News that GameStop is looking to digitize its stores has driven the stock up to January levels, but Gareth Soloway, chief market strategist said that on a technical basis, the stock looks overbought.
it's never a dull day in the markets in is never a dull day with our next guest Gareth Solloway chief market strategist at, in the money stocks.com. We're going to be talking about GM E the game stock shares. What's going on. What's going on in the broad markets and Gareth will be playing a live charting game with us at the end.
So stay tuned at the end until the very end for that Gareth. Welcome back to the show. Thanks, David, thank you for having me back. It's always a pleasure. We speak semi-regularly now. And there's always something new to talk about. I know I'm beating a dead horse here because we've talked about GameStop uni quite a bit, but it's it's come back to life.
It, it was, it was buried. And then now it's back. It's like, you know, it's like Michael Jackson doing the, uh, you know, the, uh, the thriller it's back to life. It's it's 267 bucks now or above actually it, it reached, uh, yeah, almost 300. What's going on. Yeah. So, I mean, it looks like, uh, the hope is that they're going to make the company into a more digitalized company.
I think they hired the founder of chewy or he came on board. I know he's a big investor. And, um, you know, that's just all it takes for these Reddit, you know, wall street, best to pile back on. And let's be honest. I mean, it's not just wall street best. There are hedge funds in there. Um, they know they can utilize the wall street bed's crowd to, to push the stock as well.
So I'm sure there's a lot of that, but the volatility yesterday was incredible. The stock got to close to $350 and then dumped out all the way down to about 172 in a matter of minutes. I mean, if you take out, they halted the stock three times on the decline, but if you took it out, it was about five minutes market action.
Incredible. Incredible. And of course you don't meet, you know, when it, when it was up at the 400 and change level, I was shorting it. So I was back in the market yesterday doing that same thing. I like to, uh, decipher some of the, um, the facts from fiction. I've been hearing a lot from people that I know who are trading it, I've been hearing it well, I've been reading some, uh, some posts from the wall street, best community.
So one of the theories I've heard is that the institutions are. Are also coming in. So rival, hedge funds are trying to squeeze out their competitors who are short. Is there any indication of that being true right now? Yeah. I mean, I'm sure that there is, there's always a battle between hedge funds and it's important to get the, the difference between fact and fiction.
In fact, I just showed up my trades from yesterday on the screen there, and you guys can see these are, this is what I did yesterday. So you can see these are my actual trades from my Merrill edge account. And, uh, you know, I, wasn't doing crazy share size 200 shares to 300, 300, 300, but you can see the type of volatility that this breeds, the profits that I was able to generate yesterday, close to $40,000 in profits.
Uh, just one loser in there where I actually did at a certain point where I thought I needed to before reacting at higher levels, but it's an incredible volatile move, but you're absolutely right that at this point, You are seeing hedge funds, battling each other. There's lots that think the stock is going to go back to $20 or go out of business.
And there's others that are saying, you know what? We can take advantage of them with the wall street, Betts crowd, and run this thing up and squeeze them out. And I think that's probably why it got close to $350 yesterday. Okay. Now let's talk about, uh, why you decided to get out and then get back in. W what were you looking at any news from either Twitter, Reddit, or were you just looking at the technicals?
Yeah, it was more than technicals and that's really, it's a momentum technical chart. So what I saw was the stock was getting closer and closer to 300. And what I've noticed, and this is something I use in my everyday trading is that even numbers are like magnets. They pull stocks to them, they push through them briefly, and then they'll reverse.
So I was short that one's $4,000 loss yesterday. I was short and. I know, notice that it was likely going to push above 300. Yeah. So I said, you know what, let me take this small loss. And then once it gets above 300, so that's exactly what I did, but, but again, you know, it's, it's a wild trading stock. And please notice that for my account size two to 300 share increments is small for me and I, and I don't, cause I don't want a lot of average investors to think, Holy cow, he's doing this with a massive amount of money.
