Made 10% timing the NFLX, & growth bottom in 1 day! What next? + the QuantZombie origin story.
Despite all the negativity on growth stocks (and the broad markets in general), I've been telling my insiders that "a short term bottom is forming" 4 days ago.
I finally have some trade ideas to play that bounce in my trade idea post yesterday! See https://www.quantzombie.com/single-post/trading-on-oversold-growth-names-nflx-docu-roku-twtr
Here is a sample of the ideas yesterday, these are the exact slides posted:
When I say "dead cat bounce" it means that there is a good chance that the price of NFLX might come back down to create a double bottom-ish type of structure before a real launch into a intermediate cycle up.
However, it is possible for there to be a sharp retracement of the downside first due to the extreme negativity on the share price. This happened last night! Check out last nights action!
Those who took the risk to catch the bottom made 8%-10% in one day on NFLX. The rest of the ideas are also all up.
So now that you successfully caught the bottom, what do you do? The 1H22 is still going to be "weak and whippy", but you have an initial dose of optimism.
Well, if you fundamentally do not want to have any low earning growth stocks, you can sell off this bounce for a quick 10-12% gain, like I mentioned.
However, for those who want to see how long this bounce can last, you would have to hold this long position, but use a different stop loss. Here's what a swing trader might do:
If there is a major moving average nearby, use that as your price target.
In the case of TWTR, use the moving average as a price target (or see if prices bounce off of it)
Before it gets there, use the MACD or slow stocastic as a stop loss. If the momentum cuts downward (the lines cross downward), cut your position.
Because NFLX's moving average is far away, we can't use that as a price target (unless you are really lucky), so I would use a price target that is a 50% retracement of the big move down, approximately $450.
Before it gets there, use the MACD or slow stocastic as a stop loss. If the momentum cuts downward (the lines cross downward), cut your position.
Note: if you willing to try to see if the upside can last a couple more days, it would be wise to choose growth stocks that are not in danger of bankrucy, the reason I highlighted ROKU and NFLX, is that they are both cash flow positive. Their growth rates might be in question, but their cash flow is decent (compared to other growth names).
Also, this trade idea that I gave yesterday is not based on basic technical analysis alone.
The reason why I never gave such ideas for growth names previously, even though their MACDs and slow stocastics cut upward, is because I was waiting for a higher probability situation to occur first.
Here is the first time that I warned my insiders that a short term "trading bottom" was forming. See my posts on the 25th Jan, the starting of the bullish formation.
then montitored it and followed up with a post reiterating my idea. I noted in my blog post that when popular YouTube investment guides like Meet Kevin that have never been a professional analyst or financial insider before sells all of their shares and proclaims doom, it's a good sign that the probabilities that you have a short term bottom. Meet Kevin's sale doesn't automatically mean it's a short term bottom, but it corroborates a bigger story and stats that I have been tracking. Dumb money is very pessimistic yet smart money is optimistic! In this particular case, we now know that by definition, Meet Kevin is "dumb money" and had been selling to smart money.
* I'm not saying Meet Kevin is literally dumb, he is likely intelligent for his age, but he is dumb in this particular trade. I've been on the dumb side of a trade before too.
Anyways, is the growth stock trade still good to reward-to-risk? On certain measures no, some say that their slowing growth rates will impair their valuations.
But on a sentiment level, yes.
Dumb money is still very pessimistic, and smart money optimistic. The last time Dumb Money was this pessimistic was during the first big move downward of the COVID19 crash. So, unless you think we are going into to bear market right now, then there should be buying pressure coming in when the shorts have to cover their positions.
Also this dumb/smart money indicator tend to measure broad market sentiment, remember that growth stocks "led" the broad market decline. These are the names that dropped alot more than everything else. It's a reasonable idea to think that if sentiment comes back to the broad market, some massively oversold growth names (those that aren't in an obvious bankrupcy risk and have printed a decent quarter) can get a sharp bounce first... before deciding where the stock price is going after!
So anyway, I hope this helps those people who are new to playing short term bounces.
The last couple of posts show you how I build a story if short-term bottoms are starting to form, despite so many being bearish.
This post shows you how to react if you caught the short term bottom but don't know enough to know where prices can go... in this case, you play the probabilities, set price targets and stop losses, and RISK MANAGEMENT. When playing ideas based on sentiment and not fundamentals, you cannot bet big on any one idea. This is a "trade" and not an "investment". A recommended trade position might be 5% of your entire portfolio. This way you can technically make 20 of such trades. This helps eliminiate your risk of ruin (losing too much).
