Shifting my SMCI strategy a bit to play it a bit more in line with how I've been trading TNA all year.

I've set my limit sell orders at 625, 650, 700, and 730, (and the remaining 1/5 of my shares as runners), with a cost basis method of low cost shares first. (It's in a Roth, so the basis is irrelevant anyway.)

As soon as each limit is hit, immediately place another order below, at the nearest support, for the same number of shares.

The idea is to take the profits off the table as the stock continues to recover, put those profits elsewhere, and always have my losses for the stock reflected on my portfolio.

It's definitely not the most efficient way to make money on a stock, and it very much hinders the effect of compounding interest, but for volatile stocks like these, I want to play those swings as much as I can instead of just holding through it all.

Basically I'm risking larger profits to bet more on volatility.

Brian Earl Spilner said:

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Shifting my SMCI strategy a bit to play it a bit more in line with how I've been trading TNA all year.

I've set my limit sell orders at 625, 650, 700, and 730, (and the remaining 1/5 of my shares as runners), with a cost basis method of low cost shares first. (It's in a Roth, so the basis is irrelevant anyway.)

As soon as each limit is hit, immediately place another order below, at the nearest support, for the same number of shares.

The idea is to take the profits off the table as the stock continues to recover, put those profits elsewhere, and always have my losses for the stock reflected on my portfolio.

It's definitely not the most efficient way to make money on a stock, and it very much hinders the effect of compounding interest, but for volatile stocks like these, I want to play those swings as much as I can instead of just holding through it all.

Basically I'm risking larger profits to bet more on volatility.

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NOTE: I am making no statement about the future prospects of SMCI - my comments are more general in nature.

Once an investment premise has not played out, it is generally best to ignore what you paid. You are where you are, and not all stocks trade like you think they should - now or in the future. Re-read the concept of "sunk cost" as part of your analysis.

If you get fixated on one investment as a large part of your portfolio, and it hasn't performed, it's usually best to back off of it, in part or in total. The "throwing good money after bad" platitude has a lot of truth to it. It takes a good bit of humility to look in the mirror and say "let's try something different".

If your performance is negatively impacted by something that feels to you is an inordinately large part of your portfolio, it probably is. Time to rebalance and redeploy. Not all good ideas end up as winners. Don't chase something a long way down.

Also NOTE: I'm posting this as much as a reminder to myself as to help others. Just some food for thought...

Let's talk about islands. There's a fairly well known pattern called the island reversal where a stock gaps up, puts in a top, and then gaps back down. This is usually very bearish. And in the opposite direction, bullish.

What about islands where you have a gap down, the gap is closed, and then another gap down, like the past month in SPX?



So what happens next? Does the gap close? If so, what happens after? Well we don't have to go back far to see an example, as the same thing happened in February in the opposite direction.



Playing out like that, we would get the 2007 action, where we are in a retracement period that will be followed by another sharp drop to around 8-10% loss from the high upcoming post gap close. It's certainly possible it keeps going after closing the gap. In fact, many of the previous times I've seen SPX do that ended up with marginally higher ATH's. But those weren't election years, were in normal bullish phases of the market with lower interest rates, and times when there wasn't elevated volatility levels and massively short gamma imbalances. So you need to have risk management tools in place in case it doesn't and a selloff ensues.

Speaking of gamma imbalances. I'm not sure many read that and have any idea what I'm talking about. So please go back to earlier this year when I did a deep dive post on options greeks so you can familiarize with what gamma is, what it measures, and what affects it. I think I even linked to the post a couple pages back. Gamma is exclusively an options phenomenon. Think of it this way.. its as simple as I can put it..