It's all relative. It wasn't a big risk for me at the time. Um, and I want people to understand that. How much company news is involved in the big swim, because I'm looking at the AMC stock right now that hasn't moved up as dramatically. Yeah, you're right. So I think, I think a lot has to do with this whole idea that this, uh, chewy former chewy player is getting involved.
And, and the idea is, I mean, GameStop could be massive. And I understand that you could almost argue that the share price could be legitimate up here if they really had this pivot. But the problem is that investors are missing. Is that. To get this pivot bowling, they would literally have to probably raise about $5 billion of capital, which would be insanely diluted to current shareholders.
Um, so the turnaround, if they went digital could be awesome, but the shareholders currently would get diluted tremendously. They went digital. What do you mean by going digital? Like their, with their, with their, uh, with their stores, they would be going online with digital store. That's what I think the, the end game is.
I think that's the only way they can survive is by doing it somewhere where, how you rent these games online, or you, you know, you go to more of a Netflix model. Remember Netflix at one point was, was mailing out DVDs to people's houses and then they went digital. Yeah. I mean, you're competing with steam stadia.
PlayStation. I mean, this is not, this is not a brand new sector, right? Oh, you're a hundred percent. Right. Which is why every time it pops up here, I shorted, I, I can't make sense of it really, but for the most part, I think that's what investors are hoping for. All right. Let's talk about the markets now.
Broad market action, S and P 500. Now, last time you were on the show, which is not too long ago, you had, you had said that we're reaching a top. We're reaching a peak. I remember you said that four that were 4,000 points for the S and P 500. What's sort of your upside target. Are you still maintaining that view?
Yeah. Yeah. So I would expect a Pierce of the 4,000 level on the S and P in fact, we're up there making new highs today. I believe spiders are net above, above three 95. Right now the one market I do think has taught. And this is the one that I was short going into. When we talked last time, I was heavily short, the NASDAQ and that we're that we actually covered.
Our short positions at the Lowe's we had QID on, on the lawn, which is two times short, the QQQ we got out of that position, really nice gain. Um, so those type of ones I did exit, but I am looking to reshore the QS right here. There's a beautiful gap fill. And I think we'll get there. There's another level.
I want to just show this real quick. The three moving average lines here. If you're a little bit more aggressive, you would short it right here. This is what's called a neck tie where two major moving averages. In this case, the 20 moving average and the 50 moving average, they converge. That's a huge amount of resistance.
So I wouldn't be surprised if we got a one or two day pullback. Off of that before we pushed up towards that gap fill. But in my opinion, I think the NASDAQ has put in a multi-year top at this point while the S and P is getting close. And the Dal again, with the reopening trade could still go higher for a couple of months.
Okay. Now I wonder, um, whether or not you are still short Tesla. We talked about this before. It has seen a huge drop from its highs. And look, I'm not, I'm not a technical expert like you, but it looks to me like it's sort of hit, uh, hit support and it's bouncing around at the support level right now. What do you think.
Yeah. So, so I still have my big position. I traded around it, obviously like traders do where I was able to get out of some shares at the lows or near the lows, but I still have a core position short on this. Uh, you can see the level it bounced off of look at this beautiful trend line right down here.
This is the beauty of charting, these parallel lines. And you can see again, this low pivot. Connector just goes right to where we bottomed out. And then the stock has actually bounced back per yesterday, back to the 20 moving average. I actually think it's going to go a little bit higher. You see this up sloping, this kind of this secondary trend line in blue right here.
Then you have the 50 moving average. And then right here, you have a gap. Fill, notice how all three of those levels are together. That'll be where I reload. The shares that I cover on the short side. All right. Let me ask you this from a trading perspective, not a product perspective from a trading perspective, which do you like least Tesla or GME?
If you had to pick the two to short, what would it be? I charged GME, actually. I wouldn't your GME. I think, I think at some point we'll be talking about it at 50 bucks again, uh, or sub $50. Um, Tesla percentage-wise I do think it's going down, but not as much as, you know, game stock. We are covering the PDAC this week.
