Weekend Update Video (March 20, 2020)
SP-500 ZM T2108 T2107 DJ-30 DJ-20 MDY IWM NDX--X COMPQX XAL--X DAL AAL UAL LMT RTN GSX TAL ZM IIPR BLPH PTON APRN BLPH PTON MRNA AMZN GOOGL AAPL GOOGL FB NFLX HAL SLB CVX XOM STOR
We are still above Wednesday’s (March 18) intraday low ( INDEXSP: .INX ), what I will call the Ackman low. However, keep something in mind, if we open lower on Monday that will be a new low; it will be a new intraday low for stocks. The reason that I am mentioning that is, I mentioned the other day, I talked about the 4th Day turnaround, that you look for, and that is just straight out of William O’Neil’s stuff at IBD; it is not an original thought on my part.
Just because I talked about the 4th Day Rally, which could come anytime on day 4 or later, doesn’t mean; This is great, it didn’t quite get it, that means we’re still on track for next Tuesday. No. This is just a concept that I showed you and it does seem applicable, to me it seems very applicable, but it is not, day 4, rally, all in so that we can take advantage of the big right side of the V that just rockets higher.
I don’t think that is going to happen. All we are REALLY doing is looking for some kind of evidence that the ultimate low is in and now we are just starting to try to build some kind of a base along, which axis? The x-axis, that’s what we are looking for. So we are going to have to have a lot of time pass. I am just going to do one video here this weekend because, here’s a spoiler alert, I don’t really have anything for you to buy on Monday.
The market is that volatile, and keep in mind, with so many stocks, basically every stock, broken to where there are really no great setups, then we are at that point where I start butting up against, listen to me, this is really important, we are at that point where I start butting up against the rule that I talk to you about all the time, which is, when you have standards for buying a stock and you can’t find any stock to meet your standards don’t lower your standards. If you are going to lower your standards then you might as well have no standards at all. You might as well just say, “I just like to buy stocks. I like to play the market, it’s fun to play the market.” I will tell you man, if you are trading in this environment there is nothing about this market that is playful, at least not to me.
This market remains really, really treacherous and if you are not careful you are going to gradually whittle away your money, it is just going to happen. So remember that while we are looking at this day 4 count as something that is important. We don’t know (1) when that is going to happen. And by the way, even if this turns out to be THE low it doesn’t mean that day 4, if we get a higher close, this is it and you have got to get in. it could happen on day 5, week 2, week 12. All we are looking at is a low that is reliable. And, frankly, the longer time passes the more reliable that low would be so we are looking for this reliable low and THEN evidence of some kind of blastoff. If it happens really early that is not really a blastoff it is just a reflection of volatility.
So just keep that in mind because I don’t want you to be jumping the gun, I’m not, I’m really not. I wish every single asset that I had was actually in cash but it’s really not the case; if only life was that simple. Be mindful that this is a big asset unwind, a global asset unwind. Think about all of these pension managers who for years and years and years have been running the unions push for greater and greater benefits for their members. And that is all fine and dandy; I could promise to give each of you a trillion dollars on Monday for just showing up, just if you login, but that promise isn’t worth anything because I don’t have that kind of money.
Similarly, you can negotiate all these wonderful benefits through your union and sign this great deal like, look at me I worked 15-days and I get full benefits forever. But if the pension doesn’t have the money to pay it you’re screwed, you’re wronged. It’s unfair, it’s unfair, life is not fair. Well, welcome to life, life is not fair, nobody ever said it was fair. Anybody who said it was fair was probably trying to sell you something; it’s not fair. The sooner you realize that life is not fair and that you do not have a right to make money in the market, well, markets always go up so I am getting screwed here. No, you’re not. The market is not fair. Life is not fair; I guarantee you, the people that are running your unions negotiating all this stuff are not fair. They are also not worried because they are sitting fat and happy. This applies to thee but not to me.
But think about it; now these pensions are really screwed because they’re returns that they must get in order to pay their obligations, they’re just not going to be there. So mark my words, it hasn’t happened yet, you are going to start hearing about CalPERS and whatever dumpster fire pension there is in the state of Illinois and Chicago, any of that stuff. You are going to start hearing about THEM wanting a government bailout; everybody is going to want free money. Now, I am not talking about the right or wrongness of giving everybody free money, I would like some too if possible, I’d appreciate it very much. Thank you in advance. I am not talking whether it is right or wrong I am just talking about what the ramifications are, we’ll just stick to the market here.
We are going to see a lot of things happening that no real individual is talking about them too much. The market is still discounting a lot of bad things that even haven’t happened yet, haven’t even been discussed yet, that would still fall under the rubric of uncertainty. The market hates uncertainty. Well, think about it, if you have a container of certain things in it, and it is a closed container. You know that you see everything that’s in it and there are some unknowns related to each of those things that are in that closed container. Okay, that’s uncertainty, BUT now you can go about shooting the fish in the barrel and looking at one thing at a time and seeing if you can craft some kind of certainty around an uncertain thing.
