Author: u/WardenElite
Again to reiterate, since this should probably be at the top. This is not financial nor investment advice. These are ideas and opinions for information purposes only.
This post will read bottom to top. It’s easier for people to refresh the page and see edits at the top.
Add me on Twitter! https://twitter.com/elite_warden. I’ll be using that as a backup location to post notifications in the event of a Reddit outage. Here is my YouTube. I may post videos in my future and build my channel out after GME is over. https://www.youtube.com/channel/UCZDDUjJl54h9UidiwVotM_g
Historical support and resistance levels for reference today:
234, 243, 250, 253, 256.5, 263, 267, 272, 275, 279, 282, 285
I believe this descending channel was artificially induced today. I expect it to continue until either a catalyst, or a significant amount of options activity can reverse the channel.
RSI was heavily underbought, allowing for that last correction up before the day ended. We’re at 221.41 closing price, down 16.79%.
We’re currently in a descending channel attempting to breakout with a catalyst this week. Let’s hope we get some spicy hearing memes on the 17th!
It’s broken the 220 support. Looking to bounce but selling pressure still strong. We may end low for the day.
The price action today is certainly unsettling. That is perfectly normal given that GME is not a Stock in Play right now. The price action today reminds me of trading during a bear market. A lot of uncertainty and lots of dips. Just know that this stock is way below VWAP. If we don’t correct upwards today, we may correct later on in the week.
Volume picking up but still low. Let’s see if there’s anything in store for us during power hour!
The relationship between borrow rate and availability of shares to short is an inverse relationship. When you have fewer shares to lend out as a brokerage, you will want to charge a higher fee to offset the low supply so you can make the same amount of money. As you can see, the spike back in April was due to a low supply. Why was there a low supply? It could have been due to a constant hammering of the stock when it was climbing slow and steadily.
As you can see now, it seems there was a lack of demand and thus an excess of supply for shares to short during our recent runup. We are seeing a slight decrease in available shares, but compared to April, the fee is very low right now. It’s unusual to me that the borrow rate has not yet risen in response to the decrease in share availability.
This is what I expect. I will explain more in edit 43 how borrow fee relates to price and available shares to short.
I believe that it is strange to see a low borrow fee right now because that’s an indicator of an abundance of shares available to short. This is occurring during a potential uptrend too. I honestly believe we have a “shares don’t exist” problem. Where are these available to short shares coming from? Just how many synthetic longs and FTDs are there? This is all highly unusual to me.
For those of you curious about the borrow fee. The short borrow fee is a highly important indicator for the short squeeze. Historically, borrow fee will go up before the short squeeze begins. Furthermore, the shares to borrow needs to go to near 0. As of now, according to Tony Oz: https://www.youtube.com/watch?v=aFbFTnCIPwE&ab_channel=Stocks%26OptionswithTonyOz, there are still 1.3m available shares to short alone in interactive brokers.
As you can see by this highly technical diagram, the borrow fee has yet to spike up to around 80% like it did in January. This is highly strange.
For those wondering why I haven’t made nearly as many predictions today as I have made in previous posts. This has to do with the fact that GME is not a Stock in Play.
A Stock in Play is a stock with significant volume caught in the middle of a correction or a trend. Last week, it was caught in a downwards correction that still trended positive, with volume higher than today so far. Though we had a good upwards trend and premarket gap up today, it’s evident that the opening volume was quite low, around 660k in the first minute.
One telling sign of a Stock in Play is the price action is fast and choppy. Today it was sort of like that at market open, but it’s evident from staring at the chart, that the price is barely moving.
Day traders prefer to trade only Stocks in Play. When volume is too low, the price action is often meaningless and usually just white noise. For that reason, I do not find predicting GME’s movements today to be particularly useful.
For apes wondering how to spot short attacks, one way to tell is a sudden pick up in volume. Typically during a selloff, you will see a gradual increase in volume. A short attack is characterized by a sudden spike in volume.
Boring chart today eh? For those who want to pass the time: https://www.youtube.com/watch?v=h3EU29IcFE0&ab_channel=EpicEconomist
Today has shaped out to be an indecisive low certainty day. If it weren’t for the short attack, GME would be bullish and outperforming the market. Sometimes I question what the purpose of shorting is when it artificially disrupts trends. (Yes I know it’s to disrupt momentum. I meant that I don’t think shorting makes sense for the health of the market. It undermines investor confidence.)
