Ep. 314 Never Too Volatile: How To Spot Opportunities In A Risky Market
57:41 Share

Viking, committed to exploring the world in comfort. Journey through the heart of Europe on an elegant Viking longship with thoughtful service, cultural enrichment, and all-inclusive fares. Discover more at viking.com.

Hello and welcome to another episode of the Investing with IBD podcast. It is Wednesday, April 2nd, and my name is Justin Nielsen. I'll be your host. Back from vacation from Washington, D.C., we had a wonderful time, and I thank Allie and Scott for taking care of things while I was gone. But

You know what? It's a new day, and we still have a market that we have to kind of analyze and try and figure out, especially amidst tariffs going on today. I didn't catch the full episode of what was happening in the Rose Garden today, but I'll be definitely checking that out. But also to help me kind of manage expectations here and kind of

figure out this volatility in the market during a correction is Brian Shannon. So it's going to be great to welcome him back to the show. He, of course, is the founder of Alpha Trends. He's a CMT. He's got those special letters behind his name. He's, gosh, he's an author. This is a book that I keep right here on my bookshelf in prime spot, the Maximum Trading Gains with Anchored VWAP. So it's great to have you back on the show, Brian.

Great to be back. I missed Arusha too, though. We were just talking about that. Yeah, well, I miss him too, and I'm sure our audience does. That whole, you know, having...

you know, a job at a different company, I guess sometimes gets in the way of him doing stuff with us, but hopefully he'll come back as a guest. And, you know, if nothing else, if you ever come to California, we can always get, get together like we did in Vegas, not too long ago with Joe Fahmy and, you know, Brian Lund, Brent Fitz and Lindsay Bell. It was a great dinner that we had. It was my first time meeting you in person. So,

uh, that was a really nice dinner. And, uh, and we were also talking about some of the entertainment that Joe Fahmy brought along with a mentalist, which is awesome. So second time watching that mentalist, but yeah, definitely a Joe Fahmy knows how to show folks a good time. So he does. Um, and, uh, of course, you know, one of the things I should warn folks that aren't familiar with you, Brian, is that, uh,

While I know a lot of folks do listen to this on their favorite podcast channel, whether it's Spotify, Apple, what have you, this does tend to be a little bit more chart heavy. You don't get that CMT designation for nothing. You do use a lot of charts. And the Anchored VWAP for folks that are not familiar with the volume-weighted average price is... It's amazing how you kind of show the way you use it

And how interesting it is when it's just providing the support or resistance, sometimes like almost to the penny. So maybe for folks that aren't as familiar with it, maybe kind of just do a quick overview of how you kind of got into that and why it's so important to you.

Sure. The anchored volume-weighted average price is what it's known as. The volume-weighted average price itself was a measurement that was invented in 1988 to establish whether an institution was getting a fair price for an order that they had executed. So if they were going to buy 500,000 shares of Intel and the stock was trading between $60 and $62 one day, they didn't know what was a good price. It might have closed at $61.75.

What did I say? 60 and 62. So it might have closed at 61.75. But the average price for every single transaction, that's what the volume-weighted average price does. Average price weighted for volume. So every single share counts exactly the same. So if the stock traded between 60 and 62, the average price might have been 60.75.

So if the institution was getting their fill at $61.25, they basically got ripped off. Not necessarily ripped off, but their broker definitely did a bad job for them because they paid $0.50 higher than the average price that stock traded at during the day.

So as a result of that, it became a benchmark of, is my broker doing a good job? And brokers would start to guarantee VWAP orders. So they would say, listen, we're charging you back in the day, it was six cents per share as a commission. If we, you know, and we'll do our best for you, but we can guarantee VWAP if you pay nine cents a share. And it might

You might save 30 cents on an order because we're going to start to really think hard about how we're doing this. We're going to act like it's our own money. We're in this together. So they started creating algorithms around that. So during the course of the day, let's just say that stock trades 10 million shares per day and they want to buy 500,000 shares.

Well, they can't just go in and buy 500,000 shares on the open because that's going to spike the stock. And you're going to pay who knows what it's going to do during the rest of the day. So instead, they say from 9.30 to 10 a.m., it typically trades 10% of the volume.

So between 9.30 and 10 a.m., we're going to execute 50,000 of those shares. And we're going to try to be as close to the volume weighted average price for that time. So we're breaking it into small goals. It's like when you run around the track. You're running three miles. You know you've got 12 laps. So I've got 11 left. I'm on pace. Are we keeping pace throughout the day or for the length of the race that you're running?

And that had broadened out to the anchored VWAP. And the anchor simply says, you know, from anything other than the beginning of the day from 930 a.m. So it might be week to date, for instance, an order could be let's buy those 500,000 shares this week, not today. So Monday typically does 25 percent of the volume. We'll buy 125,000 shares.

Friday typically does 10%. So we're only going to buy 50,000 shares on Friday. So what they're trying to do is break the order into small pieces so they don't have market impact costs and that other people don't see their orders and try to front run them. So if you're just sticking in big bids, you're going to see a bid for $60.50 for 100,000 shares. Well, what does everyone do? They bid $60.51.