Because The one certainty that you have is, you have 15 items of uncertainty in the barrel. Okay, well let’s just attack one of them at a time and get them figured out. That’s what the market does with extreme and ruthless efficiency. But right now, seriously, nobody knows how many little bundles of uncertainty there are in the bucket, it’s an open container. And so that is why in my view, we are still getting a lot of selling. I want to mention one thing; we have got a relative low and an absolute low. The absolute low, I am talking about the prices here, refers to numbers, it’s just the numbers.
This is what I am talking about; this is something that I started keeping a few days ago. It’s got the ultimate low; these are the lows that I am looking at in all of these various indicators and indexes and then the date at which they got hit. I haven’t really looked at these things today to see if they are accurate. I am pretty sure that this T2107, the percentage of stocks above their 200-day moving average, is lower today. I just want to show you, this is the stuff that I do when nobody is looking at me. I keep track of this kind of stuff because numbers do matter. And those numbers are the “absolute” numbers; those are the nominal figures, the price figures for all of these things.
Absolute refers to Bollinger Bands; on this one here this low extended and even back here on the 16th, several of these, the lows have extended well below this lower Bollinger Band, the black band. But even if we got a new low in the S&P ( INDEXSP: .INX ) today, say it fell down there just below here, it would still be inside the lower Bollinger Bands. So we would have, literally, had to be into the low 22 hundreds in order to get outside this lower Band. We would have had to gone another 3-4 percent.
And so right now as you look at this, again, even if this formed a lower low, if it undercut Wednesday’s low, as long as it stayed above this lower Bollinger Band, this would actually not really be a sell signal. It would actually be viewed, with respect to the volatility in the chart; it would actually be viewed as more bullish than bearish. And so there are a lot of ways for us to be looking at this market. But the most important thing to remember is you are not going to buy the bottom.
I put 20 percent of the cash that we have in the pension today, I put 20 percent of it to work in the SPY ( INDEXSP: .INX ) and now I wish I didn’t, frankly, I wish I didn’t at all. But the other way to look at it is I am glad I am still 80 percent in cash and I don’t have a stop on that. I will tell you if we trade lower on Monday and then don’t really recover right away, I will go ahead and go the cash and say, “Okay, I took a small loss on that,” I’m trying to try to gradually scale in money but any trade starts as really, as not really a day trade but you are putting money to work because you think it’s going higher.
If it doesn’t go higher, well, then you are clearly wrong. Then the question is, how much are you willing to sit and decide how wrong you going to be? Because let’s say we undercut this level here, and I put 20 percent to work, which means it is a very, very small dent in the overall portfolio. And then the S&P ( INDEXSP: .INX ) comes down to 2000.00. Well, I could say, “Well, wait a minute, I am only down 12 percent lower and I only put 20 percent of my cash to work.” Well, now I am just sounding like a moron or a money manager who has only been managing money in a bull market.
The reason is, think about this because this might apply to you, I am talking about a pension account. I am talking about a retirement account. Guess what? There are no tax ramifications. I don’t have to worry about; I’ve held this thing for 15-years and I don’t want to have to pay a capital gains; it’s tax free, it’s no issue. Don’t do this, but you could literally day trade your pension account or your IRA and you don’t have any tax ramifications. Like I said, don’t do that. That should be patient money.
The point is, if you are scaling in on kind of a market call like this you must have some kind of exit strategy on the downside. Don’t just always be looking, in this case, at the 80 percent that is still on the sidelines. No. You have got to still focus on that 20 percent. And maybe taking a small loss on 20 percent of your portfolio is quite a bit better than taking a bigger loss on 20 percent of your portfolio. So if the S&P ( INDEXSP: .INX ) trades down to a new low on Monday and it doesn’t rebound right away I am probably just going to take that off and go back 100 percent to cash. I can always buy it back, that’s what I tell you guys. You can always buy it back.
I am going out of sequence here, but I sold Zoom Video ( NASDAQ: ZM ) today. I had a really nice profit in that. We had a really nice profit over on Option Market Mentor too. But I sold this even though it could go up; in fact, it is trading up after hours. You can see it closed at 130.55, now it’s at 131.43. I thought if it keeps running up to 140.00 and beyond I can always buy it back. But I got a nice profit here and there are not that many profits to be made right now so I will take it. You can always buy something back but you can’t always sell it at the price where it is today and you have to keep that in mind.
The point here is, cash is still king and you need to be paying attention to the technicals. This is a brutally treacherous environment and for most of you the best trade is no trade at all. The best trade for you is to trade your time for learning; for setting yourself up for tomorrow, for next month, for two months from now. That is your best trade. Look, you are sitting at home with your wife or your husband or girlfriend, your boyfriend, your whatever, and your kids. Lord knows, you want to be doing something and so don’t be focusing on this quiet desperation scene of buying and selling, and buying and selling, and buying and selling. Do something that is going to set yourself up for the long run, that’s what I am saying.
Look at all the old videos that we have. I have done a ton of videos and we don’t, frankly, this is my note to Gary, we don’t really market those enough. We don’t really put those in front of you and say, there’s a lot of video content here, take advantage of it. Seize the day, get that stuff, learn, and take notes. There are a lot of things that you can be doing to bump your game up.
