What we’re seeing in the market is a sector rotation. Sector rotation describes where and how the money flows from one sector to another. Right now a lot of money is flowing out of the tech sector which has been the hottest sector for the last few years. Looking at $QQQ, we’ve just been in an epic trend for years. But in recent weeks, a lot of money has been flowing out and into other sectors.
That’s a healthy thing. From these types of rotations, we as traders can see fresh charts and newly developed trends that we can play with. But when the money leaves a sector, we can see some epic shorts in that distribution.
Recently there have been some amazing short opportunities in tech. On July 3rd, I made about $1800 shorting tech stocks and $2500 in futures shorting the tech sector. The beauty is that I traded the same setup in both. My biggest short was in NVDA. Currently, NVDA is having a huge rollover after its epic run. This morning the tech sector gapped up. But when a market gaps up while undergoing distribution, those gaps will often fade. The strength becomes a major liquidity event.
When I saw this gap up, I knew it was a distribution event. The first trade of the day was in NVDA. There were two major clues that fueled our trade. First, the tech sector gapped up, and then began fading right off the bat. But looking at NVDA, it didn’t gap up, but instead opened up weak. That’s relative weakness. NVDA just started to make a move lower right off the bat. Eventually, you can see it run into support from its previous day and then popped up into its EMAs. When it comes back and breaks below on the second test of the day, the 3rd test of that level, now I’m anticipating the short. I shorted it at 144.50 and as it broke down, I’m scaling out. You can see NVDA drop almost $3 in a hot second. When it bear flagged later, I added more shares and played into the next dump.
After it popped off of $139 into the 9EMA, I waited patiently for the re-short. What I want to do is watch to see if that’s where the stock gains traction. When it breaks back under, I have my confirmation and that’s when I reentered. If you’re not sure of the setups and price patterns that we’re talking about you can learn them all here at our Bulls Bootcamp. It's an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email me at firstname.lastname@example.org today!