dani face dani quote

Bulls Need a Squeeze

Story of the Week

Not much change from last week to this week. A bit less coverage this week given the holidays. We will be back to full coverage with next week’s report.

Holidays are over and the charts look similar to the previous two weeks as we enter 2023.

The stage remains the similar to the past two weeks, except the stakes continue to climb for both sides.

Bulls enter the week having held key levels on weekly closes: SPY $380 and QQQ $262.

This is not enough on its own as they must create a catalyst to pressure the bears to need to cover but considering how the week closed, they are in place for the short squeeze to come through.

Many charts show double hammer candles on weekly charts, which can be classic reversal precursors.

This week is simple in those ways… bears are in charge, but bulls are holding the key lines and a bit of a push would encourage rapid short covering.

The odds are a bit better that bulls will be able to start the year with a squeeze.

If this dynamic does not play out very soon, watch out below.

Game Plan

The gameplan for the week is almost identical to last week, but the stakes are higher, and the odds have shifted slightly to favor a short squeeze soon.

The technicals are not good here and this week starts with almost everything giving significant sell signals on multiple timeframes all at once.

Longer term probabilities continue to favor the bears here, but as always, we must understand the other side of risk… how can the bulls get out of this box?

Bulls are at a level where they must short squeeze or die… this is not the expectation as the probabilities highly favor new lows, but it’s the only way out for bulls… it will be very difficult to grind here, so they must find a catalyst and blast.

Again, this is the much lower probability. The much higher probability is that the weight of the technical sell signals takes the market lower.

This will likely be led by megacap tech stocks as things like AMZN, TSLA, GOOGL, and AAPL all collectively have large air pockets under support and squeezes.

There are some straight up crash setups out there with huge open-air pockets under price, a defined bull-trap high with lots of distribution over past month, multiday squeezes under price, and HiLo sells on the most important products.

This would be the last spot for the bulls to create a large short squeeze.

This is the lower probability trade as bulls would have to overwhelm all the active sell signals, but remember “if this, then that” and that is the only way out of the box for the bulls is to spike it.

This can be facilitated by the very high $PCALL at the moment. But that alone is not enough… high $PCALL is simply gasoline, but it requires a “spark” to light it… the spark needs to be price generated by getting above some resistance levels and triggering the short squeeze, without the price trigger the high $PCALL is irrelevant as shorts would have no price-based reason to cover.

Go into next week and next year expecting lower prices and force the bulls to prove it.

Swing trading short makes a lot of sense given the setups, swing trading long does not make sense.

Put calendars attractive with VIX relatively closer to 20 (buy) than 35 (sell zone).

Risk to reward to the long side is limited, risk to reward to short side is unlimited.

Daytrading long/short with a swing trade short backdrop makes the most sense.

SPY $385 and QQQ $268 are two levels that if broken will encourage short covering by the bears, the internals imply this should be broad based and likely led by laggards like tech and semis.

Bulls need to short squeeze here and now or their time in the sun is over.

You’ll notice that Sam refers to his proprietary premium indicators, the TrendOscillator Pro (TrendOsc) and HiLo Pro. For more information on Sam’s true momentum indicators and how to apply them to your trading, visit the link here or reach out to our support staff at [email protected]

Cheers,

Sam

Up Next...

Earnings in Focus – DOCS & ENPH

The Bearish Nasdaq Head & Shoulders Pattern We made it through FAANG earnings relatively unscathed. However, most often, a big move comes post-tech earnings. That move is likely coming this week into next week. Based on the bearish patterns all over the place, the path of least resistance remains to the downside. But just because … Read more

Read More

The Fed + FAANG Earnings

‘Disinflationary’ It’s finally happened, traders. Jerome Powell and the Federal Reserve have used the word ‘disinflationary,’ the Fed has slowed the pace of rate hikes two meetings in a row, and the market has reacted incredibly well to earnings thus far. I anticipated a bullish move in Tesla (TSLA) and Microsoft (MSFT). These are two … Read more

Read More

I’m Back

Hi, Five Star Traders! It’s me again! I’ve been on maternity leave for the past three months, and it’s crazy because, on the one hand, it seems like everything has changed, but on the other hand…nothing has changed.  While I’m finally feeling like myself again and ready to get back in the game, at the … Read more

Read More

Subscribe Today!

Want to walk the path to trading success together? Join Danielle’s “Five Star Trader” E-Letter for market insights, tips, tricks, and special bonuses.

Sign Up Now
all-as-seen-on-logos