It’s like a quarterback and a receiver, you train all during the off season and get everything squared away, all the timing and all the routes and everything between you, the communication between you. And you are not scoring a touchdown because there is no football game. But once the fall comes you start playing football again, now all of the sudden all of the work that you have done together in the off-season is going to payoff big time. And by the time the season starts it’s too late to be working on your game because now you are in it. You are prepping for the next opponent; you are looking at game films, you are doing whatever it is that you do. But you don’t have time to put in that work that you should have been doing during the off-season. I want you to keep that in mind.
Most of the time people are here and I get it. You are here because you want stock picks, you want me to tell you when to trade, you want me to tell you what to trade, you want me to tell you how to trade. You want to show up at the end of the month with more money than you had at the beginning of the month. I get that, I embrace that, that’s what I do. But every once in a while, and I have seen a few of these in my career and each time I get better at dealing with them, I’m the best that I have ever been right now today. It’s like the saying goes, I’m not as good as I once was but I’m better than I used to be.
That is actually not true, I am actually way better than I used to be and way better than I once was, but not as good as I am going to be. And why is that? Because we all learn, so I am learning too. I will constantly be learning. I am learning about what I need to do during times like this to keep you in the game. I know what I need to do to keep you from doing dumb stuff. I mentioned either yesterday or today, when I am typing so much in the forum it keeps me from doing dumb stuff. I am trying to give you what you need in order to come out when the season starts, you are going to be Super Bowl champs, no question about it. So right now you need to reorient yourself into thinking about things in other ways.
Now, let’s look at these breadth indicators (T2108). The percentage of stocks above their 40-day is still higher so breadth has been increasing a bit. Here (T2107) on the 200-day, no, this is a lower low so breadth is actually decreasing, so you are getting even more stocks that have fallen below their 200. Put it this way, more stocks are getting even weaker and fewer stocks are actually regaining their 200, so the market is getting heavier. This is not a good thing.
I want you to look at this though, look at this diagram. These are Merrill patterns. John Bollinger wrote a book, probably 20-years ago, on Bollinger Bands. One of the things he included in it were these Merrill patterns. These are M patterns, there are also W patterns, which is the whole thing flipped upside down. Don’t get all confused with all of this, this one and that one, oh my gosh. Well, if you at all of them they are very, very subtle; very, very subtle differences. There’s your first dot, higher high, lower low. Lower high, higher low. There’s your first dot, higher high, higher low, lower high, lower low. There are 16 different combinations here because there are 4 dots, not including the first one, and you can have all these different things.
Here’s the point: Merrill didn’t think to do Merrill V patterns or Merrill I patterns. There are Merrill W patterns. Why is this important? This is important because of all the bull traps that I see right now, DJ-30 ( INDEXDJX: .DJI ), and this is what I am talking about. So we will get through these first and then we will got the these, what I think are bull traps. These transports, DJ-20 ( INDEXDJX: DJT ), they’re all holding. The Mid-Caps ( NYSEARCA: MDY ), still a higher low, ( NYSEARCA: IWM ) still a higher low. The Nasdaq ( NDX–X ), still a higher low, ( COMPQX ). So again, all of this stuff can change on Monday but right now the only thing we have that looks worse is this breadth over the long-term 200-day moving average.
But if you look at these various charts ( XAL–X ) what you are going to see are a bunch of bull traps. So if you look at the Airline Index ( XAL–X ), we’re going to get a bail out, it’s time buy these things. Okay, well fine, that didn’t work real well for Delta ( NYSE: DAL ). It came up today but then closed lower. Here ( NASDAQ: AAL ), for all intents and purposes it closed lower; it was up less than a dime. UAL ( NASDAQ: UAL ), this is a bull trap, where the stock rallies up here, it sucks in a bunch of people because they are buying the bottom and then it crashes and falls even further.
Look at some of the defense names: This ( NYSE: LMT ) was a bull trap, right here. Just so you know; what is a bull trap? That’s what I am showing you. You are waiting, and you are waiting and you are waiting for an opportunity to buy the stock right off of the low. There it is, that’s the low, I have got to buy right here. The next day, oh, there it was, it gapped down but then it closed even higher, I am definitely in. Oops, not so fast and then boom, definitely not so fast. What happens is you are on the sidelines and you are waiting and you are waiting and you are waiting. And then you are jumping in there to buy. The stock goes up even more and then it crushes you so you were a bull and you got trapped.
Well, think about this (there is a method to what I am doing here), a sell-off, what turns out to be a bull trap, and then a reversal, and then this is starting to look remarkably like a W or maybe this way or maybe this way. There aren’t V’s, that’s what I am saying. So when you are looking at all of these stocks, and I will show you a bunch of them, when you are looking at all of these stocks be mindful of bull traps. What you are doing is, you are totally ditching your standards for what you’re buying because the market has changed and I have got to change with it. You actually really don’t. You can try different strategies like trade really small and stuff like that. That’s okay, that’s all right to do. But be mindful that you are changing your strategy and that puts you at a disadvantage, you have to understand that. But know that the end is ultimately going to happen and it is going to happen, in my view probably sooner than you think.