VOO getting ready for a small correction again. This should drag the current support levels a bit lower than 250. 243 and 234 are fair candidates. We’ll correct before we bounce.
Keep in mind not all whales loading up at the dip are playing for a short term squeeze. Some are going long well into next year. This is good for us. More whales holding is good.
We should eventually retrace to 263. It’s a long way up and may take a long time. I’m gonna go get lunch and let the price cook a bit. Should be a period of consolidation followed by a breakout to the upside.
Remember that GME is affected by broader moves. Guess what? S&P 500 tumbled dragging GME with it.
Given that they chose today to do the short attack, my price target needs to be lowered. Lowered by how much? I don’t know. Today’s chart is now quite artificial from that drop so it’s hard to say.
Bottom is out!
Thank you for the firesale Melvin and friends!
Short. Attack. Go get a drink. Nothing interesting happening.
We may go as low as 250-251. Broader market going down. VOO ready to fall again.
Next dip target is 259-261 range.
Nevermind, right as I finished the edit, the dip came LOL.
An unlikely dip at 263-264 range btw. If the broader market goes lower, it’s possible it will drag GME down. Again. Unlikely. But look out for it.
If you were wondering how I spotted the dip around 267 at 10:58 AM.
You’ll notice there are plateaus and periods where the price stayed flat. Some of these were attributed to Hedge Funds accidentally running essentially “buy the dip” High Frequency Trading algorithms on LEH.
The most disappointing HFT program known today is the so-called “Buy the New Low” program. A stock will make a new intraday low which will make many day traders go short and ride the downside momentum. The program will then start buying the shorts from the day traders and ultimately push the stock higher, causing all of the day traders to panic and cover. It sounds pretty effective, especially since the institutions that run these HFT programs have essentially unlimited buying power. The problem with this algorithm is when another large institutional seller is behind the trade and wants to dump their large positions. No matter how many shares the program buys, the stock will never push higher. The more the program buys, the more the institutional seller and day traders will dump their shares on it.
This algorithm failed miserably in September 2008 when the investment bank Lehman Brothers (ticker: LEH, now de-listed after bankruptcy), Federal Home Loan Mortgage Corp (ticker: FRE), and many other mortgage holdings and investment banks, all started a massive downward drop in price. Programs were trying to buy their stock to squeeze and burn the short sellers, but since those stocks were already fundamentally broken, their stock price never went higher. Day traders and huge institutional sellers dumped their shares on the program. Those programs and their developers were obliterated, left holding a literally huge number of worthless shares of LEH and FRE and other bankrupted holdings
How to Day Trade for a Living by Aziz
So basically, they bought a bunch of crap LEH stock trying to cause a short squeeze that was never going to happen.
Our favorite fraud Kjetill Stjerne did something similar. It was an in between of Nick Leeson and Buy the New Low.
Before the financial crisis of ‘08, interest rates were low and there were many reasons the housing markets looked appealing.
People took out subprime mortgages, basically a type of home loan issued to people with low credit scores. These mortgages were issued at an adjustable rate. The problems come in when the interest rates are adjusted up, and all of a sudden, the perceived value of real estate went down a lot.
So for the Lehman Brothers who were heavily involved in the housing market with their mortgage backed securities (76 billion dollars!), when people begin defaulting (not paying) on their mortgages, this is terrible for their company. Not only that, they invested in real estate themselves! Their investments tumbled in value.
In edit 20, we’ll explore LEH, and how hedge funds accidently tried to prop up LEH.
Potential dip at 267-268.5 range btw.
Seeing how boring the price action is right now, let me tell you guys a second story: the story of Lehman Brothers and the housing crisis.
The Lehman Brothers was one of the largest bankruptcies of all time. The company was 150 years old at the time of bankruptcy. In this story, I will tell you about another failure in the history of propping up prices, how hedge funds accidentally tried to prop up the housing market and how it failed miserably.
Stay tuned for edit 19!
We’re consolidating nicely. Notice how RSI is staying nicely in the blue zone. This is extremely bullish, especially when the broader market is in the red.
Singlehandedly, Leeson bankrupted Barings Bank. I remember when I was visiting a trading company in New York a couple years ago, a head trader told me this story. It was a lesson in how NOT to do risk management at your company. Leeson originally started with something like a 10k loss and let that snowball into a 100 million dollar loss that he tried to fix with Nikkei. Too bad his luck is literally 0.
