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After a short-lived hiccup early last week, the market is back to doing what this market seems to do best – making new highs.

And don’t just take my word or the SPY’s new record – a real indicator of greed and excitement are popping small caps.

And popping they were – SCKT, NAOV, IGC and a few others pulled off some of the wildest moves in a while.

Buyers are clearly plenty, but buyers alone don’t do the trick – it’s the forced covering by short traders that can really take a move to another level.

As I often point out, for a short squeeze trade my goal is to find an area where short traders would be red – at that point, any move forces them to cover.

Today, I want to show you 3 names I’m watching where the price is nearing these dangerous levels:

Nanovibronix – NAOV

  • Market Cap: ~50M
  • Free Floating Shares: 21.18M
  • ATR: 0.19

This one surely is for the history books – shares went from ~70c to $3.30s in a matter of hours, following Australian approval of the company’s portable therapeutic device.

Talk about not looking back – this was just a one-way rocket.

Even at current levels, almost anybody who shorted on Friday is likely red or near red – any swipe higher will get these traders uncomfortable.

I’m not chasing here, though, I do need to see a setup first – ideally some kind of protracted hold above $2.50.

Xenetic Biosciences – XBIO

  • Market Cap: ~25M
  • Free Floating Shares: 8.02M
  • ATR: 0.40

Similar idea, totally different reason – the company announced a $12.5M private placement at a premium to free-market price.

Such announcements are understandably great – somebody wants the shares so bad they’re willing to pay more than what the company currently trades for.

The stock battled through Friday, and slipped into close, but is beginning to shape up again today.

Down the road, in my personal view $3.90 is the real area to focus on – that’s where most of Friday’s action took place.

For now, though, I want to see shares settle and firm up at $3.50 for a swipe up later.

Medigus – MDGS

  • Market Cap: ~45.65M
  • ATR: 0.14

The chart says it all: through the second half of day on Friday the stock looked completely dead, but then squeezed up and put the short traders in a bend.

It’s holding fairly well today, although I do want it to be higher before I can get involved.

I want to be above $2 and for now this is the key level I’m watching. Above that, any further up move will mean short traders now have to cover.

 

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

“Is the market about to crash?”

If only I got paid a dollar every time I overheard somebody ask that…

But I surely see where this is coming from, especially given the current environment – we’ve gotten relatively high up, there’s no questioning!

I’m not even talking about all individual climbers… just look at the SPY—the index the whole world is glued on.

SPY is currently up more or less exactly 100% from the COVID low of $218.26… in a mere 16 months! Talk about a great time to be alive…

And believe it or not, by the looks of it, we might be headed higher still…

A Crash, That Keeps Pushing Back

Look, there’ve been plenty of legitimate concerns about the state of the market over the past year.

First, we counter-intuitively climbed higher through the COVID-19 pandemic – all the while economies domestically and around the world struggled to keep afloat.

Then, our election… The more pro-free market Trump got replaced by a more pro-regulation Biden with some arguing and rioting in the process. Not the most bullish sequence of events on its surface, yet higher we went still!

Now the deficit, the inflation, the slow-ish job market recovery, the Delta strain concerns…

Add into the mix the “not ideal” recent price action across the board… For one, here’s the SPY from last week-early this week:

Getting a rough rejection at all time highs and then losing 16 points in 2 sessions on giant volume sure makes some people sweat.

The VIX, or the Fear Index (you can read more about VIX here) in chief demonstrates that well, as it’s moved from $16 to $25 in a matter of those same 2 days:

Then, there’s Bitcoin too. And I’m not implying that Bitcoin is in any way related to the market, but we can surely agree that it’s a useful gauge of traders’ excitement.

Well, Bitcoin has failed to excite this time around:

It finally slid below the $30k level that it’s been holding onto for so long, seemingly ready to finally fall into oblivion and take all the hype with it

That’s a pretty gloomy looking picture. isn’t it?

Except that, well, this is not at all how it turned out!