I want to show you something here: This is just a diagram I stole off of some article on the Internet. Compare the S&P ( INDEXSP: .INX ) decline, that’s this steep, steep, steep thing here with the 1987 decline; 38 days before it ultimately hit bottom. The 1929 decline 40 days before it ultimately hit bottom. So we are not even at that magical time yet, as far as the number of days. But if you look at the extent of these pullbacks, this is major, major carnage so you have to understand that.
I look at things like this and when I was younger in the trading business, this time is always different, it’s always different; you know, sell the canons and buy the guns, whatever it is. That’s an old term where it’s like you sell the anticipation and you buy the actual event, stuff like that.
I remember during the buildup to the Iraq War I was really, really bearish and I thought, if we go into Iraq that’s not going to be good. We did go into Iraq and imagine my surprise when the market rallied, it rallied big time. But to me, I don’t know about you, but war is kind of bad news. But what happened was the market had already sold off in anticipation of disruption of oil fields and this and that and the other thing. And then in comes Schwarzkopf and took out Saddam “Insanes” intelligence and the next thing you know the markets were up a lot.
The point is, that time was not different. I had remembered reading, hearing about, if the market anticipates this stuff, and then when the bad stuff that is supposed to happen finally does happen, that’s when you buy. And I could see that on the chart. I am looking at all of these stupid historical charts going, oh yeah, absolutely. Absolutely, buy at the bottom in 1929, which I think, actually, the market bottomed in 1930, if I recall, I don’t remember that far back and I wasn’t trading in 1987. But absolutely you buy these big dips that’s a no brainier. I would have made a boatload of money.
Well, guess what? No, I wouldn’t have. Do you know why? Because that time was different. It’s ALWAYS different. It always feels different. This time always feels different. I remember in the whole Iraq War, I remember exactly where I was sitting, at the kitchen table some cheesy apartment in Sacramento. I was sitting there and I remember looking at the charts and looking at everything and thinking, well, that happened in the past but this time, this is a war man, it’s different and it wasn’t different, it was the same. I am waxing philosophical and taking you for a walk down memory lane.
Do you remember when Lehman failed and Bear Stearns was having all of those problems? I was actually back in New York and, some of you older members might remember this, I was actually back in New York and I was scheduled to go on Fast Money. It was the first time I was ever going to be on that show, I was scheduled to be on there. The market was just absolutely imploding because of this. I sent them my notes in the morning; I’m sitting there at the DoubleTree or whatever it was hotel seeing the market just implode and I am getting excited.
Now, I have been trading for over 10 years and I am a studier of history, I’ve been through a few of those things and I am looking at the breadth indicators. I am looking at, literally, the same stuff that I look at now. And I see all the market, back then I thought everybody on CNBC was so smart they were geniuses. I was so lucky to be included in there and they would actually let me come on the show. OMG, I am just a boy from Selma, California. I don’t know anything about anything and I get to be on CNBC. Imagine my delight.
So I am sending them my notes and I get a call from the executive producer, I forget who it was, it was one of the big producers in the show, going like, Dan, do I read you right? You are saying to buy? And I said, “Yeah, we’re so oversold, this is a massive buying opportunity.” And while I was talking to this person the stocks are still going down lower and lower and lower. And I am saying, “This is a buying opportunity,” and I gave her some reasons why. Now, this is a producer, she doesn’t trade. She doesn’t know squat about anything except which way the camera is supposed to be pointing; and who is paying for commercials and stuff like that. So fine Dan, we’ll get back to you.
And then I get an email about an hour later, they are going with Carter “Worthless”. Why? Well, because Carter is established and I would be new and so they just don’t feel comfortable going on such an important day, they don’t feel comfortable going with somebody who is not proven on the show and so they are going with the old standby. Okay, fine, no hard feelings. So what does Carter Worth say? “Oh, you have got to sell, this market is going a lot lower, it’s going a lot lower.” When was the bottom? It was about an hour before Carter said you have got to sell, the market is going a lot lower.
I would have absolutely crushed it on that show that day but I didn’t get to go on. Do you know why? It was because nobody knew who I was. Alright fine, too bad, so sad, life moves on. Why do I care? The only reason I care is because when I would do TV I literally took the approach of being and outsider. I was talking to people that look at these chuckleheads on CNBC and think they know something. And so I was basically telling people, and you can see it in some of my clips there when I am on I will say, hey, I really don’t know. I remember when I first would talk like that I would hear afterwards, Dan, you have got to say you know. Yeah, but I don’t.
Now I don’t bother with that kind of stuff because I think it is a waste of time and plus we are getting big enough to where I feel like I have my own TV station here and you don’t have to look at the bearded guy on TD Ameritrade or certainty Mike Lindell talk about getting the best sleep of your life. You just get to listen to me in my John Ritter/Willie Nelson hybrid voice. The point is, when it gets right down to it, it doesn’t matter who is making the market call, who is doing the market analysis; whether it is me or you or Carter Worth or Jim Cramer or anybody else.
