Sell the rallies.
Weekly Plan 3.1.25
Hey friends-
A lot of time has been spent by wannabe traders to crack the holy grail of trading. In this quest, the new trader often seeks to find out a technique, many times based on charts or indicators that will give him a guaranteed and sure shot method of making millions in profits.
Educators sell weekend seminars for the 9 to 5 office guys or girl, and courses are sold for thousands of dollars, showing charts which are so insanely accurate - in hindsight. Only if you spend $2999 on the course, millions will soon follow you into your living room while you buy and sell stocks from the iPhone in your sandals.
I want to assure you this is all fantasyland. This is not real.
Unless you are a long term investor where you Dollar cost average into stable, low cost mutual funds and assets, reality of trading is very different from often what is portrayed on internet and social media by influencers.
Unscrupulous influencers sell you a dream of easy riches showing you perfectly cherry picked trades and charts. Often these trades are on demo accounts. In this post I am going to be very blunt about what it takes to be a consistently profitable trader.
And it has got nothing to do with charts. If you have read the greatest of trading books ever written, whether that is Jesse Livermore, Pit bull by Martin, Soros, or Darvas, you will note very little, if any focus is on the technique. These legendary traders describe their day to day struggles with mindset. They describe their thought process, the back and forth of vagaries of trading.
What is this mindset we all keep talking about?
Mindset is your thought process or behavioral patterns once you are in a trade. As simple as that. Since we know for a fact that most traders lose, we know for a fact that they all think alike in some aspects. Since only a few win, we know for a fact that their thinking is vastly different from the crowds.
While I cannot really prescribe a way to improve your mindset overnight as I am not a psychologist, I can offer some alternate approaches to trading which will over time strengthen your mindset. It is like building body. If you do it over a long period of time consistently every day, your body will get better. This is a fact.
Today I am going to suggest something so unconventional it may blow your minds. You may forever stop talking to me if you don’t like this, or you may share and subscribe to me if you agree with this. It can go either way.
What I am suggesting is do not approach trading in terms of technical analysis or charts, but instead approach trading in terms of position sizing or dollar risk.
What do I mean by this?
I mean stop trying to find technical analysis tools which will give you a 100% win rate but instead use whatever you have and use it to make may be 100 dollars a day. If you have a 1000 dollars account, try and make 10 dollars a day.
I am saying most of you already have a viable trading system, you do not have to beat it to death trying to make it right 100% of the times. You just need to focus on using it on a daily basis by observing some simple rules -
You will never add to a loser.
You will not hope for the loser to turn around and instead cut it in its infancy.
You will try and let your winner run for as much as it can without cutting it down prematurely. Once you get better at this game, you will now learn to add to a winner.
Once you can make a 100 dollars a day for a 100 days, now try and see if you can make 500 dollars a day. Another 100 days of making $500 a day on balance, try and see if you can now make $5000 a day?
This will do 2 things for you which cannot be understated how important they are in your evolution as a master trader:
Your focus will shift to consistency rather than finding certainty. This is important- you have to learn to trade with limited information. No one in the markets has all the information at all times. You cannot spend next 10 years of your life finding 100% probability set ups. You have to find a technique which works may be only 60% of the times, and yet gives you that $100 dollars a day. Get it?
You are now laying a foundation of one day making 10 grand a day by first learning to make $100 a day. I have now freed you up from the hell of indicators and spending all your energy finding the holy grail. This post if you have understood it, you are now focussed on finding consistency every day rather than certainty every day.
Now under no circumstances this MUST be construed as me saying you should cap your MAX profits. Not at all! Never have a cap on your profits. In fact I am saying the exact opposite. Cap your max losses but never cap your profits. I wanna be trading even larger size when I am in profit. When I am in a losing streak, I want to lessen my activity. Most folks will do the opposite. When they are winning, they trade small and when they are losing, they go on trading or trade even larger!
My intent or ask is for you to develop confidence in the system you already have! And confidence comes from knowing you can consistently take some profits out of this market 8 days out of 10. Confidence will not come from drawing more lines on the charts. That is a false sense of security.
A master trader believes in trading size. He or she does not believe in being right at all times.
Even great stocks like AAPL, NVDA and AMZN can keep on selling even if the support looks great in your analysis. If you are trading a 100K shares in NVDA, every 2% drop means you are losing a quarter millions dollars. Would you in this situation focus on charts or cutting your loss and trying to go long again at my Friday support level which gave an 8 dollar bounce?
Think about it what I just said. Stop reading any further. Go for an hour long walk and chew on what I just said. I am working on a book which will have all of my educational posts as well as mindset posts in one book. A PDF will be provided for free of cost to my subscribers when the book is released.
I am now going to share an intraday chart of Emini S&P500 below. Closely observe this chart. Can this chart predict anything?
No.
Can you use this chart to make profit?
Probably.
But only if you cut the loser fast and let your winners pay more than your losers.
There is no amount of analysis, tools, lines, indicators that you can throw on this chart below that will make it more predictable. It is pure naked price action. 100%.
