This is one way to trade $GME and avoid getting caught in a manipulated stock. Ken Griffin won’t like it. – May 13, 2024
Dan here at StockMarketMentor.com. We’re going to look at the Roaring Kitty carnage today. The dude who absolutely crushed Melvin Capital a couple of years ago and was the impetus for a movie called Dumb Money. It turns out to be back again, and the guy’s not so dumb, he wasn’t then either.
It’s really fun to see short squeezes on stocks that are really, really, really heavily shorted by hedge funds. Because the guys in hedge funds, most of them do not outperform the market, they just talk about it. They tend to think that they’re smarter than the market, and a lot of times they are.
They’re not really smarter than the market, you see the stock going down, and you think you are the only one who sees it, but when they’re not, they’re wrong spectacularly. I think the challenge that these guys that run money have is, that they create these algorithms, these formulas, whether they’re based on fundamentals as well as technicals.
And their fatal error is that they think that the market actually trades according to those things. They will look at a stock and say, oh well, it’s X number of percentage points or multiples of X above fair value. And what’s fair value? Fair value, according to their calculations, is some number that doesn’t mean anything to the market.
People trade the way they trade and it’s all the function of, for every stock bought, there’s a stock that’s sold. It’s an even exchange from one trader to the next. So this idea of, why a stock go up? Oh, there are more buyers than sellers. No, there aren’t, they’re the same. The question is, how aggressive are the buyers, versus, how aggressive are the sellers?
That’s what really, really matters, and that’s a psychological thing, for the most part. In fact, for100 percent of the time it’s a psychological thing. Even if an institution is building a position that they build over weeks or months. Even then it’s a psychology game because the desk traders will look at the price action.
And if the price action gets too hot, too much aggressive buying, they’ll pull back and let the aggressiveness wear itself out and then come in and buy more. In this case though, with GameStop ( NYSE: GME ), and then AMC ( NYSE: AMC ) as well, but I thought GameStop ( NYSE: GME ) would be better to illustrate my point here.
In this case, you have to be really, really careful, and this is why. First, I would look at the entry on this as, not right at the open, you’ve got to see what’s going on first. Your entry would be right here on the opening range breakout. This is a five-minute chart, so the opening range breakout would be when the stock is, and you can use a 15-minute ORB if you want.
I tend to just do the five on something like this, where the stock runs during the first five minutes and does whatever it’s going to do. And then when it breaks above the intraperiod high, that first five-minute high, that’s the time when you want to be buying this stock. Similarly, if it’s a short, let’s say this gaps way up, and then it starts trading below the low of the first five minutes.
Then that’s a short and then the idea would be, if the stock reverses again and they do whipsaw. If it reverses again, then you just go ahead and close that trade. So this gives you, at least, a leg up and puts you in the right direction, in the direction of the trend. But this is the deal, it’s really easy to say, oh, 36 percent in 15 minutes, or even more in 25 minutes, over 40 percent.
What I’ve got to tell you, because people got screwed last time with Vladimir, whatever the guy’s name is, the guy who originated Robin Hood, where they kept getting pressure from the Citadel who was basically capitalizing Melvin Capital, and they were getting absolutely crushed.
Well, good old Ken Griffin’s company front runs, they call it “providing liquidity”. They front-run all the orders on Robin Hood, so Robin Hood is basically in the pocket of Ken Griffin. Everybody knows that. What happened last time was, at some point, they’d never seen this before, I’d never seen it before.
Some dude on a subreddit platform, whatever you want to call it, I’m not a “Redditor”, where a guy goes ahead and says, hey, I really, really like this stock. And suddenly, everybody starts rushing in, and they’re holding for several days, many days. Finally, Ken Griffin calls up old up Vlad and says, “Dude, you’ve got to shut this down, we’ve got to be able to get out of this stock, we’re trapped.”
And so magically the system went down. And then when it came back on, hey, the Citadel was able to liquidate all their short positions. That’s a simplistic version of it, but it’s more accurate than not. You can fact-check me on this. Here’s what happens though, I’ll cut to the last part, you need to be focusing on selling into strength.
You don’t want to get caught in a situation where you are chasing something like this down. You have to say, I’m in early and if I get 10 or 15 percent out of it, I’ve got to sell some of it. And then if I get another 10 percent or 5 percent I’ve got to sell some more. I’ve got to sell to those people that are rushing to buy the stock.
Let’s go to the one-minute chart. The flat lines here are when it doesn’t trade. So what do we have, six minutes in, nothing but flat line for five minutes. Again, nothing but flat line, nothing but flat line, nothing but flat line. Then suddenly, magically flat lines here, boom.
This is a one-minute chart, do you think you would have gotten a fill if you decided to sell here? No, you wouldn’t. Then it goes sideways again, boom, one minute later it trades down to here. Again, do you think you would have gotten a fill? No, you wouldn’t have. From the top to the bottom here, you’ve lost 15 percent.
The point is this, in these kinds of markets, these fast markets, you can place a market order to sell. There is no assurance that you’re going to get filled. And the broker will say, “Well hey you know, it was a fast market and your order didn’t get filled before they halted the stock again. And then you are just in line and like everybody else.
The point is if you are going to trade this stuff, and it’s fun to trade it if you are going to trade this stuff don’t get so greedy. And in my view, it’s really, really risky to be holding it overnight. That’s not to say that it won’t be a profitable trade because it very well could be, and it probably will be.
What I’m saying here in this video is, to make sure you’re selling some into strength. Make sure you’re selling some to the FOMO folks who are in after you. And then you don’t get caught in these downdrafts that you can’t get out of until you basically give up all of your profits. That’s my suggestion on this,
This thing could run up to $40.00 easily, it almost did today. It could definitely do that. But I will say again about tomorrow, if you are going to be trading this stock tomorrow, I would suggest just heeding my suggestion here. Make sure you’re not looking at this as the one trade that is going to be able to make up for all your silly trades. Look at it as one trade that will definitely give you outsize gains if you trade it right.
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