This is a special edition of our Investing letter. Since we know a lot of people might be interested in this and it is a paid letter we are running a 25% discount right now!
Here’s what we’ll discuss:
Our signals spotted both AMC and GME before they moved. We will talk about what you want to do about situations like that in the future.
Market Update - Discussion of Daily Averages for QQQ and SPY Net Options Sentiment and Upside Breakout.
Sector / Market Cap Movements Update.
This letter is about taking a reset on a crazy week in the market. I know it is a little later than normal but we wanted to gather more data first!
I’ll start with a few stories.
I (George Kailas) haven’t personally traded stocks in close to 2 years. I made that decision, to avoid even a whisper of a conflict of interest. Despite my commitment, I almost bought FFIE yesterday at $.80. As I write this letter a day later, it’s currently going for $3+. Some might call that a miss, but I stand by my decision. All this echoes the problem with meme stocks. Even though I chose not to buy the stock, I still checked it a bunch because these movements are fascinating, exciting and volatile. I ultimately passed, though I knew my wallet wasn’t likely to thank me. I could have made a lot of money. But let me frame it differently:
In order to compete with the market maker robots, you have to be able to process more social and price data than you can comprehend. I am ultimately happy I didn’t do it, because I have a lot of responsibilities and interests in my life. For me to even HOPE to execute well and time my exit from the stock, would have been my highest priority and taken most of my time during market hours. For those that might say: “set your stop losses!”. In my prior times on memestocks and memestock options, I cannot even begin to express to you how awful my execution price was even on Schwab. If you are in Robinhood or WeBull, or any other broker who primarily makes money off letting people front run your trades, you will, more often than not, be behind a halt on your execution. While other trades are executed in the dark pools while the market is closed.
This isn’t to say it’s impossible, it’s just that the biggest issue I see with retail investors is that they severely overestimate their skill levels. Over 70% of retail investors lose. And that is on stocks that you can, at least, make sense of. GME is a 33 Profitability and 12 Growth in Prospero. It’s already severely overvalued. So as it is falling in price, how do you know how far it can go? Do determine that is challenging, and is orders of magnitude more difficult. If you have tons of time and you want to play momentum, no reason not to build your technical analysis skills to train yourself to spot these and many other trades. But per my point above, I can count on about 4 hands how many technical traders with real chops I’ve met outside of Wall St. and a bajillion more that think they are…but frankly are not very good.
All this being said, Prospero did spot both AMC and GME BEFORE their big moves, and I’m going to talk about how you could spot these opportunities in the future based on our signals. But I hope all the caveats above were properly taken in!