Look, some of you may be looking for a 100% guaranteed success in markets and this post is not for you. You will figure this out sooner or later. This type of thinking is for those of you who understand that the market will be in your favor may be 60-65% of the times on best days, and that is your window of opportunity. Make hay while the Sun still shines.
Levels for next week
So this past week, not only the market held my resistance levels, it also saw a good bounce from the levels I shared earlier on Thursday.
Most equities bounced from my levels which I shared in Substack last week- so there were really no surprises there.
The surprises however will be next week in 2 forms -
If we continue to rally from this Friday close at 5970.
If we continue to sell below last week’s lows.
These are not priced in at the moment and therefore are surprises.
So to derive levels for next week, lemme first share my 10, 000 feet view on where I see this market structure.
So with Trump actions and policies, what you have is an inherent anxiety and uncertainty which is bearish in the short term. At the same time, it creates more efficiency and effectiveness in the system, which could be bullish in the long run. You also have potentially more power and money consolidation in fewer hands which again is bullish in the long term- consolidations and monopolies work until they stop working.
Essentially what you have a disruptor in Trump who is basically taking a sledgehammer to the existing power & economic structures and institutions. The benefit of this is that this is faster- if you want to implement change or destroy what you don’t like.
The downside is it can break things and have unintended side effects. In many cases you need a scalpel and not a chainsaw.
Now the sum total of this for me is that this is potentially bullish in the long run but I cannot rule out short term volatility.
So if you consider 6200 or so as a recent high, and here we are at 6000, I think the closer we get to 5600-5700, if we get there, I think there is a compelling bullish case for next year or two.
Now, the bearish case ofcourse is millions of white collar jobs that may vanish due to AI, but I think we are probably 2-4 years from that. Then you have the mid terms which are potentially bearish in 2026 as even though markets love political grid lock, some of Trump’s effectiveness may be blunted by 2026.
So this means for me, I do not wanna be too bearish here, especially if we are trading 5700s in next few weeks. I am not saying we will trade 5600-5700 any time soon, but I want to put my thinking up front what I will be looking for if we do and be prepared for it once it is here.
Now on the week, there is not much event risk. I will lean on 6000-6020 as potential resistance on the week. I will consider lows near 5800s as potential support on the week. These are March emini levels, I will probably roll over in 10 days or so once volume rolls over. Not yet.
Scenario 1: I will like to see 6022 or so come in as resistance for a move down into low 5900s to confirm if this late Friday move was serious or flimsy.
Scenario 2: I will say 5850 and 6034 will remain my edge case levels. I will send an update if we are able to take out 6034 or break 5850 in chat room or daily email.
A tertiary scenario here will be resistance coming in at 5970 for a move down into Friday lows near 5850. The bulls here need to build momentum above 5970 on Monday, else I think we may be headed lower to retest the resolve of bulls at 5850.
To summarize:
I think we are still in an uptrend on longer time frames but there may be short term volatility due to the reasons I outlined above.
If you want to benefit from the “Trump Pump”, I think that dream is not dead yet but I think there may be more bang for the buck closer to 5700s than closer to 6000s.
Folks, as you may know I rarely ever do any promotions or discounts. But with the weather getting warmer and volatility remaining elevated, I have been wanting to offer some sort of deal to potential subscribers. Please use below massive one time discount to be grandfathered in at these insanely low levels and get access to education, mindset, options, chat room and much more.
BUD
With Budlight, I recently shared a bottom on this stock near 40 and this has since rallied into near 60 at time of this post.
I see a resurgence in bear drinking in years ahead and I think Bud light can put its PR fiasco behind it and this can rally back into 80-90 zone in next year or so.
GLW
This one I shared back in July at 37 and has since risen about 35% into $50.
I continue to like this action in Corning. I like these type of stocks in bear markets, I think we could trade 70 on Corning.
In the short term, I like these Monthly November $60 CALLS which are now around $1.9.
NVDA
We saw tremendous rally in NVDA on Friday from my support levels and this stock closed near 126.
Watch the general market if it runs into resistance near 6000, as a lotto I like these March 21 NVDA 115 PUTS which are now like 3 bucks. With these short term options, their price is very sensitive to the greeks- your deltas, gammas and IV. It is not uncommon for these options to gain 30-50% in a matter of minutes and then lose value. So any short term options strategy should be cognizant of this basic fact of this option pricing.
RBLX
This is an older orderflow stock which I first shared near 38 before it jumped to 70s. Despite this recent sell off I have been liking this action in RBLX.
I think as long as we hold 50-54 on RBLX, this could be headed higher into 80s. It is $64 at the moment.
PLTR
PLTR is a classic example of larger institutional traders loading up when the stock is cheap and then dumping the stock on retail when it is near its peaks.
Is it dead now though?
I dont think so. What I need to see is a bottoming process on Palantir which I think we have begun to see. Interim, there may be some volatility on the stock but I think it is closer to a bottom here at 85 than not. I will eventually like to see PLTR push back higher above 100 again. I think if there is volatility in the general market next week or two, this could be supported on dips into upper 70s.
Have a tremendous week ahead!
~ toc
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