And then they move that order up and the chase is on. So information leakage and market impact costs are what you're trying to establish as an institution to

for VWAP orders over the course of a day, a week, a month, it could be a quarter, over even the period of a year. You'll see the year-to-date anchored VWAP is often a really important tool right from day one all the way to the last day of the year.

Yeah. And I think it should also be mentioned that, um, while you can go off the calendar to, to use as your anchors, uh, one of the things that you do often is you're using either events or, um, you know, a gap or what, what have you, there's just a lot of different opportunities you have to place an anchor that can really kind of inform, uh,

where you would expect to find those areas of support and resistance based on, hey, are most of the participants happy right now? Or have they made money? Or have most of them not? And it really comes down to that simplicity, right? It is. And so in my book, I wrote about three categories, basically. Time-based, so that's traditionally how it's been used, is from the beginning of the day, the week, the month, the year, etc.,

event-based. So since the tariffs were announced just 45 minutes ago, I put an anchor on that. And that's going to be a reference point that people are going to look at from the election, from a Federal Reserve event, from an earnings report. So we've got time, we've got event-driven, and then price-driven. So for instance, the year-to-date anchored VWAP on the SPY and the Qs

Just a week and a half ago, we're tested and we saw a very strong reversal off of those. So what that tells us for the just to take it another step deeper is, as you explained, they tend to be supporter resistance levels.

And in the case of the SPY, running up to the anchored VWAP from the beginning of the year, it acted as resistance because people who are selling, they don't want to sell 10% below that if they're a big institution taking a position from 10% of the float down to

4% of the float and they have to sell 20 million shares to do it. So they don't want to sell it in the hole, but as it gets up back to that anchor from the beginning of the year, they're saying, okay, let's put more shares out up in here. We're going to get more aggressive with our supply because we don't want to do a bad job for our shareholders and our ETF or mutual fund or whatever it may be. So they get heavier on their offers.

And then short sellers look at that and say, hey, it's right up to the anchored view app from the all-time high. That's typically a place of resistance. Let's put some supply out there and start to get short. And it's just about measuring where those levels of interest are so we can measure the supply and demand and say, are the sellers actually taking control here? Or is it just a coincidence? Yeah. Well, you know what? I feel like

You did a good job of describing it, but a picture, as they say, is worth a thousand words. So maybe you could show some of your charts. And, you know, this is one of the things that...

We usually have Brian share his charts a lot of times because he does have that anchored VWAP, and he's so good at kind of nailing that down. So maybe you could kind of show what you mean about how those anchored VWAPs from the beginning of the year were kind of tested and what happened as a result. Yeah, so this purple VWAP that I just drew in, that is the all-time high in the S&P 500.

And just to frame that on the daily timeframe, we had that breakout right here. And from that failed move came this fast move lower. So that's the daily timeframe. We're looking right now on the 30 minute timeframe. So just to get a little bit more clarity. And you can see that, you know, the first rally up to that anchor.

it bounced hard off of there. There were sellers waiting. Whether they were short sellers or natural sellers looking to get out, they were there. And then last week, we saw it came up to that level and it held there for a little bit. This black anchor is the anchor from this gap that occurred. And once we found supply here and then broke below that week-to-date anchor last week, that's when this market completely fell apart. Hmm.

Now, I have this anchor here off of the 31st because that's our new year-to-date all-time – I'm sorry, the 2025 low. So back to our three things. What we want to look at are price-based – I'm sorry, news-based, time-based, and then price-based. So news.

Price would be important highs, all-time high. Important lows, the low for the year. Now, that's the low for the year. And you can see, since the tariffs were announced right on this bar, and you can't see it good on a 30-minute bar right now, so what we have to do is go down to a two-minute time frame. And you can see, this right after hours,

Let me clear some of that up for you. But that one right there, and we'll color it orange because it is a Trump event. And...

So that, you know, initially it sold off. The buyers tried to take control. And where did the sellers take control? Right as soon as it broke that volume weighted average price, it was lights out. And now we're selling off in the after hours. We hit 570 in the after hours. Now we're down at 550. $20.

points on the SPY. That's a huge move. And now we're closing in on the anchor, I'm sorry, the low for the year again. So that is going, the way I look at this orange anchor is in the coming days, you know, maybe we get rallies up to that. And then if we start to see that it holds its resistance and then breaks a lower low, that to me is a beautiful place for a short with a stop, let's say just above that little high.

And then how long can we hold it is up to the market. If it just runs back up through there and stops me out, well, that's what stops are for. But it's, you know, so those are, you know, three great examples of news-based, time-based,

Yeah. And I love that what you just kind of described here is that you're not hanging your hat on any particular one outcome. You're like, okay, if it's going to go down or if I'm going to have a shorting opportunity, this is what I would expect to see. And if it goes the other way, this is what I would expect to see. So you kind of

can play both sides and let the market kind of tell you, oh, this is what it's actually going to do as opposed to, you know, knowing for sure one way or the other. But you have the scenarios kind of built in here and the charts really help you do that. It is. And the thing is, Justin, that, you know, when I think of those scenarios on the shorter term timeframes, it's always, you know, based on where I know we are in the bigger picture. On the bigger picture, I don't...