What matters is what the market is doing and what it has done before. I have been saying this and talking all this time letting you look at this chart. Wouldn’t it have been nice to have bought the 87 low or the 1929 low? Sure it would have; it would be nice to buy this low, if this is where it is, it might be from down here. But in all of those instances there was plenty of time to get back in, plenty of time to get in. So you don’t have to buy the low, you don’t.
If you look at this, this is a bull trap. If you are buying here, crap, you are forgetting about the W. You are forgetting about the W, it isn’t a V, few things are; that’s why V comes before the W. So if you are buying the V ( NYSE: RTN ) you are buying at the middle part of the W. That is kind of the best way I can say it, you are buying at the middle part of the W.
You are forgetting about this, you are forgetting about a probable test and then we find out which Merrill pattern it is. We find out if this first part of the W is this Merrill pattern, which is bullish or if it is this Merrill pattern, which is not bullish, it’s not bullish. So we are in this kind of no man’s land where we really don’t know what is going to happen with these stocks. And the sooner you figure that out the sooner you are going to remember and learn how to make money.
So let’s just move on here with some of the stocks that have kind of caught my eye that’s it for my monologue. So GSX ( NYSE: GSX ); we are still waiting. Hopefully, it will drift sideways for another month and give us a nice solid base from which to spring higher. The other educational stocks, remember TAL Education ( NYSE: TAL )? Boy that sure looked good, well not anymore. Oh, well maybe we will buy it here at the low. Sure that’s fine you could do that. But is that part of your process? To me the process is when it’s doing this, then maybe here you buy or something like that. But once the stock implodes and does this it’s no longer your stock, it’s somebody else’s stock.
Like I said, Zoom ( NASDAQ: ZM ), this has done well. You could say it’s kind of a cup and handle; it’s a really sloppy one but the stock is moving higher. Okay, great. I sold it, not because I think it’s done going up, I kind of do, I feel like it’s probably going to come down a bit, but I am kind of trading the W here. That’s the V I am waiting for this. So don’t think of V as not just the first half of W. It is, it is the first half of a W, respect the W.
Innovative Industrial ( NYSE: IIPR ); I mentioned this, a good dividend. It used to be higher because the price was lower. The stock is up 15 percent today over the last couple of days like it’s a monster trade. I have a nice position in this. Do you think I am just going to hold it and watch it cruise through 100.00, 120.00 and make a lot of money? No. This is a V, it’s a V. I am going to respect the W. I don’t know whether it’s going to happen on Monday, maybe we get another move higher. I don’t know, but at some point we are going to get the second half of the W starting to form and then I am going to learn whether this is a Merrill bullish pattern or whether it’s a Merrill bearish pattern. But irrespective of whether it’s this or this, I will probably be long gone because that is just the way this market is trading right now. You have got to respect the W’s.
Now, let’s look at this Bellerophon ( NASDAQ: BLPH ). This is a company that makes an inhalation delivery system. I think it had been kind of under review by the FDA, a Phase 3 patent review, whatever it was. And then they just basically said, okay, in light of the Coronavirus fine; go ahead you’re good. And so that is why the stock jumped up. Okay, anytime a stock runs up like a thousand percent or whatever it was, it’s close to it it’s 650 percent. That is really a stock that you want to sell. It was hard to borrow, I don’t know if I actually could have borrowed it if I called my broker. But I figure if a stock is that hard to borrow that you have to call a broker, it is probably not a stock that you want to short anyway because it’s crowded. But with that said, look what’s happened even after hours, it’s down another 13 percent.
When you are buying stuff like this the obvious one, Peloton ( NASDAQ: PTON ). Now that you can’t go to the gym, the one that you are not going to anyway but that you signed up for on January 2nd, because of your New Year’s resolution and have not been there since even before Valentine’s Day, you know, that gym that you can’t go to? You are going to go drop $2,000.00 on a stupid stationary bike and try to be that chick in the commercial with the uncertain look on her face. Or now I guess there’s a dude on there that is doing the same thing. Don’t be those people, they’re knuckle heads. You are not going to go out and buy a Peloton ( NASDAQ: PTON ) bike for $2,000.00.
The market, though, thought you would, at least some retail traders thought you would, they jacked this price up 35 percent. All this has done is given you an opportunity to sell this pig. You are going to be able to find these things on eBay for a fraction of the price in the not too distant future, if not already. Or you can go with Echelon, which is a bike that is half the size and I think you stick your iPad on there along with your ashtray and your beer, whatever it is to watch other people who don’t look like you workout and who are always much stronger and have better endurance than you or me for that matter.
Because the people that workout all the time, are working out all the time. They didn’t need to be told by Andrew Cuomo or “Slick” Newsom or whomever it is that is telling you that you have to stay inside. They didn’t need to be told that maybe they should go buy an exercise bike and start working out. So this is just stupid stuff. Don’t fall prey to it.