So how does this relate to Kjetill Stjerne? Well on Jan 29, Stjern ran a big wall algorithm to soak up GME shares just like how Leeson bought more Nikkei futures in an attempt to prop up the price.
“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.”
Daniel Kahneman, Thinking, Fast and Slow
I remember he posted a tweet that was something like “I’m ruined!”
No shit sherlock.
Volume still quite low btw. S&P bounced from a low today but seems to be consolidating.
Back to the story. Imagine betting on the S&P 500 recovering from a dip, and then having a hurricane wiping out the power in the entire country. That’s what the Kobe earthquake was like, but worse.
When the Nikkei was free falling, Nick Leeson tried to prop it up by buying more and more Nikkei to try to reverse the trend. At one point, he was long 7 billions dollars on Nikkei futures. This is like the opposite of what Melvin and friends did last Wednesday and you know how that went.
So Leeson miserably fails. Nikkei continues to plummet and now Barings Bank is holding a bunch of worthless Nikkei futures.
The story continues in Edit 15.
Let me tell you guys a little story and why I think Kjetill Stjerne, “the viking of stocks”, is a fraud.
Ever heard of Barings Bank and the rogue trader? Nick Leeson was a trader at Barings Bank who made risky bets in the options market. He began having an unlucky streak, losing millions of dollars. So he bet big on the recovery of an Asian index Nikkei.
On the very day he needed it to recover, in one big stroke of bad luck, the Kobe earthquake shook Japan, and his plan to make money from Nikkei to offset his loses, never materialized.
The story continues in Edit 14. Coming soon.
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As of now, the price is barely moving. Even with a high bid ask spread, volume is too low to induce volatility. I’ll be pausing my predictions, commenting on any broader market events I discover, and resume my predictions when volume ramps up. There’s nothing interesting happening as of now.
Extremely low volume right now. It’s dead quiet for GME. Other stonks like PLTR have decent volume. Something’s up and I bet they will ramp it up mid day. Expect a boring morning :P
Folks, the S&P 500 is in the red. I wouldn’t be surprised if we hit the 267 level. HFTs will drag GME lower.
Dip #2! Possible entry at 274-275 (edit, added 275 range)
It’s just seeing a minor correction. Still not really a juicy dip or anything.
We should see a lot of upwards pressure now. For this special spot the dips edition, I’ll be focusing my predictions not on how high it goes, but when I think it will dip again! Stay tuned.
Scenario A) confirmed. It hit a lower support line than expected. What a juicy dip!
Juicy dip #1 right now!
Begin Reading Here
Goooooooooooooood morning my bombastic interplanetary apes. Daylight savings aggggh, I wanna sleep some more!
I hope you all had a restful weekend spent adopting gorillas and strapping on your astronaut suits for our upcoming trip to the freakin moon! I hope you didn’t let FUD get to you over the weekend because Melvin and friends are itching to buy those shares from you for anything below a discount of 100k per share.
Thoughts on Contradictory DD
I know recently many of you may be angry or disappointed with last week’s expectations of a gamma squeeze not coming true. That’s a perfectly normal reaction; do not let it get to you. I hope that what I’m about to tell you will help dispel FUD and help strengthen your convictions.
Last week, many people realized that there were conflicting DDs that were all right in their own way, but contradicted each other. They are all right.
Why? If you end up working at a Wall Street firm, they’ll set you up with a desk and teach you their strategy. Every firm has multiple desks and each section employs a “basket” of strategies. I’ve had the pleasure to visit the trading floor of one of these firms in the past back when I wanted to become a trader fulltime.
They have halls in these floors. In one area you would find the Forex traders. In another cubicle, you’ll find the Equities desk. Within each of the sections, there’s groups of traders executing different strategies.
Just look at all the types of strategies an options trader can employ. These don’t even include arbitrage techniques.
It really makes more sense to interpret things like options activity in the lens of “basket strategies”.
It’s honestly friggin impossible to make simple statements based off options data. The options stuff I examined in my previous DD were a bit more obvious, but you really can’t just assume a long whale is buying all the 260 Calls. Half of those might be used for Conversions. The other half might be used in Collars. Heck they might even be Covered Calls.
The point is, it’s impossible to tell what these options will be used for. We can only really catch the obvious ones and make reasonable guesses. In my opinion, last week’s 800 dollar Calls were low risk low return Covered Calls. Not some long whale.
Thoughts on Strategy: the power of trends
So what’s my point? Don’t let options activity fool you. It’s a lot more complicated than just long whales and short whales. It’s a chaotic pit of strategies fighting each other.