Another Dip, Another Buy

Fast forward some 4 days… and all three bearish looking charts from above turned bullish in a blink of an eye:

Here’s SPY, back at the highs like nothing ever happened:

Here’s the Fear Index, not looking very fearsome anymore:

And finally, here’s Bitcoin, back above the $30k, possibly setting up for a bounce higher:

Throw into the bunch a couple of wild runners we’ve had over the past few days – IGC, WISA, SCKT, etc – and the seemingly overheated, desperate and scared market starts to look more like business as usual.

Which makes me wonder…

Is The Next Leg Up Coming?

Let me be clear here – I’m not discounting any of the bearish arguments, in fact, I think many of them have great merit.

But as a trader, I have to rely on what I see happen, not on what I believe should happen.

And what I’m seeing and trying to point out to you is that price action suggests we may easily get more upside.

The SPY had just vigorously defended its long term uptrend:

If the $430 area continues holding and trying to advance higher, I really see no reasons to be short.

At the same, an all time high, especially one that gets rejected and defended multiple times is often a tipping point – meaning the next move may be violent in either direction.

That’s why if the $435-$437 area starts getting rejected again – I might position myself for a pullback.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

It’s safe to say we all know pretty well what Twitter (TWTR) is.

And while most people associate it with funny tweets in their feed, those of us who trade are excited about it for entirely different reasons.

See, Twitter is one of the most active names out there… and a very polarizing one!

Many are convinced it’s the next “big tech” runner neverstopper, others have been openly bearish since the day of its IPO, and long before that…

For us, traders, that can only mean one thing – Q2 earnings, scheduled for today, July 22nd, after the market closes may play out volatile!

And don’t take my word, let’s have a look at how they turned out over the past year:

3 reports – 3 gaps of 10-20% in either direction.

So, what can we expect ahead of the 4th report later today?

TWTR Is In A Peculiar Spot

Let’s have a look at the chart going into the corporate earnings:

There are 2 things I take away here:

  1. Twitter is back to ranging at the highs in the $62-$72 area, where it’s historically had a lot of troubles
  2. The stock is positioning for a break higher

Shares are now trading at the higher end of the $62-$72 range I just mentioned and holding quite tightly near the breakout area, which may take it straight for a re-test of the February all-time highs and possibly far beyond that.

Given the strength of the stock over the past month, it seems that the market is eager to push it higher and expects Twitter to beat the analyst estimates.

Speaking of which….

TWTR is High, Expectations Are Higher

There are 2 key metrics analysts always follow closely in Twitter’s reports:

  • Revenue growth
  • Number of Monetizable Daily Active Users (DAU)

Speaking of the former, the consensus currently sits at ~$1.06B in revenues for the quarter, implying over 55% growth rate YoY!!!

If you wanna know my take – that would be quite a statement by the company that’s historically grown anywhere between 7% and 25% a year over the last few years, even if it is catching up for the slow 2020.

The DAU consensus figure is ~206M which translates into ~11% growth YoY from 186M in Q2 2020 – that’s not a historical high, but not a lowball figure either.

So to sum it all up, we have a stock that’s right near the high of its range, seemingly ready to tackle all-time highs again… But the expectations for its performance are really high as well!

Do you see where this all might go wrong quickly?

Will Corporate Earnings be a “Sell The News” Event?

Don’t get me wrong, I’m no bear and in no way am I suggesting to get ahead of ourselves – I’ll only consider trading the name after the earnings are out.

But the way I see it, the stock is at a “decision point” and there are 2 ways this can play out:

  • Results slightly less than perfect will likely make it a “Sell the News”

The expectations are so high and the price action has been so bullish that any reason “not to love” the report will likely put a selling pressure on the shares – given how high it’s been and how tightly it has consolidated, we may get a serious pull back.

  • Breaking higher would take a HUGE beat

I may sound pessimistic, but that’s not true – I’ll eagerly look for long breakout trades later today or tomorrow, shall TWTR deliver a really impressive beat that justifies the optimism and sets it well for the clear skies above.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.