This ( NYSE: APRN ) is the ultimate stupid stuff, I guarantee you that by July or August or sometime before the end of the year this thing is going to be back down at least at $3.00. That is almost a lead-pipe cinch. Why? Because this is all related to a fungible good, it’s a virus. At some point that virus is not going to be an issue, with respect to people going out to restaurants. I don’t even think that this is, oh honey, let’s stay in and cook, lets call Blue Apron ( NYSE: APRN ),
I think this is like, hey, we cant’ get food, we have got to get food. Let’s call Blue Apron ( NYSE: APRN ) because on their website it says that they will deliver us food; all the way up to the time that they don’t have it. Or all the way to the time that you can go get it. So this isn’t like let’s restructure date night because culture has changed or something like that. That’s not what is going on here. This is just idiot investors thinking that because we have a flu epidemic of monumental epic civilization killing proportions. Screw global warming, now we are all worried about getting sick, whatever the deal is. Whatever floats your boat to get you all panicked. People start buying Blue Apron ( NYSE: APRN ), really?
And so ultimately the ether is going to dissipate and this thing is going to come back to be the great business model that it is, which is, take something that is an innovator that basically created a new category, which is date night at home. We send you all the ingredients, we even give you the spices and you can make a really, really good meal with your honey at home and it’s really fun; and it is. That was their niche, so they took the company public and all the bag holders that bought here weren’t thinking about the fact that the barrier to entry on that is literally a shopping list. Anybody could do it. You could do it I could do it.
We actually buy food from somebody locally that we are supporting. She is a single mom, she makes really good food and she delivers it to us a couple of times a week. What’s the difference between her and Blue Apron ( NYSE: APRN )? Well, she makes it for us, which is really cool. Anybody can do this. There is plated, there is all kinds of different things. And there is also the supermarket and Betty Crocker, so this is a stupid business model if you want to take a company public and actually turn it into a profitable venture for people that are buying once it becomes publicly traded. This is not that.
This is like the WeWork of food. It sounds really cool on paper but it’s not going to make you money. So you are looking at Blue Apron ( NYSE: APRN ) and thinking, well, I bought it here at $25.00 I am only down $15.00, it could go back up there. I could and pigs could fly. Neither one is going to happen. This will never be back at $25.00 so get this stuff out of your head. Stop snapping at shiny objects.
This trade, ( NASDAQ: BLPH ) is over. This trade, ( NYSE: APRN ) is over. This trade, ( NASDAQ: PTON ) is definitely over. How about this one? Moderna ( NASDAQ: MRNA ), it is a potential vaccine, whatever it is, fine. I would say this trade is over too. This trade was over right there when the stock gapped and crapped. Look where it is now, where it is trading right now it is down 21 percent below where it peaked here. But look at the volatility that it has had in between then and now. This has been a money sucker for those who snap at shiny objects. What I am saying is just sit there, sit there in cash. Study; look to bump up your strategies. Do things that you know you need to do later and get good at them now.
We will look at some other stuff. Amazon ( NASDAQ: AMZN ); it closed right around the 200-day moving average. I had sold some puts on this and was profitable on them today but I wound up selling them for a small loss. And the reason was because I didn’t have that much conviction. I didn’t have that much conviction in it, and listen to me because this could be you sometime, I am looking at this saying, “It will hold at the 200-day moving average, I will stick with my trade.” And then Monday comes and the stock gaps down to 1775.00. Now, I am still good, my puts were down here I think like 1650.00 or something, but I just didn’t feel like farting around with a stock that is flopping around like a fish on the hot pavement in July so I closed them out for a loss. I did a few of those things today.
We are looking at stuff like this, is this the time to buy Google ( NASDAQ: GOOGL )? Or this is my opportunity to get into Apple ( NASDAQ: AAPL ). Any day that the stock trades is an opportunity to get into Apple ( NASDAQ: AAPL ). This stock is dead, there I said it, that’s right, I said it, it’s dead. The stock was up at 330.00 in February, now it is down 30 percent to 230.00. It has got whacked by 30 percent. Now, I am not talking about like head and shoulders here, that’s really not relative here for various reasons. But when you look at this stock this is what distribution looks like.
Just because it’s Apple ( NASDAQ: AAPL ), the time to buy Apple ( NASDAQ: AAPL ) was 15-years ago, not now. Buying it now doesn’t give you a cost basis or $12.00. It gives you a cost basis of $230.00. So the question is, do you think Apple ( NASDAQ: AAPL ) is going to do this? We are in a new world now. I think they have closed all of their stores; all the sweatshops in China are closed. I think. I don’t know, maybe they are opening them up, they don’t care about their people over there. This stock is now below the 200-day moving average. Are you going to buy this just because it’s Apple ( NASDAQ: AAPL )? Big deal.
That is like getting the finest steak that you have ever had, Wagyu or whatever it is and insisting on eating because it is the best steak imaginable, totally ignoring the fact that you forgot and you left it in the trunk of your car for a month. But hey man, it is still a really good steak so I am going to go ahead and eat that thing. No, you don’t do that. So there is a time and a place for steak, there is a time and a place for Apple ( NASDAQ: AAPL ). But the bottom line is, this is not an opportunity to buy Apple ( NASDAQ: AAPL ) at a low. It is just an opportunity to buy Apple ( NASDAQ: AAPL ) at 229.00, don’t go there.