I don't really like this market because we are below a declining 20-day moving average. We're below a declining 50-day moving average. We're below the year-to-date anchored VWAP is that blue one. The orange one is from the election, so another Trump –

anchor. So it's orange. And this is the two-year anchor. So from January of 2024, and if that break, if that fails to hold, then the next level of interest in terms of an anchor point where we might find buyers would be down here at the anchor from the November of 2023 low. And just go back to, you know, the January of 2024 anchor, look at how, you know, in January it held.

and then in April and then in August and now here we are again and in fact the NASDAQ has been even more interesting in that the two-year anchor bounced at first now we're breaking below it so again we look at the anchor off of this low and that's where it looks like we're you know at least testing next after that then I would put an anchor off of this and say how does the market respond at these areas

Does it start to bounce a little bit, make a lower high, fall apart, and then drop down to the next level? So that's why there are levels of interest to look on the shorter-term time frame and say, here are the scenarios where I can get involved in a short. I don't want to short down here after it's just dropped 20 points on the SPY. I don't want to short down here, but I want to look for rallies up to that point.

anchor and then if it falls apart i can short here with a low risk stop where i'm not setting my stop above this high you know 15 points higher instead i'm you know using a dollar stop right and so

The spirit of innovation is deeply ingrained in America, and Google is helping Americans innovate in ways both big and small. The Department of Defense is working with Google to help secure America's digital defense systems, from establishing cloud-based zero-trust solutions to deploying the latest AI technology. This is a new era of American innovation. Find out more at g.co slash American innovation.

Maybe this is a good time to kind of talk about in general. Again, we're in a market right now that has not been really conducive to a lot of buys. So what do you do in this type of market? Do you basically just sit on the sidelines and cash or?

Or do you, you know, try and kind of play some of these shorter-term moves? You know, I mentioned your book on the anchored VWAP, but of course you also have your first book, which was, you know, how to trade on multiple timeframes. And, you know, I guess...

When do you apply what timeframe to what market, if you don't mind? Yeah, when we're in a primary uptrend, so when we look at the S&P 500 on a longer-term timeframe, there's the COVID low right here. My camera's in the way. And there's the 2022 low. So we put anchors off of those. And actually, before we even look at anchors, we just want to look at the definition of trend.

And an uptrending market, a stage two uptrend makes higher highs and higher lows above the moving averages. So on here I've got basically the equivalent of 100, 150 and 200 day moving average.

When you say stage two, are you kind of referring to kind of the old Stan Weinstein? Correct. Yeah. So then stage three is what's known as distribution. And to me, that's when we have mixed messages. It can kind of go either way. And then when we break a lower low below all those declining moving averages, then the sellers are clearly in control. Now, it doesn't mean there aren't going to be great bounces because there were great bounces in the S&P 500. But-

those bounces will fail generally with a declining 200-day moving average. So then we go sideways. We see the same thing. This becomes stage one. And stage one is defined by moving average crossovers. A lot of people look at moving average crossovers and think it's a signal to do something when, in fact, I interpret it as indecision. We have mixed messages from different lengths of time.

So if the buyers regain control, that tells me the buyers are in control. We're in a stage two uptrend. As long as the 200-day moving average is still rising, we give the benefit of the doubt to the buyers. Now, this line right here...

is where we were 200 days ago. So as we get rid of this data in the next two weeks and replace it with this data, well, then that means that's why this 200-day moving average is starting to flatten out. And then if we get trapped below it and then we see these longer-term moving averages, well, then we could be in this position right over here again. So we're on, I think, the precipice of...

a longer-term bearish environment. And it's not my job to try to guess how long, and this is what I've been drawing in for the SPA, for the SMH, rather, the semiconductors, because they're in worse shape. These guys are below those declining moving averages. We've got the 50, below the 100, below the

200 and it's making a pattern of lower highs and lower lows. This is an established downtrend. Call it a bear market, whatever you want. It's a bearish environment. By the time it's a bear market and they tell you about it in the news, it'll likely be time to buy because that 20%. And I'm kind of kidding because where did these markets kind of bottom a week and a half ago is

when we were down 10%. When we were officially in a correction, the markets bounced off of that 10% low 5%, 6%, and they ran right into the anchors from the all-time highs. So you look at a stock like Microsoft. Does Microsoft look like a stock that's going to continue higher? I think it's heading down to the anchor from the 2022 low down near here at about 355. That's not a price target, but...

but it's a reasonable expectation. And this is what I drew in a couple of weeks ago. And it's, you know, it's just doing what it's supposed to do in a downtrend. People are always trying to buy the dips and they get excited about these two to three day, even, you know, week long rallies. But the sum of the declines is greater than the sum of the rallies in a downtrend. Just like AMD has been in this downtrend for such a long time. And people keep getting excited about every little bounce. And

Maybe AMD is going to do this and start to establish a bottom.

