Trade It Until....it Hurts
Make your own Lists!
Trade it until it hurts. This statement is true in both bull and bear markets. At a high level, it is important to know the current trend in the markets and not fight counter-trend unless you identify a possible inflection or you are timing disequilibrium sprays on a given day. Ok, in English please: Trading successfully requires getting on the surf board at the right time, staying put for a long as it is working and avoiding rug pulls or getting hit in the head with the board. Right now, we are still in a bull market. That should be obvious to everyone by now. The overall markets aren’t moving dramatically, but under the covers there is a lot of action to trade, until it hurts.
Let’s address up front, trading is different than investing. I have two accounts, one for trades and one for investments. For example, on May 27th I wrote up Alibaba (BABA) as the time to just own the stock given a variety of factors identified. That is in my investment account. From a trading perspective, KWEB and all things China are now in the trade it until it hurts bucket. Why? Simply, sentiment has turned, the Chinese government appears to be preparing a growth bazooka of stimulus and the valuations of large cap names are barely 10x earnings. Yes, at the lows, many claimed accounting issues, de-listing worries and slowing or no growth. Now? Well, BABA is buying back massive amounts of stock (over $4 billion last quarter alone), growth ahead might re-accelerate and the market needs a new horse to ride, again, until it hurts.
Does this mean be all in long Chinese names or whatever stock or sector you think is trade it long until it hurts? Not at all. It means getting very familiar with the trading patterns, being patient and having targets for your exit. For example, CORZ, the BTC miner with the big Coreweave contract was a long on all dips below $10. It should be obvious right now it is meandering, waiting for the next data point. To my mind, the potential to become a REIT would be a re-rating event for CORZ. It is probably too early given they won’t really ramp revenues for this contract until mid 2025. I do not own any CORZ right now, it seems stuck in the mud. But in that group, I am trading HUT, until it hurts. They have the most BTC on their balance sheet and tease Wall Street about signing a hyperscale by year-end. The valuation is the least demanding in the group, thus, trade it long….yes, until it hurts. What do I mean by “hurts”? Well, on down days I will add to my position. Excluding new news, company specific or a big spill in BTC (since it seems to trade with BTC most days), I am a buyer on dips. On rallies, I lighten up a bit to give myself room in case it comes. For you, decide the max position size you would ever be on dips and come up with a plan.
But, let’s get back to the concept of trading until it hurts. The world has been max short the Yen for over a decade, “the carry trade”. The central bank of Japan finally capitulated that rates need to rise. In very quick fashion, the Yen strengthened and hurt all those carrying that trade. A good and successful trader will stay with the position until something changes (either news, inflection or extreme relative strength readings). When the Yen strengthened, it hurt many levered players quickly. Do not fight. Get out. In fact, those traders flipped to max net long the Yen from my readings and got whipsawed last week when the BOJ said they are in no rush to raise rates given the market uncertainty. Get out. This leads me to my next theorem which is avoid what seems like even odds or too hard to game the outcome. If there is no trade to be made, there is no trade. I send WhatsApp texts in the mornings to subscribers mostly with trade ideas that I am doing. I send the information, the source and the set up. What you do not see is how many pieces of information I see each morning that doesn’t make my list. If I identify “not for me” or too hard to game or doesn’t fit in with the market set up that day, I pass. (Please ask to be added to the WhatsApp text list via email to me direct).
So, let’s conclude with a quick list of what I am trading, until it hurts (and why). Your list can be the same, different or entirely different names. Process is everything which is why I wrote this article. You decide what you see “working” and trade it, yes yes, until it hurts.
Trading Long KWEB and BABA on all spray downs. I went out flat Friday as the expectation for a stimulus bazooka is tricky over a weekend. If they gap down Monday, I will be a buyer.