Facebook ( NASDAQ: FB ); okay fine, V, no W, wait for it you can always buy it. You can always buy it you don’t have to buy it here KNOWING that the stock is going to do that, it’s probably not going to. Yes, but it’s on online social media platform. Isn’t everybody going to be online now? Well sure, but Facebook ( NASDAQ: FB ) doesn’t make money by people being online. They make money by the advertising dollars that they get. And a lot of people, like us, are saying screw advertising. We don’t need no stinking advertising right now. We are doing it for different reasons but the bottom line is, there is no company that is particularly safe. You don’t know any more than the market, in fact you know much less.
Netflix ( NASDAQ: NFLX ); zigzag, down. There’s the V, oh crap, where’s the W? So you are sitting here, seriously, buying at 332.83. If you are doing that you have to be the guy who is pouring over the balance sheet and the income statement and looking at the fundamentals and all of that because the stock sure isn’t giving you a buy signal.
Okay, we’ll look at some other stuff here. Halliburton ( NYSE: HAL ); I opened up a covered straddle on this. Bought the stock, sold the $5.00 calls, sold the $5.00 put. The cost basis is, I don’t know, around 3.50 or something like that, I forget off of the top of my head. If this stock starts falling I will ditch that thing too, I’ll get out of it. The stock is at a 15 percent dividend. Of course, when a dividend gets that high a lot of times a company will cut their dividend because they are going to say, “We need the cash. The stock is at $5.00, for cryin’ out loud. We can’t afford to pay a dividend.” That is why companies cut their dividends. I don’t know whether that is going to happen and frankly if it did, think about it, the stock might rally on that news because who really thought an energy company would be paying a 15 percent dividend? And so therefore, oh okay, they are doing what they need to do in order to survive. So this is a totally speculative play.
You could do similar things on Schlumberger ( NYSE: SLB ). I have talked about energy kind of maybe being at a bottom. But keep in mind what is this? This is a bull trap so far V, looking for the W. Looking for this kind of W, but all we are seeing right now is a V. Don’t assume that that is going to continue.
Exxon Mobil ( NYSE: XOM ) is another one that just keep going down. One thing that I thought I would mention, Store Capital ( NYSE: STOR ), this is the one that I told you my buddy bought the other day. I think he bought it at 25.00, I think he bought it last Friday, right around here. You might be saying, “On man, I’ll be he’s stressing.” He’s not, he actually texted me last night and said, “Hey, do you think I should buy more?” And he’s not a trader but instinctively he is really good at what he does, which is, he realizes that the market is risky.
It was his couch that I was sleeping on 20-years ago when I started Stock Market Mentor. He understands trading, he just took a really small position and it is totally based on the dividend. Now, if they came out tomorrow and they cut their dividend he would be bummed. He would go, crap, can a company do that Fitzy? Can they cut a dividend? He doesn’t trade. Can they cut a dividend, is that legal? And I would say, “Yes, it’s legal”, stuff happens, that’s what happens. But he’s not looking at it that way. And there are a lot of people that don’t look at stuff this way. They look at the stock and they buy it. They look at the dividend and they’re good. If the stock falls They’ll buy more. If it runs up they might buy more too.
The bottom line is not everybody gets freaked out about these big moves, only some people do. And they are important, don’t think that I am telling you they are not important, they are hugely important. They are the difference, hello, between 25.00 and $15.00. That is a pretty big move to me. That is never insubstantial; but keep a perspective on things. If the market is freaking you out right now, you are trading too big. That’s the deal; you’re trading too big if the market is stressing you out. You are trading too big or you are trading too frequently or you are trading too stubbornly. Don’t do any of those things.
And again, you don’t have to be trading right now. You don’t have to be trading. If you are a trader, if you are a student of the market, which is what I consider myself to be. I don’t consider myself to be a professional trader. Doing these videos, this is me trading my time for your subscription dollars. Let’s just say it, I am a professional financial trading information and tactic marketer and provider. That’s what I do. I also love to trade. But I will tell you one thing and you have to understand this, you have to understand this about anybody on my end of the microphone, I am not trading my lifestyle. I am not trading my lifestyle. I am trading to trade because trading is fun.
It’s fun because it is really, really hard it is really hard. Trading is really, really hard. So why don’t I do something easier? Well, then it wouldn’t be fun. What’s fun is the hard, trading sucks. Losing money sucks, embrace the suck. I love it because it’s hard because then when I see myself doing things better and I have done this a lot of years, when I see myself doing things better, when I look at mistakes that I have made in the past, I go, oh, I am not making that mistake anymore. I am not even thinking about it. When I get that realization, that’s self-evident factoid that I am better than I used to be now trading is fun. What used to be really hard is actually really fun because it is like I have slain the dragon. And I am getting to the fourth level of competence.