But if they don't scare you out on the downtrend, they'll typically wear you out as it starts to go sideways. So this is another example of kind of how I've sketched out what I think is likely to occur in AMD. So, you know, just know the timeframe. If you're trading these bounces, that's great. Just, you know, have a strategy in the right timeframe to lock in your gains and move out of the way once the sellers regain control. Yeah.

And it's worth noting because not only is the SMH having its 200-day moving average line in a downtrend, it's rolled over. But the NASDAQ composite, if you even want to go to a broader index, that has just recently had its 200-day moving average line roll. You can see I've had this discussion here, yeah. Okay, so...

Yeah, for those of you looking at the video. So yeah, you've got some markups on this. You've done some analysis here on the queues. So here is the 200-day right here. And this is where we were 200 days ago. And that's why it's now declining because as we drop this data off and average it with this data, well, this is lower than that. So it has to turn lower.

lower and in the next three weeks it's going to continue lower even if this market rallies up to the 200 the 200 will still decline because we're getting rid of this data even if we're up in here

So that these are that's what these vertical lines are. So I can anticipate how these moving averages are likely to trend, which direction that is. And again, that's just a simple matter of counting, you know, and knowing the way averages work that one drops off and another comes on. What is that? What is that going to do to your average and where does it have to go? So.

with as bearish an environment as we have...

Can you talk about what kind of strategies you use in a bearish environment? Kind of getting back to that, do you just go to cash? You mentioned that there could be a shorting opportunity here since we've undercut some areas of, some levels of interest, as you call them. We've undercut some of those. And if we rally back to other areas of interest and get turned away, there could be shorting opportunities. How much

how much shorting are you doing? How, how much longs, how many longs are you kind of trying out, uh, just to see if anything works in some of these small, small bounces? Um,

in the current environment. I'm not the best bear market trader. I mean, it's just a lot easier to make money on the upside because, you know, here, you know, look at the NASDAQ since Monday's low. I think good bear market traders are probably pretty rare. I think so too. But, you know, from the Monday low, we had a nice little pattern. We had this low and then we had this high. We had a higher high, higher low. And now that's all getting destroyed in the after hours. And that's not unlike

bear market or bearish environment to destroy what looks like it's starting to become constructive. So I use this guideline for my near-term trades is if it's got a declining five-day moving average, I'll day trade some of these rallies in here and maybe hold a little bit overnight. I didn't tonight because we had this catalyst with the tariff news and I want no part of that gambling event. Right.

So even if it went up to $4.95, I wouldn't have felt hurt. I wouldn't have thought, oh, I should have bought because it's more about missed – I love this phrase. I used it earlier with subscribers is missed opportunity is better than lost money. And to buy after this type of rally into a news event is –

is just not the best risk reward for me. So Justin, I will trade intraday. If there are individual stocks that are set up that look like a low-risk way to get involved, I'll get involved in those but with small size.

I do short and I prefer long, but I could not resist this trade, of course, because it came to the 200-day moving average and the anchor from the all-time high. And that's where I was expecting supply to be found. I didn't short it there, though. And in hindsight, I could have shorted there and said I had the high. But instead, I wanted to see the average person from this gap up.

For the last week's week-to-date volume weighted average price, I wanted to see that broken because that meant the average person who bought these three days was now losing money and they were likely to sell and the shorts were likely to get aggressive. So I sold short in there. Not a lot though because we had a rising 5D moving average. So there's always, you know, as clean as the setup might look,

It's not exactly clean. So I covered down in here. And then actually, fortunately, I bought some puts over here. Very small amount because I was thinking, well, looks like the five-day moving average is rolling over. We could get an event. We touched that anchor. The 20-day moving average is declining. The 50 is declining. We're below the 200. So I got lucky on some puts right in there. And then I've just been basically day trading here the last couple days. Mm-hmm.

And so why go with puts? I mean, when do you do puts? When do you do shorting? And when do you just say, I'm taking my toys and I'm going home? Yeah. So this was a trade that was entered midday or so. So I felt like I've got time for this to work.

I don't, you know, it's not like it's not an overnight situation where I can't control risk. And as it did work for me, I covered a little bit on weakness and then, you know, covered in pieces. But on this one, it was initiated towards the end of the day.

And I thought, I'd like to have bearish exposure, but I don't want this thing because in bear markets, bearish environments, we could have just as easily gapped up to 490 the next day. And if I was short the queues, I'd be out a good chunk of money. But instead, if I can bet, let's say, a couple thousand dollars on premiums,

That's all I'm going to lose. And even if it gaps up to there, I'm not going to lose all of it. But if it gaps down, I'm going to start making money immediately. I'm going to peel some contracts off, peel some contracts off, peel some contracts off on the way down and get a nice trade that way. So

Paying for premium to me is a risk management technique where I've got a, you know, I've got overnight risk that I don't want to take with, you know, shorting a thousand shares of the queues at 488. You know, I've got $488,000 out there. That doesn't mean that's what you're going to lose. But the point is that's, you know, I'd rather buy 10 contracts or I'd rather buy 50 contracts, truthfully. Yeah.

and get that little bit of leverage.