By the way, in case you are new, I have made it a life-long science to detect bottoms when it's not obvious. My rise to being known was when I caught the 2009 GFC bottom, and then more recently, the COVID19 bottom. https://www.quantzombie.com/single-post/2020/03/20/stocks-i-am-looking-at-nov-planet-fitness-stwd
There, I was calming people down and telling them to start nibbling at stocks while many sold everything. My post turned out to be the absolute killng play. The post came out the day before the actual bottom day. I made no post for the last couple months, and only started posting on this day because I felt the probability of a intermediate bottom (that will last weeks, not days) was high.
Anyways, I will leave you with the message I gave on the first day of the suspected bottom idea.
"If I were a trader, I would take short term bets on good solid stocks with visible earnings that are too cheap to ignore. I would sell into strength and then wait and see."
But everything you read here is for educational purposes only.
Do your own research. Consult people you deem experts. Make sure you have sound risk management. Don't leverage yourself on speculative names!
I am only adding in a point of view that might be different from the lens you are watching through. Market statistics is not full-proof, but it gives better context making better financial decisions and doing proper risk management. Stay safe everyone!
Also, if you like the blog posts and would like to learn how I analysis stocks and markets with a combination of fundamentals, technicals, sentiment and quant; as an ex-fund manager and analyst that returned me a CAGR of 30% from 2016-2017. It's not fluff. It's not teaching a get rich quick strategy. I am going to be running my 1st comprehensive "QuantZombie Investment Analysis++ Course with Current Case Studies." I will be covering the basics of fundamental analysis and technical analysis and sentiment analysis, then applying those principles to current ideas. You won't find anything out there like this from anyone with my experience.
It's 6 lessons of 5 hours each, starting this Saturday 29th Jan 2022, Singapore/Perth time. 1 pm.
If you missed it, don't worry, I will be developing a series of e-lessions and video on demands to teach people not just basic fundamental analysis and technical analysis, but to use advanced techniques that many don't that helps you get an edge over the average person, average you-tube guru and even some analysts. These lessons will show how I find certain undervalued under the radar stocks, but also how to do proper market timing, and finding major bottoms before they are obvious.
I am not kidding when I say that what I teach is worth hundreds of thousands to some hedgefunds. But I am retired and so just want to teach people who want to empower themselves.
Click here if you are interested or want to learn more.
But please send me a direct email to Ken@quantzombie.com if you want to be considered for the future e-lessons as well as registering on the form on the course page.
By the way, in case you are wondering why I call myself and this brand "QuantZombie", I am going to tell you a little bit of why.
My STORY (5 minute read)
It's because for years, I literally looked like a Zombie. Between 2000 to 2014, I spend most of my days in great pain as my flesh was inflammed and on somedays looked like it was "melting off". This was due to the incurable extremely severe atopic dermatitis I suffered that got worse every year since young. The doctors and dietitians could not find a long-term solution for me, thus it got worse every year.
I lived like this for decades, and lost everything... my career, my love life etc. I could no longer go outside to work and thus had to give up my career as an engineer and then teacher. I had to stay at home, in the confines of my room for most of my life, hardly going out.
Until God suddenly changed my seasons just 5-years ago, at the age of about 39. The doctors and friends are still confused how it happened. And in a way, so am I. Read more of that story here.
But, because I was confined to home, that's what "forced" me to learn the stock market. I was forced to become a stock trader and I HAD to make it work, because if I couldn't make money in the stock market, I would have literally been wiped out since I can't go out to work anymore. When you are trading for your survival, your desperation will make you much more rigorous in making sure you protect your losses and make high probability trades. Eventually this avenue for survival turned into becoming a professional markets and equities analyst, then a senior business consultant in US, and managing the QuantZombie Alpha fund (which returned a whopping 30% CAGR with no leverage or leveraged instruments... all deep value stocks with superior market timing. My performance is found here, and my trades are not even secret! I posted the ideas on my blog, check check out the posts between 2016-2017.
However, there is another reason I call this site "QuantZombie"
As I developed into a manager of funds, I realized that to outperform the market, you have to try at all costs to leave your emotions out of your investment and trading life. The only way to do that is to learn the best quantititative tools to guide your investment decisions and risk management.
I sought to eliminate my emotions from trading like a ZOMBIE. Zombies don't get emotional. They see a good opportunity, they just lumber towards their juicy prey without second guessing. This is what you must have because when the market is bottoming there is always legitimate fear (or at least fear that is propagated at the popular level).
That's how I caught the SILVER bottom, the 2019 GFC stock market bottom and the 2020 COVID bottom. Read my blog posts and you'll see how. Each time, even analysts were calling for more downside. I am three for three is calling major bottoms before it becomes obvious. Will I be four for four? I cannot promise you that, because it's all about probability. But what I can do, is to help to measure those probabilities for you, and so you can make decisions based on probability and not the fear and greed of the markets.
