this week's lesson.
Today I am going to talk about how to really take advantage of the next market cycle and how to find the correct timing of it.
Before I start this video, we have a conference coming up in November 14th to 16th so make sure to grab your opportunity and let’s get into the video. In this video, I am going to generally talk about my market experience because it is very important that it’s related to the market cycle that we’re having in 2020.
At the beginning of the cycle, it will be slow and boring. Short seller’s often get eager to push a trade too early; then they will get caught in a massive short-squeeze like I’m going to talk about in the video IE: “$APVO”. Once they get squeezed, they will give hope to all the people that are long, when they see a ticker that’s up 1000% to 2000% a day, then it will then give them hope that maybe the next play will see the same performance. Like ex: $APVO.
This is where patient short sellers take advance of all the people trying to go long and maybe that are long into massive resistance. This is where longs start to lose their money again, then the impatient short sellers start to bring the market cycle back again. That is a consistent loop that will rotate about 3 to 4 times throughout the year. Let me give you an example. This week we have $APVO. This is a parabolic runner that went from $5- $80 in a week.
If the ticker did not have any type of action at the beginning of the day but is spiking in the afternoon or in afterhours, we want to avoid shorting.
There is no way to know where all the buyers are and secondly $ABVO was producing low liquidity during the day.
There is no way to know where all the buyers are and secondly $ABVO was producing low liquidity during the day. If ticker has low liquidity it’s hard to short and the spread is going to be really wide, that’s a big NO especially for both long and short traders. If you really want to long $APVO I suggest choosing something that has higher liquidity. It must trade about 50 million shares in a day for you to have a decent entry and exit. You can see the habit of $APVO each day. It starts to spike in the midday or in the late afternoon. This first green (11/03/20) went from $7 to $14 and on the second green day (11/04/20) it went from $9 to $19. Then started spiking in the midday again (11/05/20) and it went from $15 to $22.
In this case, if the support is way too close to where your short target is, you need to be patient. Now what does that mean?
When you are looking for an area where momentum shifts, you want to look for a decent range to short into. The point you want to short into is far above the support area. In this case $ABVO spiked from $10 to $17, that is the minimum percentage (70%) for breaking off the support. The minimum extension is roughly 60-70% and you need a massive amount of volume to trade in the top of the consolidation area before you short into resistance. So $APVO didn’t really consolidate at all. You can see that it went from $9 to $19, consolidated a little bit. For less than 2 hours while trading between 5-10 million in volume. This isn’t enough to make the stock drop. It did not trap enough bad orders. On Friday (11/06/20), you can see that it did a fake out for the entire day.
On these multi day runners we do not want to see the spiking behavior in the late afternoon, it is not a good shorting opportunity.
When you want to go long in these types of tickers you look for enough liquidity and, in this case, $ABVO did not provide that. This is how market starts to make this cycle. People are eager to catch the opportunity, but they aren’t paying attention to the liquidity or the charting behavior. This is where they are making a major mistake. On Friday, the company filed a 13D, announcing new insider percentage of ownership and the stock went from $24 to $80. The stock went from $24-$80 in afterhours with low liquidity. If you were trying to short this, you would have been taking the ask by yourself because of the low liquidity.