Yeah. And so you also mentioned that you've been day trading a little bit more because, again, how do you minimize that overnight risk when you see news coming out? I mean, especially if you have the audacity to wait a whole weekend, you know, and let all the news come out over the weekend and potentially, you know, big gap up on Monday morning, big gap down on Monday morning. So with day trading, again,

um, do you, do you kind of have to change your mindset at all when you know that there's kind of the clock is ticking, uh, for you to get what you can out of a trade, um, before, before the day ends? Yes. Um,

To a degree. In that, anytime even I enter a swing trade, I enter it with a day trade mentality. Meaning, if it starts moving against me instantly and pretty hard, then I'm going to lighten up real quick. Because I don't want... Even if I say... Let's say this was a long setup and I was looking to buy above 473 with a stop at...

467, which I would never have a stop that wide on a short-term trade. But if it starts to rally, then I'll quickly raise my stop up to 472, let's say. But if it immediately starts to go against me, and I'll say, wait a minute, that five-day moving average is declining. I'll

I'm selling 50% of it here. I'm not waiting for that stop. I don't need a lower low to tell me I'm wrong. So I'll use much tighter risk management when I know it's kind of against this declining five-day moving average. So in other words, I've been trading long.

Actually in the SPY, not the Q's, so we can look at that. I've been trading that one long. But even there, you've got to get out of the way quickly because the rallies of the last two days, this is – let me clean this up a little bit. So we had this rally off of this morning's low and –

That was from 550, what was this, 555 up to 567, 12 points. Well, that went from 567 all the way down to 561. That's a six-point drop. If you're day trading that and you're letting that all go against you, to me, that's not good risk management. Or if I'm thinking, let's say it was a clean setup and I was thinking, well, I want to buy it long for a couple days hold.

If I buy it, let's say right here, I would be taking some off right up close to daily R2 or as it fails near there and then peeling out of it and maybe holding some. So it always depends on price action. But as it gets extended, I start looking at things like what I call the two-minute exit. If it's making higher lows as it's approaching an important level –

And each one of these lows here, so let's say I'm involved and I'm looking to sell some, but it's rallying and it's each one of these two-minute periods that shows a higher low. It's getting this nice quick move, two points real quick.

I'll set my stop under the two-minute low. So as it makes a new low for the last two minutes, I'll say I maximize that bit of momentum and then it just happened to fall apart from there, which was nice because I did get out of it up here. So that's how I look at it is I'll manage it a lot tighter with things like as it approaches key levels –

Daily R2, it didn't hit it, but it was starting to roll over there. I said, enough's enough. This is good. It's a day trade. We've got a big catalyst after the close. I have to make sure this is a day trade. So for me, yeah, it's a little bit more pressure, I guess, to say I need to be out of this thing.

But that was 1 o'clock. We still had three hours left in the day. It wasn't really like a gun to the head. The ones I don't understand are the zero-day trade options. If you don't move quick on those, you're up 200%. If you bought here, you might be up 100% there, and it comes back to here, you're down 20%.

Yeah, yeah. Yeah, I haven't played with those either myself. It's, you know, go with what you know. And when something isn't, you don't understand it, I, yeah. And again, it's back to that managing risk. And if things can move against me that quickly, I'm always a little bit hesitant, especially because I know I can get distracted by just...

doing my job, you know, as much as it's great that I have a job where I can look at charts and no one's going to say, hey, why are you fooling around? You know, it also sometimes we're in meetings and things and yeah, that just moves too fast for me. But I want to go back because you did mention R2 levels and I know this is something that you

you use a lot. You have on your charts the R1, R2, R3. And then on the flip side, you also have the S1, S2, S3. So these are technical levels. And if you could just kind of walk people through, how do you use those? What are they? And

What do you do when you get maybe conflicting signals from your R2s and your anchored VWAPs? Or the anchored VWAP of this time frame is telling me one thing, and the anchored VWAP of this time frame is telling me something else, and it's squeezed between them. So a lot of questions there. Yeah, that's called the art of trading, right? If it were easy, everybody would be doing it, right? So a lot of it has become second nature to me, Justin. I've been doing this full-time since 1991.

And I've looked at pretty much all the tools and indicators along the way. There's always new ones. And then, you know, each one will appeal to a different person. Back to the reason I like the Anchored View app is because it combines price, volume, and time. So it gets us the actual supply and demand from any point. So for instance, the daily view app on the queues today, you

We saw that it opened right here at daily S1. That didn't really mean anything to me. What did mean something to me, though, was it opened right at the weekly anchored VWAP. So this purple one, it opened right at the week-to-date anchored VWAP.

right on the money. I mean, you cannot make that up the way it hit that and began its rally. It came back to the daily VWAP, which is also the pivot for the day, and then it began a new rally. And where did it make its high during the regular hour session? Pretty much dead on at that daily R2. So the pivots are what's known as floor trader pivots, and it's a mathematical formula based on the range of the prior day.