I have talked about that before and I will be talking about that again as part of a course that I am putting together. Where some of you are here, you are in your first stage of competence. Do you know what that is? You don’t even know what you don’t know. You don’t even know how bad you suck.
The second stage of competence or I should say incompetence is conscience incompetence. You know how bad you suck. That is when most of you will quit and there is no shame in that. If you get to a point in your trading where you go, man I really suck, this isn’t for me. There is no shame in that, you go ahead and do that and say, do you know what? I used to trade but that stuff is hard I don’t like that. Not everybody is meant to be a trader. You might not be meant to be a trader, this might mot be your cup of tea and that’s okay.
The third level of competence is conscience competence. You go from knowing how bad you suck to a point where you don’t suck anymore and you are aware of it and you are thinking, I can do this. But you have such a rigid set of rules, and hopefully this is where a lot of you guys are, you have a rigid set of rules that REQUIRE following, you have to follow those rules and you break them sometimes, Sometimes you do stupid “spit” like you did before all the time. Sometimes you do stupid stuff, you lose money but then you get back on track, you straighten it out, tighten up the lug nuts, you get the wheels going again and then it’s all good.
Okay, you are at that third stage of competency. You are good and you are aware of it and you have to really, really try hard. The bridge between the second level, which is conscience incompetence. Again, I suck, between that level and, hey, I don’t suck anymore. I can do this; I am getting the hang of this. That is a wide chasm that that bridge has to go across. That is not just jumping over a puddle. There is a huge chasm between knowing that you suck and getting to a point where you actually know that you don’t suck but, okay, on occasion I kind of do suck but I figure it out and I keep moving on; because once you are there then you are on the way to the fourth level of competence, which is the exact opposite of the first level of competence.
Rather than being unaware of how bad you suck, you are actually unaware of how good you are. You are unaware of how good you are because you are just trading. You are just trading for profit that is what you do. If you are not making money we say, well, I’m not going to trade, I’m here to make money. You are not even thinking about it, you are just competent. You are just doing what you want to do because trading is hard but it is also fun when you are doing it right. And you are doing it right, therefore, trading is no longer hard, it is just fun. And that is the key distinction, when you suck trading is really hard. When you don’t suck trading is really fun, but it is still trading and it is always hard.
The difference is in how you treat the hard; whether you have processes and procedures that keep you from dumb stuff at the worst times. And you will find, as you go through these four levels that you don’t have to trade to be a trader. In fact, in Jack Schwager’s first book, Market Wizards, I forget whom the first trader was that he interviewed but I think it was on the bottom of first page or on the bottom of the third page, I forget which. The guy said his style of trading was this way: He stood on the floor of the NYSE and he just kind of looked around and he didn’t do anything. And then when he saw a dollar on the floor he just walked over and picked it up. That was his style of trading. If the dollars aren’t on the floor then why bend over? If you are old, you’ve got lumbago you might pull your back or something, stretch a hamstring. So you just sit there and wait and if there are no dollar bills don’t bend over unless it is to tie your shoe, just wait.
And so what I want you to do is get to this fourth level of competency, but you have got to go through the program. If you suck right now, fine, embrace the suck you are in stage two. Get to getting over that chasm and get to stage three. It is really hard and this is where you are most apt to fail. I will just tell you right off the bat, if you are in the second stage, I suck, there’s a really, really good chance that you are going to quit before you get to stage three, to where, hey, I don’t suck. I get this I have my rules. I’m good; not all the time but most of the time I’m good.
You are probably, if you are listening to this I’m talking to you, you are probably going to quit before you get to stage three. Those are the odds, just like if you get the Coronavirus you are probably going to live, those are the odds, they’re in your favor. Well, the odds of you quitting between stage two and stage three and finding something else that is more rewarding for you, personally rewarding, whatever that might be, whether it’s being a lifeguard at the pool in the summer time or running a Fortune 500 company, something, anything but trading because I suck. The odds are you are going to quit between now and stage three, conscience competence.
But I will tell you this, if you decide, well, that’s fine Dan, but not for me buddy, I’m going to stick to it, I’m going to stick it out, and you do and you actually get to that third stage I will promise you this: You will never stop trading because it will be fun and it will be profitable and I have the emails to prove it. I am getting so many emails from our members, we probably don’t market them as much as we should, but I am hearing from a lot of members who are saying, wow, this is awesome. I have come so far since have been a member here, etcetera, etcetera. All that stuff makes me feel good and I read all of them. Gary typically answers them I can’t answer every email. But I’m just telling you, I’m getting really good at what I do and you are going to be the beneficiary of that. I’m a hell of a lot better at what I do now at Stock Market Mentor than I was a year ago, than I was in December 2018, a lot better. And I was better then than I was in 2008.
I am getting better and I am getting to the point that where I feel like I am still in stage three. I know what I am doing and every once in a while I screw it up but generally speaking I do know what I am doing and I am helping you to get where you want to go. Hopefully, I will never get to stage four where I am not aware of all the things that I do because it is really super important for me to be aware of all the things that I do. If I am not then how can I be aware of the things that you do? If I am not aware of the things that you do, then what possible good can I be to you?
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