The last reason i call myself "Quant Zombie".
I am not trying to get religious, but this has truly been very important in my investment journey, and is arguably the biggest reason why I did so well. You see, sometimes, the right information can be right in front of you, but you are too paralyzed to act because of fear, regret and condemnation (of losing too much), OR, the right information in buried in an avalanche of FUD. Even more importantly, there are legit professional platforms giving legit information... but at the wrong time. Even legit data but given at the wrong time, is bad data! You really DO need an edge to control the emotions that enslave us, and more importantly, a discernment that is outside own natural tendancies to know which data is the better data to build an investment case.
Honestly, this is hardly surprising... if just being a little more hardworking, and just studying data could make us outperform the broad market, it wouldn't be a phenomenon that the "average investor" does much worse than if he had simply bought the S&P500 and held it throughout. The "average investor" always sells too late, and buys back in even later. But the reason they do so is NOT because they are stupid or lazy. These people are your engineers, lawyers, doctors and business men. These people read reports from investment banks and brokerages with "good" research with fancy graphs and words.
The problem is that they are too fearful when they should be aggressive, and too greedy when they should be conservative. When everyone is making money, they feel the pressure to make money too or get left behind. Isn't that greed? When they lose half their investment, the thought of losing even more makes them feel that cannot afford that risk, and hence they stop investing. Isn't that too much fear? In theory, when stocks are cut in half, that is the best time to buy, not the worst. Yet, people cannot help but be paralyzed.
The finance market and the average investor performance veerified for me that the Bible is on to something when it says that men have a problem in that they have a sinful nature and that we are "slaves to sin". (Rom 6:20)
It's the sinful nature as described by the Bible that traps us in the realm of "natural knowledge" but also gives rise to unwise fear and greed.
Here's the rub. A slave cannot free himself. If it was so easy, more people could increase their stock market performance with time... this is especially so given the rise of technology and the internet. In theory, all the "wisdom" and data over the ages are at our finger tips. Investors should be getting better in their performance than previous generations... but this is not the case! The problem isn't getting the correct knowledge, it is finding the correct knowledge at the righ time under a pile of wrong knowledge, or "legit knowledge" but too late. This takes a special discernment. After that, even if you find what you suspect is the correct knowledge, there will be many voices shouting that you are wrong. It takes a supernatural moment where you have lucidity and a courage to take this "risky" position.
As a Christian, I realize that our sinful natures gets us into a lot of trouble. In fact, the reason why the average investor does badly in the stock market is because of what the Bible calls "sinful" nature. Our sinful natures make us too greedy and too fearful. Our sinful natures want to make money, things, and power into idols. Once we do that, the powerful moves of the market and the FUD from media have too much influence on our trading, making us sell at the wrong time and buying more at the wrong time. I make the worst trading decisions when I forget about God and just want to be rich. In a strange twist, during those moments that I make God as number one, and look at money as a tool for God's purposes, I do alot better. Again, when I choose to "give up" more money and put God as number one, the thing I "gave up" got multiplied. The more I try to hold on to that earthly possession, the more it slips through my fingers.
"You cannot serve both God and money," the Bible says. " Either you will hate the one and love the other, or you will be devoted to the one and despise the other." (Matthew 6:24)
Yet at the same time, when we give to God's purpose, God tends to bless us with the very thing we gave up... but much more than expected. (Luke 6:38)
"Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.” (Luke
But, when we have a greater purpose like finding the Logos, the divine reason as thought by the Greek leaders of thought, the great purpose for yourself since the beginning of time, why would we NOT regard money (or the things that are analogous to it, like beauty, fame, power, pleasure) as pursuits?
The Greeks philosophers knew that a perfect design for men existed, called the Logos. A principle originating in classical Greek thought which refers to a universal divine reason, immanent in nature, yet transcending all oppositions and imperfections in the cosmos and humanity. An eternal and unchanging truth present from the time of creation, available to every individual who seeks it.
The Greeks thought people can become the people they were meant to be by finding this Logos. This is the other side of the coin ... the greek realized that people are corrupted by something (the Bible calls that sin) and need to return to a perfect form that they were obviously designed for.
Isn't the Eastern thought of "the TAO" (the way), analogous to this Logos?
All cultures are pointing to a "sinful nature" of men that people cannot seem to easily escape from.
Christianity makes a uniquely historical claim that the Logos, that thinkers of all cultures know to exist, is a person that you can know and fully embrace.