You can also do it on a weekly basis for the range of the prior week, a monthly basis based on the range of now March. We would have new April pivots. I don't pay attention to those so much.

There was a study done, and I don't really know the source. I've actually only seen it as an infograph that laid out S1 and S2, R1 and R2. So they're basically, you could kind of loosely think of them as a standard deviation of what's expected for a daily range based on the prior day's range.

And I don't claim to be an expert on these, but the study I saw was that on the course of an average day, 88% of the time, a stock will trade between daily S2 and daily R2. So when we have a day where we open at S1 and we run up to daily R2 –

To me, that's another level of interest. I say, I don't necessarily want to sell it right there, although it was the exact high of the day today. It doesn't always work that way. As you saw with the SPY, we didn't hit it. So instead, when we get to that point, you look at it and say, okay, as long as it's making these two-minute high or lows, I'm going to continue to hold until today.

It breaks a lower low on a two-minute time frame or two-minute bar. So that's getting you out within pennies of daily R2 and that high. The reason I don't hit it out at daily R2 is because it might continue to make two-minute bars that look like this. Right? Right. So just like anything...

It's not a place to take action. It's a place to say, okay, I'm going to study it on a smaller timeframe. And if I had used the two-minute exit and did this, look how much extra profit I could have made on that, a couple dollars per share. So they're all the same to me. Pivots,

VWAPs, moving averages, Fibonacci retracements, they're all levels of interest, not a place to do business, but a place to say, okay, let me look at the shorter term timeframe to see if there's evidence that the supply and demand imbalance is reaching an equilibrium here. And we have the potential now at this place to turn lower. So once we do turn lower,

then it just happens to be a great place to sell here today. And again, it's not every day they're going to hit these exactly. But when you look at odds of 88% of an average stock is going to trade within this range and you hit the high end of that range, it's time to pay attention. Yeah. And as you explained before, if you're kind of moving that stop up, you can just easily get yourself a little bit extra if it does continue to go higher and not...

not lose that much off the top. But, you know, I want to shift gears here a little bit and get a little bit into... I was never really a runner. The way I see running is a gift, especially when you have stage four cancer. I'm Anne. I'm running the Boston Marathon presented by Bank of America. I run for Dana-Farber Cancer Institute to give people like me a chance to thrive in life and

even with cancer. Join Bank of America in helping Anne's cause. Give if you can at bfa.com slash support Anne. What would you like the power to do? References to charitable organizations is not an endorsement by Bank of America Corporation. Copyright 2025. Individual stocks. And, you know, before we do, I want to kind of start with the question. Like, I guess now that we've kind of entered that official correction territory, a lot of people start wondering, okay, if the market comes out of this,

AI is still what everyone is saying is kind of in its infancy. So do we go back to the NVIDIAs and the chips and the air conditioning, the servers, all of this that was working so well in this last uptrend? Or do you think we need new names? So before we go into individual stocks, maybe let's hit that broad subject real quick.

Yeah, I mean, I think that it would be nice to go back to the names that have treated everyone so well and everyone has that recency bias. And, you know, I brought up NVIDIA in particular because, you know, it's been a monster stock for a long time and it's had prior big corrections.

You know, this was a massive correction right here from this peak of, you know, 36, $35, 65% or something down to 13. People forget that. Yeah, 65%. And same story we had, it got, it made a higher high above those moving averages and that was up, up and away. Now, where are we?

We're making lower highs and lower lows. So, you know, there's the phrase that I always like, Justin, and you've heard me say it is, if they don't scare you out during that 65% decline, they will often wear you out as the stock has to rebuild. So it's not likely...

that Nvidia is going to see a V bottom and just go back to new all time highs. That is highly unusual that. So what we're looking for is what's the typical course. How does it typically have, you know, work? Well, if we put an anchor off this low, maybe that's our 65% correction. I don't think it's going to go down to there, but you know what? For every time the market surprises me, if I had a dollar, I'd never have to trade again, but maybe it drops all the way down to that level.

One, don't be buying on the way down because...

Just you think it's a good deal at 101. Wait till you get to 70. You're going to be thinking, oh, I missed it. I chased it. I was the dumb money. And instead, what's more likely to happen is we're going to get these longer term moving averages to flatten out. It's going to either scare you out or it's going to turn sideways for three, six months. And then buy it over here. You don't have to buy the low. The low is only known in hindsight.

But everyone tries to buy here and here, and I'm buying the new low. I'm so smart. It goes up for three days, and then it makes a lower high and a lower low. So it would be nice to see NVIDIA lead again.

It'd be nice to see meta lead again. But look at the magnitude of this rally. I think we need to see some more of this. At least, you know, if not a bigger time price correction, then maybe just sideways through time as it rebuilds and just wastes everyone's time. You know, that's the best case scenario for these types of stocks.