Nevertheless, I personally believe in the power of trends, and that traders will gravitate towards strategies that amplify the trend until that trend shows a sign of weakness and reversal. For example, the simple Long Call strategy, the Long Call Spread or Long Combination strategy are all strategies that force MMs to hedge and buy more shares. This is profitable and creates a self feedback loop amplifying the upwards trend. It only stops working when people begin running out of buying power and whales begin hedging and setting up strategies for a reversal. We ain’t running out of buying power anytime soon. Stimmies!
I believe Melvin and friends tried to induce this reversal early last Wednesday and failed miserably. GME is not reversing anytime soon. If you see a dip this week, that is probably a cornered rat trying to fight the trend.
It really makes no sense that this trend will reverse anytime soon. There are way too many catalysts. People are holding. Institutions are holding. All technical indicators are bullish. I mean just check out this latest Bloomberg terminal screenshot:
Retail
During Wednesday, basically no retailers sold. In fact, we’ve since increased retail ownership from 7.35% to 7.49%! This is excellent news.
What’s even greater about this week is that retailers now have Stimmies coming in slowly! I’ve collected some data and it seems that they are slowly trickling in. Polls show around 10-20% have already gotten their Stimmies over the weekend. Our buying power has increased!
Institutions
I anticipate institutions are doing the same. In fact institutions like talking to each other as trading desks have direct lines setup with other firms. What alliances they’ve established nobody except they know, but I can speculate that they know exactly the situation shorts are in and the power they have holding this position together. Institutions are holding, and their buying power has also increased! This is because the premiums on Calls have decreased, allowing them to setup more trend amplifying options strategies.
Catalysts
Stimmies
2nd Hearing
Earnings Call
Highest options activity week
Stimmies and the hearing will increase certainty. The market loves certainty. A nice steady climb should be absolutely expected.
Given the increased buying power of retail and institutions, our combined holding, and all of the catalysts lined up, I am incredibly bullish for this week. I believe it is highly probably today we will strongly outperform the market.
Forget about 3/19. Forget about dates. Look at this from a strategy perspective. We have a series of bullish events lined up like dominoes. We just need one of them to fall to set all the other dominoes into motion.
Technicals
Technical indicators (however brainless they are), look exceptionally bullish.
Again in my opinion, indicators are quite brainless. I examine trend and interpret it from a market dynamics viewpoint. This image below screams hey as an institution, I should hold and at the same time execute strategies that amplify this trend! I believe we will have our second bull run this week.
Premarket Analysis
Broader market gap up today. S&P 500 starting in the green. What’s interesting today is UST10Y.
Last Wednesday, not only did whales hammer the stock with Conversions, they did it during an opportune time. No those dips in other stocks was probably not hedge funds liquidating their positions to cover GME, that’s nonsense. It was a normal sell off as the US 10 year treasury bonds spiked the fuck up.
High 10 year yield = sell off and market panic.
A) seems more likely as a lot of swing traders made money from this premarket gap up and rally. Not only that, a lot of swing Medium Frequency Trading algorithms like to sell off right at market open. Option B will happen only if more buyers flood in than sellers.
My price target today, by linear extrapolation, is 281-291 conservative, and 300-324 high estimate.
At the bottom of every post now, I will include the resources I use to learn.
Summary of resources I used to learn:
I would recommend Technical Analysis of the Financial Markets by Murphy and How to Day Trade for a Living by Aziz. You can find the free PDFs online. I watch Humbled Trader on YouTube. She’s legit and really knows what she’s doing. Roensch Capital is excellent for some more deep dive Technical Analysis.
I also read a lot of Investopedia and learned about options trading from the online websites Options Playbook and TheOptionsGuide. Understand options is important for understanding trends, sentiment and where prices should go. Being able to read and understand the options chain is important. I use several tools at my disposal. Namely, optionistics for understanding IV and option price trends, barchart for options chain, OptionSonar for scanning for unusual options activity, Webull for charting and level 2 data and StockCharts for their bond charts, ThinkOrSwim for quick news scanning and Stonk-O-Tracker for SSR data. I check TradingView for amateur trading ideas just to make sure I haven’t missed anything.
I like to read Form-10Qs (quarterly earnings), Form-8Ks (emergency updates), Form S-1 (for IPOs), 13Gs to track institutional positions (it’s usually outdated but still useful), and 13Fs for funds that didn’t file a 13G.