He himself bore our sins in his body on the tree, that we might die to sin and live to righteousness. By his wounds you have been healed. (1 Peter 2:24)
But if we are honest with ourselves, we know our sinful nature cause us to be slaves of addiction, to covet the wrong things, to have the wrong temporary focus on highs. It can't satisfy. There is a song I used to listen to by Audio Adrenaline... it goes like this that because of Christ, "I'm dead to sin... LIKE SOME KIND OF ZOMBIE."
And so, this is a pursuit of mine too, to allow Christ to manesfest more inside of me, so I can be less and less... and more dead to sin, and alive in Christ.
For we know that our old self was crucified with him so that the body ruled by sin might be done away with, that we should no longer be slaves to sin— because anyone who has died has been set free from sin.
Now if we died with Christ, we believe that we will also live with him... count yourselves dead to sin but alive to God in Christ Jesus. (Romans 5:6,8-11)
During my 2009 and 2020 crashes, everyone was losing their heads, including me. It is difficult to pull the trigger and buy the "bottom" because at the time no one knows that's the bottom. Furthermore, the regret and condemnation of losing a big chunk of your savings becauses of the losses accumulated to that point makes us paralzed to act, even IF THE STATS are in your face.
I remember that the conviction to go all in only came because a certain verse in the Bible came to life in my heart at the right time.
That because of God's great love for us and promises to us paid by the gift of His son Jesus,
"The Spirit you received does not make you slaves, so that you live in fear again; rather, the Spirit you received brought about your adoption to sonship. And by him we cry, “Abba, Father.” (Rom 8:15)
We can never conquer fear in our lives just by "willing" it. The fear is there for a legitimate reason and we are too small and vulnerable by ourselves. In Christ, we are sons of God. God takes care of His sons, and that is why we have reasons to not be fearfulness.
What about the condemnation and regret of our past actions in life (and bad trading decisions)?
"Who then is the one who condemns? No one. Christ Jesus who died—more than that, who was raised to life—is at the right hand of God and is also interceding for us. Who shall separate us from the love of Christ? Shall trouble or hardship or persecution or famine or nakedness or danger or sword?
As it is written:
“For your sake we face death all day long; we are considered as sheep to be slaughtered.”
No, in all these things we are more than conquerors through him who loved us. For I am convinced that neither death nor life, neither angels nor demons, neither the present nor the future, nor any powers, neither height nor depth, nor anything else in all creation, will be able to separate us from the love of God that is in Christ Jesus our Lord.
Once I understood the implications of this, I understood why this verse makes sense:
"In all things God works for the good of those who love Him and work according to His purpose." (Romans 8:28)
That's the exact moment that my fears and regrets that paralyzed me melted away in a very surprising few seconds of silent lucidity. In that few moments of silence, where I could ignore all the screams from the market that you shouldn't go back in, I made that decison to go with the statistics, that it was the best time to go in, not the worst. The worst was 1 year ago when everyone felt so invulnerable, and young people were overconfident in their ability to make money. I told myself that no matter what happened after... whether the stock market would take 5 years to recover, or 1 year, that my life was Gods, and I would serve him in whatever form... whether I ran out of money and had to quit as a trader and do something else, or not. If I made money, I would think about where God would want me to contribute the money to. God would be the master, not money.
for God did not give us a spirit of fear, but of power, and of love, and of a sound mind; (1 Tim 4:7)
Because of God, fear was silenced and a sound mind to fully appreciate the statistics that were in my face appeared.
This is part of being "dead to sin, like some kind of zombie", for it is our sinful natures that empowers and gives rise to extreme swings in emotions like fear and greed. We also need God to show us the correct data at the correct time, to discern which data is more valuable... considering that in the financial markets there are many people with big platforms giving all sorts of valid information. But valid information at the wrong time is bad information. Hence we need grace and wisdom from God to sort it out too.
Summary: Our sinful nature keeps us in the realm of the natural, and makes us a slave to fear and greed. We cannot get out by ourselves. Being in Christ allows me to be "sanctified", to become less attached to that sinful nature and more living a life influenced by the Logos, the person i was meant to be, loved by God and working according to His purpose and not my own selfish desires.
The more that happened, the more I could see past the FUD and make wiser investment decisions.
Sometimes when I forget those principles or my heart gets cold and distracted, I tend to make the same mistakes again. That's why my Christian faith has been very integral in having the discipline to invest wisely, because if you haven't realized by now, the market is SPECIALLY DESIGNED to bring out the worst in us.
That's why I call this site and myself, the "Quant Zombie."
1) I literally looked like a flesh-melted Zombie before a sudden unexpected recovery without change in medicines.
2) I wanted to be able to make emotion-free investment decisions (like a Zombie)
3) I wanted to be "dead to sin" like some kind of Zombie in the other areas of life.
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