But I think, unfortunately, the more likely scenario is we're going to see more prolonged declines because we're in a structural period like SMCI. People get excited about these rallies and you can trade these rallies, but SMCI is likely going to take some time. Maybe it does this and that.

does a bunch of this stuff. But once that range tightens up, the moving average, then you want to be a buyer over here. And it's no different than what all of these markets have done over and over again. And that's just the way the cyclical nature of money flows through these markets. You've got to give them time. And so when do you kind of get to the point where

Um, you think that the, either the, the pain has been enough to kind of shake those people out, as you said, or the time has been long enough to wear those people out to kind of, uh, give these a chance for, uh, success. Um, or, uh,

Again, if there are stocks that are not in this position where they've come up so much and now they kind of need to course correct and there's a new crop, what is it that you look for? For kind of like the I don't want to say the all clear signal, but at least the hey, you know what? It's time for me to shift to a little bit more of a bullish posturing than bearish.

So the stocks will lead first of course because that's how relative strength emerges out of a market is the stocks that pop up first. When the market is still doing this over here, you'll see at the same time there will be some stocks that are instead doing – at that same time, they'll be doing this.

And they'll be leading the market. So once we see more and more stocks doing this type of action, even while the market is turning sideways, that's our clues. That's when relative strength matters. Right now, relative strength recently has just been, we'll save that for next week until we sell it. Right.

And that's true even of some of the defensive stuff. I mean, like, you know, Altria Group, you know, you can't get more defensive than tobacco. You know, that was, you know, looking like something that was holding up. The relative strength was, you know, very good. And then, you know, here you are down 3% today where, again, I don't know that this is going to continue going down, but it certainly seemed like, oh,

We've seen this so many times where something that's holding up and holding up and holding up and then whack, it gets knocked down. It's interesting right where it's coming into. I just want to point this out because we've got that thick blue year-to-date anchored VWAP, the orange anchored VWAP from the election, and the 50-day moving average all coming in right here. So 55 looks like an important level for Altria Group.

But a stock I bought today, Justin, and I didn't buy a lot of it for a couple reasons. One, we're in a bearish environment. Two, I don't think it's going to be a leader. It's ADT. And I didn't read anything about their fundamentals. I'm looking at the chart. And I believe this is ADT, the security company. And it's been moving higher. It's got a pattern of higher highs and higher lows. Right.

But it's doing it such a slow motion, right? So it's breaking higher. It looks good on multiple timeframes. But this isn't going to be, you know, what are they going to fix in the world that's going to make the stock do this? Not likely, right? So, you know, you look at the hot IPOs. What was the big one was Newsmax. Newsmax, right. You can't chase that. I mean, this stock was down 77% today.

And anyone who is buying the dip in here, you know, thinking they had a deal, you know, all afternoon in particular, even on a, you know, on a two minute timeframe. If you look in here, we had a very clear pattern of lower highs and lower lows, you know, all the way from one 50 down to 50. So a hundred points uninterrupted downtrend. Yeah. There were a couple of little bounces in there, but they were insignificant. Right. Some of the declines, uh,

is greater than the sum of the rallies, you're in a downtrend. Your odds are better for shorting or just leaving it alone. So what do we have to pick from? Uber looks like maybe it's starting to rebuild, but you can see that's getting destroyed after hours as well. Some of the energy names, so XLE, for instance,

is, you know, looking better on the daily timeframe. But when you look at on a weekly chart, it's just stuck in a range. And I'm not, I was saying to somebody, you know, it might have done that, but instead it's holding up. So, you know, it's, it's showing relative strength, but it's doing nothing for the last year. Um,

So about again on the defensive side, kind of like your insurance, your gold, those things have been holding up relatively well. So, you know, whether you look at like on the insurance side, I mean, there's been a whole host. I mean, even KIE, if you if you look at the insurance ETF, you know, I mean, it's it's kind of like what you know, what downtrend on this one? Yeah.

Yeah. I mean, it's certainly holding up. And you look at the daily chart, it's holding the 20-day moving average. It's holding the 50-day moving average. Since this beginning of the year, it's been holding the year-to-date anchor. So I look at this year-to-date anchor and say, there's an institution that wants this stock.

And when it pulls back to that year-to-date anchor, they're putting in a solid enough bid to absorb all the supply that comes in. So they're defending it. And as it gets extended away from there, I don't want to buy this breakout because it just rallied from –

you know, 57 to 61. So it just rallied four points or about 8%. Instead, I want to see, you know, if it breaks the 20, does it pull back down to that year to date anchor and then monitor that? And if it,

No problem. I'm not going to buy it. But if it starts to bounce from that level, then great. I'll be a buyer here with a tight stop under there because I know that that level has been defended. So if it's not defended this time, then it's likely that instead it breaks down, touches it from underneath, and then falls apart like so many names have been doing.