Say you buy a put on SPX. The person selling it to you is the dealer, not another trader. The common misconception is that the dealer is trying to play casino and take the other side of the trade from you, IE, competing against you. This isn't true. He's collecting the spread from all the options he buys or sells based on what the market is buying and selling. He's like a casino in that his job is that he has to offset his risk to collect more spreads than his total losses (win over the long term). So for every option that moves, the dealer or MM has to hedge their position. And they don't hedge by buying a put to counteract the one they sold you. That would create a derivative feedback loop of having to constantly hedge against themselves and the market. They sold you the put, meaning that if the market goes down, their risk grows. To offset their risk, they sell shares of the stock. If price continues to fall, they have to continue selling shares causing a negative spiral in the stock price. If you were the only option player with your one put, their risk would always have them selling shares when the stock is going down.

So when something like SPX is observed as being short gamma, it means that with every move down in the markets dealers have to sell more shares than the amount they would buy with every move up. When an imbalance like that, the one we are in now, is in place, there is much less liquidity to "buy the dips" on the way down, and much more liquidity to sell the bounces on the way up. Dealers make their moves at strategic times of the day, open, close, and maybe around lunchtime. Which is why you see the most action in those periods. But it all changes as the option market changes, minute by minute. Right now, the market would have to get over about 5500 to even start to flip back to long gamma where buy the dip becomes the expectation. And even then, it won't be significantly long gamma enough to be dependable. So it will almost be in no man's land.

Talon2DSO said:

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ProgN said:

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Brian Earl Spilner said:

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Damn, you could very well make life-changing money. For the sake of this board and you in particular, I really hope it happens.

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I hated posting that because that's not the man I am, but y'all deserve to know that I put money behind my recs. Only a couple in here that I PM with have known the amount of shares.


Yes, this stock has life changing potential and I'm not scared holding onto it.

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So why SMCI over NVDA or AMD? Don't all of these AI companies face headwinds as their customers develop AI of their own?

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I posted on the main thread Monday morning the symbols of the stocks I was entering during that irrational selloff at the open. NVDA and AMD were listed.

AMD's AI chip is behind, but they'll catchup. SMCI uses their chips in their servers as well as NVDA's. Capex spending for AI by GOOG, META, APPL, XAI, and all other major corporations is the one constant they they've said they will increase, even as they're cutting jobs before an anticipated recession.

I like SMCI for the following reasons:

1) Their tiny float offers more potential for future splits and price expansion. Look at the current floats of NVDA and AMD. I know I've previously mentioned 'Dellionaires' from the mid/late 90's. SMCI has that type of potential, imo.

2) Their current and projected PE vs. those other two is trading closer to a bank than a tech company. Then look at their growth rate for over the next 4 qtrs.

3) The CEO of SMCI came from NVDA and him and Jensen Huang are very close friends. SMCI don't compete with NVDA, thus not a threat.

4) They are now a recent addition to the SPX and institutions like them. One of the only constants when it comes to the market is retail's FOMO. It may happen post split, but SMCI will be chased by retail which only adds rocket fuel.

Looking at SPX here. Whichever way futures opens tonight might dictate tomorrow.

If futures open down, SPX 5295 / ES 5300 is strong support intraday. Below that, and there's only minor support between SPX 5215-5245 / 5220-5255 ES.

Hold support or open upward, and I have SPX 5465 valid through first hour RTH. As that would be a pretty sizeable 2.25% move from Friday close, I deem it very unlikely. But I have SPX 5427 valid through noon Tuesday. And that's slightly above the August 1 gap fill of 5410. And I have two bunched up targets at SPX 5525 range through first hour Wednesday at the earliest and September 4 close at the latest. There are only unprinted higher targets from there, so not reliable. But it shows that we would need to break that 5525 range, not coincidentally the area where the market would try to flip to long gamma, to signal that the market might be heading for a new high.

Long story short, if futures can hold the 5300 area tonight or early tomorrow morning, and SPX can hold the 5295 area within the first hour after open, there's a really good chance the market will be going up early in the week targeting 5410-5525 area where it will likely meet strong resistance.

The reaction was delayed by a few minutes from the news release, but it seems it was about the imminent Iran attack. Triggered a bunch of stops.