you who missed it, Revlon has had a rough year so far.
The make-up company was really affected by the pandemic and the stock tanked from $22 to $4 in the past 10 months. Rumors of bankruptcy started to circulate as the company no longer could service their debt.
Revlon had an important deadline looming on November 16th, the day by which the company was supposed to find a solution or announce the default on its bonds.
On November 10th, however, the company announced it was in talks to refinance $343M of their bonds. The stock spiked from the low of $5.9 to the high of $13.4 within 3 hours before settling at $8.8. The rally was fueled by 50% short interest and 6.9M share float.
Yesterday, the story started to heat up again. Headlines suggested Revlon was going to avoid bankruptcy and refinance all of its bonds. New York Post came out with an article at 10:45am mentioning Carl Icahn as one of the potential investors in the new deal.
The stock went bonkers, flying from $8.67 to the highs of $14.56— before finally closing at $10.77.
Here's what the chart looked like:
As you see, the stock was just all over the place…
If you analyze the chart above, you will see that the stock trapped traders at least 3 times: twice on the long side and once on the short side.
Chances are that even those who completely avoided a bias long or short were puzzled by the conflicting signals REV was giving.
The lesson here is simple: risk management is the key to profitability. Always honor your stops, no matter how much conviction you have. Only the price pays.
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The market is in the state of emotional overload right now.
Things that get a bid just continue sky high, as everyone immediately joins long.
Others that show weakness tend to fall right through— short sellers are keeping pace with the rush.
People have been so prepared for volatility and the craze, and then it just never came...
The election went smoother than many had anticipated, and the vaccine news dealt yet another blow to the hopes of violent one-sided action.
Traders just aren't sure what to do with all that energy and keep overreacting to every pop or dip.
Bigger picture, such emotional splashes are not a great thing.
For short term traders, however— this is literally the best we could ever ask for.
Overreactions result in market inefficiencies and inefficiencies bring some of the greatest opportunities out there.
As you probably know, the past few days we've been focusing on small cap, low float stocks.
Reason being, they just work best in this environment!
Due to their size and share structure they're easy to get moving.
And once they move, they attract more attention and move even further— like a snowball!
You should've seen enough charts by now— APVO, GTEC, ACB— to know that if you're on the right side of such a mover, your biggest issue becomes "what do i do with all this money."
The hardest task is to keep track of everything and pick and choose the right setups intraday.
Well, we've gladly done some dirty work, in order to showcase what we're liking best.
Here're some of the small-cap chart picks we'll be watching closely:
Equillium (EQ):
Leju Holdings (LEJU):
Some traders may want to get long with a small position size ahead of the move.
For this setup, looking at the big picture, it makes sense to wait and see volume pick up and potentially get in intraday for a move above $3— and if that level holds, it may make sense to get aggressive and add to the position for a potential move to $5.
Taitron Components (TAIT):
To learn how RagingBull's #1 small cap trader makes his moves in-real time, check out Jason Bond's next Monday Movers trade dropping here tomorrow.
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Short-dated, far-out-of-the-money options contracts are cheap because they're unlikely to happen.
Despite the tremendous potential payouts on them, the stock would have to make a huge move in a short period of time for them in order to just break even.
Nobody in their right mind would throw down on them— unless they had an especially high conviction the play would work out in their favor.
Turns out, big players on Wall Street place big bets on these unusual options contracts everyday— and Kyle Dennis takes note.
After dishing out thousands and thousands of dollars on financial data, realtime feeds, and subscriptions, Kyle discovered a special scanner that hunts down unusual options activity.
He shares his secrets to scanning for these "smart money" moves in his Dollar Options Trader ebook.
Download the book
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AMA: What Made You Decide To Do This All Day Live Thing? By Kyle Dennis of Biotech Breakouts
[Trade Recap] Fishing For Beaten Down Stocks By Jason Bond of Jason Bond Picks
I'm Still Bullish On The Market, Here's Why By JC Parets of Chart Hunter
Here's a Complimentary Trade Idea By Jeff Bishop of RagingBull Investor
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