Yeah. And again, I just want to point out, uh, one of the things I love that you do is it's kind of that if then statement, if this happens, oh, then I know, then I know this, this is the information that just gave me. And if this happens, this is the information that just gave me. And so you have kind of your, your game plan for those, those multiple scenarios. Um,

Any other stocks before we go? And I'm just going to quickly check and see if there were any questions from our YouTube audience as well. I mean, one question they had is, is this live? And yeah, of course it's live. So thank you for joining us live. Someone else was asking, who's buying MO these days?

Altria Group, the tobacco company. But yeah, anyway, any last stocks or things that you want to talk about before we go? So one that I've started to buy, I started to buy it yesterday.

two days ago, and I added to it. And I broke my rules to do so, which is I bought it while it was below a declining five-day moving average. And I told AlphaTrends members, you know, don't follow me on this trade. I'm buying it because I started buying it right here, and I added to it there yesterday. So it's not bad, but it's getting hit after hours. And I have May 35 calls on this, which I think my average price is about $0.95. But

Here's what I did with Love, which is Southwest Airlines. I don't know if you saw it, but they said they're going to start charging for bags for the first time ever. So they're going to be charging $49 or $59 per bag. And so I am such a good fundamental analyst, I went over to Perplexity and said –

If they start charging for bags, how much is that expected to add to the bottom line? And when you look at the market surge chart, what you know is that

The stock earned – their estimates for this year are $1.77. Well, with this baggage fee, they're going to add a new source of revenue, which should go straight to the bottom line, of $2.51. So instead of earning $1.77, they're going to earn $4.25. So they're going to earn $4.25.

So the last time the stock earned that much money, it earned $4.25 in 2018. And the stock was up here at $60 per share. It earned $4.27 then in 2019. And then things fell apart. And so now we've got this longer term base. If they didn't scare you out, they're wearing you out. And it's looking like it's trying to get ready to go.

I'm starting to buy a little bit, but so far it's not rewarding me. It's one that I wouldn't suggest you follow me into right now, anyone out there. But if it starts to stabilize, what I'm going to look for, where I'll actually get aggressive on this is,

is that if it starts to do just the same thing I sketched out on the other timeframes in the next week. So this is where we were five days ago, four days ago, three days ago. So that tells me this one, two, three, that's what the five-day moving average is going to look like. So best case is something like this. And then that would put us towards next Tuesday.

Then we would be getting rid of this Tuesday morning, meaning the five-day moving hours will decline. But if we can start to do this...

And that I know that by the end of the day, as we get rid of this data, that five day moving average will begin to rise. So I would be looking at this next Tuesday or Wednesday as a potential place. If it hasn't fallen apart completely, right? That if it builds out this way, then I would buy this higher high above the flat to rising five day moving average. I would get involved in the stock and I would probably add calls and have my stop under somewhere like this level right here.

How far out are you going on your expiration for your calls? So for this, it's May. Just because, you know, premiums are high. We discussed that a little bit yesterday with the VIX high. I didn't want to buy too much time.

but I didn't want to, you know, be too tight on it either. Yeah. Well, Hey Brian, it's always a pleasure seeing you. You can go ahead and stop, stop your share. Really appreciate you showing us all your charts because again, you're, you're a master at that anchored VWAP and all those levels of interest. And yeah,

And again, thank you so much for sharing how people can kind of view this and when they can start dabbling a little bit more into the market and test the waters, if you will.

More important, the way that you kind of lay out those scenarios, I think, is something that everyone should be paying attention to. The wear you out or scare you out, there's kind of two ways to see that happen. You know, the V-shaped recovery, as you said, is not as frequently seen. Just because we saw it in COVID doesn't mean it's something that you see very often.

Right. And, you know, I saw I forgot where I saw it, but the amount of times that has been uncertainty met mentioned in news headlines, they went back to 1960 and they they they set the baseline at 100. It's at about 600 right now, which is the highest it's ever been. And, you know, the phrase the market hates uncertainty and that's what's going on. It doesn't necessarily hate the tariffs.

It hates the uncertainty of the continued changes and what that's going to mean. And maybe it hates the tariffs a little bit as well. But right now, it's just the uncertainty. What does this mean? Is President Trump going to change his mind again because he's getting too much pressure from this country or that country? He's going to backpedal on things. Or is it just a negotiation tactic, right? Right. Yeah. So it's here today, gone tomorrow. And you just, you know, how do you plan for that?

Yeah.

Yeah. Well, again, Brian, great seeing you. Thanks so much again for sharing your stuff. And hey, hopefully we can hit Vegas again sometime. But if not, I might be seeing you in Miami for another money show. So that's right. That's going to be in May that you're going to be out there. I think it's around May 15th. I think I'm going to be out there. So, hey, I'll see you then.

Okay, that's going to wrap it up for us this session. Thanks so much for joining us. And I hope you join us next week because we're going to have a returning guest on with a little new twist. John Kosar from Asbury Research is going to be on and he's bringing his son along this time around who does a lot of the quantitative analysis for him. And so we're going to get John and Jack Kosar together to kind of walk through some of the ways in which they do their analysis.