Traders spend a lot of time wondering when to buy a stock – but how about selling it?
It doesn’t matter if a trade racks up 100%, 200%, or 300% gains while it’s still sitting in your account. The second it drops back down, you could lose it all.
Want to put that asymmetrical return in your pocket? Then you have to sell at the right time. And the best time to get out of a stock is the moment everyone starts talking about it.
It goes against common sense, I know. If everyone is talking about it, doesn’t that mean it’s only going to go higher?
That’s not the case.
A few years ago, I was in an Uber with a particularly chatty driver. He was going on and on about how much money he had made on cannabis stocks. He had already doubled the money in his account, and he was getting ready to triple it.
He asked me if he should buy more. But I told him five very important words…
“When in doubt, sell half.”
It wasn’t what he wanted to hear. Everyone was talking about pot stocks back then, and he thought cannabis was going to the moon.
But here’s the thing – if everyone is talking about it, then the profit opportunity has already come and gone.
There’s a rule of thumb in the trading pits. It’s one that Wall Street has abided by for years. And if you want to make any real money in the markets, if you want to take over Wall Street, if you want to make your returns asymmetrical, then you need to know it too.
When the guy on the corner is talking about how much money he’s making on something… the gig is up.
Essentially, you want to get in and out of a stock before everyone’s talking about it. Before it becomes a social media phenom. And before it hits the Reddit forums.
See, the story of GameStop Corp. (NYSE:GME) and AMC Entertainment Holdings (NYSE:AMC) wasn’t all that the media portrayed it to be. It inspired a new generation of traders, sure. And it scared Wall Street – for a second, that is.
In reality, retail investors weren’t pushing GME up on their own. Wall Street was helping.
Let me tell you what really happened with GME in January…
Hedge funds were shorting the near-obsolete video game company, and Redditors took notice. They started talking about a short squeeze in the stock and bought shares on their own to push it even higher.
The stock started to rally… big-time. It went from under $20 to over $60 in just a couple of weeks. Those hedge funds started losing money, and Redditors started making it. That’s the story everyone knows. But it didn’t stop there.
These hedge funds and other big Wall Street banks noticed what was happening on Reddit and Twitter. They saw the message boards conspiring against them, and they started employing news-reading algorithms. The same type of “algos” that YouTube and Facebook use to suggest content.
Wall Street was spying on retail investors, and it knew that these new traders weren’t done buying GME.
So they stopped shorting the stock. Instead, they bought it up. As the squeeze picked up, they bought more. And the second they realized that the shorts were being shaken out, they sold GME to a bunch of bag holders reading the WallStreetBets message board.
The big money jumped out at the top, and the retail investor got burned – the end.
You see, the convergence of the little guy and the big guy is really what caused GME to explode higher. And the big guy exiting is what caused GME to tank, hurting a fair amount of the retail investors that thought they were part of the “retail revolution.”
The little guy did take it to a few of the “Big, Bad Funds.” But they did it with the help of a whole bunch of other big guys. It wasn’t just David vs. Goliath. It was David and Goliath vs. Goliath.
Not quite as heartwarming as the original – but I’m not telling you that the individual investor isn’t capable of taking over Wall Street.
Quite the opposite, in fact. I’m here to tell you exactly how to put Wall Street’s financial power into your own hands. And understanding the truth behind the GME phenomenon is the first step.
Remember this: Don’t buy the stocks your friends are buying. Buy the stocks your friends and the big banks are buying.
How? By tracking the impact money. By spying on Wall Street just like they spied on you.
See, these big banks don’t just purchase simple shares. They also buy options – and you can’t “dark pool” an option trade the same way you can with stocks.
They have to print on an exchange. And when they do, that’s a sign that what I call “impact money” is investing with the retail traders, and the stock is ready to soar.
Here’s an example:
In early January, as the oil trade was just starting to pick up, the Energy Select Sector SPDR Fund (XLE) was still in the low $40s. I noticed names like Exxon Mobil Corp. (NYSE:XOM) and Marathon Oil Corp. (NYSE: MRO), however, were moving up the actively traded list on the Robinhood Top 100.
That means individual investors – the Robinhood crowd, at least – had started jumping into these energy names.
Shortly after, large blocks of call trades started to go up in XLE, making it clear that the big banks had taken notice. And it didn’t take long for the ETF to run over $43 per share… and then some.
Fast-forward to mid-March, and XLE climbed over $53. It was a 30% increase that let the big banks – and any especially smart, option-trading individuals – profit big-time.
I see this type of behavior over and over again. It’s the same thing that happened in GME. The retail public starts to buy a stock, and the moment impact dollars jump on board that stock makes a serious move.
And now, for the first time, you can see that move before it happens. By spying on Wall Street the same way they’ve been spying on you, you can start to profit off of Wall Street’s game.
If you want to read WallStreetBets, go ahead. But before you push buy on a trade just because the message boards said so, check to see if there are large-block option trades trading in the direction you think the stock is going to go.
The message boards may be your way in, but the impact money locks in your win. It’s a trading technique I call “two-factor identification.” You need to check the retail money and the impact money boxes.
And by joining me in the Profit Takeover, you’ll be able to follow along as we scrape the big bucks off of these Wall Street-level trades.
The retail trader is the match… but impact dollars are the true fuel that lights the stock on fire.
Until next time,
April 19 2021