Daily Plan 5.1.24
Alright folks, after the action today, I think there should be no doubt about superior nature of this publication when it comes to analysis and research.
Let us start with my call in SMCI. On Sunday night, I said as we approach 900, this stock becomes expensive and could sell down to sub 800. It is about 780 at the time of this post.
On one hand you have this call. Then on the other end, you have dozens of mindless calls calling for mindless levels- 1000 after earnings said one, 1250 after the ER yelled another.
1250? A 40% rally after the ER, based on exactly what? The stock itself has been in a bear market. Fundamentals do not support a move of even 8-9%, option market is not even pricing a 10% move, and we have the so called experts calling for a 40% move? What is going on?
I do not say this as a boast, though I could. I share this just as a cautionary tale. Many of you are new to this. It is easy to get influenced. However, know your flows. Know what the MM are thinking. Know the sentiment. So you do not throw your moment around wasting it.
With SMCI, I think the damage today was extensive.
I suspect a large majority was long on this stock. I think due to this reason, if this holds 800, I expect this to sell even more this week.
Now the other thing I want to talk about is my bearish call on the index from 5160.
The index itself shed about a 100 dollars today. I sent an update this morning about that LVN at 5140 and why I thought I was bearish on this. Sharing below as an educational note why I was bearish below this LVN in the open-
MSFT stock, one of the highest quality stocks, sold off despite having a very good ER.
So I thought may be this sell off is because money is flowing into GOOG as it plays catch up with MSFT on AI. If this assumptions as true, then GOOG should have held the gains. But that was not the case.
Then very early on in the session, AAPL also gave up all its gains despite recent analyst upgrades.
The sum total of this analysis was that we were gonna head lower.
Now this type of thinking is very new to some of you who may be used to a very strict chart or indicator background.
But see, the indicators are useless at any type of cogent analysis. They only show the sum total of the market. The market is a complex organism made up of small parts or components.
We have to understand and know how these components work. This takes a lot of work and many who are simply not accustomed to a deeper dive, perhaps cannot understand this interplay.
If you are only a chart or an indicator trader, know that in the short term, there is really very little value in such an analysis. Charts work great in longer time frames. Not so much in intraday time frames. My goal with this Substack is to train folks to think differently and view market from a different lens altogether. If y’all think like the 99.99% out there, then you really have no edge.
Why?
Because if market was so easy as watching an indicator like RSI oversold or overbought, then every one will be able to see it at the same time. This means every one will place buy or sell orders at the same time. When this happens, no one will take the opposite trade and hence the market will not move in the direction of majority.
This is not to disparage or demotivate any one but rather to share my opinions on what I see as driving the markets. At end of the day, it is upto you what you wanna do with this information. Eventually as you study and understand the nature of complex systems more and more, you will also realize that a single threaded view point, such as watching RSI oversold overbought, simply cannot contain a system with infinite moving parts. A very small change in one part can cause a large change in the overall system.
Key level
Key level tomorrow will be 5100. Level is from June.
FOMC day so know that this could be a large range day.
I expect 5100 to cap rallies unless overcome for a retest of 5030-5050.
We are now 5050.
~ tic
Disclaimer: This newsletter is not trading or investment advice but for general informational purposes only. This newsletter represents my personal opinions which I am sharing publicly as my personal blog. Futures, stocks, and bonds trading of any kind involves a lot of risk. No guarantee of any profit whatsoever is made. In fact, you may lose everything you have. So be very careful. I guarantee no profit whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this newsletter, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission, CFTC, or with any other securities/regulatory authority. Consult with a registered investment advisor, broker-dealer, and/or financial advisor. By reading and using this newsletter or any of my publications, you are agreeing to these terms. Any screenshots used here are courtesy of Ninja Trader, FinViz, Think or Swim, and/or Jigsaw. I am just an end user with no affiliations with them. Information and quotes shared in this blog can be 100% wrong. Markets are risky and can go to 0 at any time. Furthermore, you will not share or copy any content in this blog as it is the authors’ IP. By reading this blog, you accept these terms of conditions and acknowledge I am sharing this blog as my personal trading journal, nothing more.