It's the largest conference for metals and mining in the world this year, we're doing it virtually. So I'd like to tie the discussion into the theme of metals and mining. Uh, although, uh, for just a quick, uh, segment here, let's talk about the mining index. GDX can we pull up a chart on that and let's go over the technicals Gareth.
Yeah, I love the GDX. In fact, I was a buyer with my members, um, just down in the $30 range, just around 31. Uh, we picked it up, I think at 30, 95 to be precise. The reason I did it was very simple is you had this gap fill right here. You had all this consolidation on the chart. You basically retraced into there.
If you look at this pattern here from this high pivot on GDX, which was around $45 all the way down to this 31 to 30 level, it's basically just a slow grind, lower. All right. And that if you zoom out is actually bullish, right? So this is a sharp move up. And then consolidation, essentially, it's working off the overbought condition that was created by this dramatic move up.
That is very bullish. The fact that over the course of what, since July. This has only retraced, um, basically half of the move from the low here to here that is incredibly digestive for this ETF. And I think this is going to go much higher. I'm still in, we're up a couple of dollars on this at this point, and I think it's going to go much, much higher.
And in the short term, you're probably looking at about 35 $36. Um, longer-term you should see new highs above 45. Okay. Now I've heard that the GDX or gold mining stocks in general, they tend to lead the gold bullion in price performance. Do you think that's true? I do think it's true. I've seen this in the past and I traded for a long, long time and it was one of the reasons why I still continue to accumulate gold over the last week.
Even when I saw bold going lower. So, you know, if you remember, I talked about how basically from the 2009, 2011 breakout, we did a three, two retrace, and then we went higher. Uh, the same kind of thing happened. Work is happening in my opinion, where we did another Fibonacci three 82 retrace. Now we did overshoot that to the downside.
Um, and a lot of people were like, Oh no, is this breaking that, that mantra that three 82 Fibonacci retrace. And in my opinion is partially Bitcoin. There's a little bit due to Bitcoin, but also the fact that the, the miners are performing so well, gave me confidence to just accumulate. And we have seen the GLD move off the lows nicely over the past couple of days.
Okay. Now Gareth, let's move on to the fun part of the segment. Let's talk about you. We're going to talk about your trading history, your background, and how it is you've developed your style and what better way to demonstrate your style than with a live charting exercise. So would you do the honors, please show us your screen.
I know you've got the chart game pulled up once. You've got your screen pulled up. I'll explain to the viewers what's going on here. So here we have a chart game. It's peer technical analysis. I played this game with a guest I had on last week. It was a lot of fun. What we do here is we have a chart in front of us.
It doesn't have the ticker symbol. It doesn't have the timeframe. And it's not going to tell you any other information besides what you see on the screen. You can select a few technical indicators in the bottom before you begin. And all you have to do is decide to buy short or hold the black boxes. Um, do nothing.
So you, you, you do nothing until the next trading session at the end of the game. And I'll tell you. So let's, uh, let's have some fun Gareth. Wonderful, wonderful. All right. So, so right off the bat, and I'm going to analyze this out loud because I want people to learn from this and listen, I could be wrong.
I've been wrong before that's that's no, no doubt. But what it looks like is the stock was oversold, started to bounce, hit this moving average, and then began to make bullish consolidation. And the last candle close above that, moving average, I don't know which moving average it is, but to me, this would be a BI chart.
Let's see. Oh, it looks good. Are you going to put any indicators at all? Where are you? Are you, are you good with just a moving average? How do you, how do you say what's your style possible? All right. So all the other stuff, RSI, Ballinger bands, that's just noise. It's just distraction. Yeah. I mean, occasionally in, in weird situations, I take a look at it, like for instance, the RSI, one of the stops that I recently shorted, uh, just yesterday is Viacom.
Um, I love the chart it's into major resistance. Um, and the fact that the RSI is now above 80, it gives me a lot of confidence that my analysis in terms of the technicals is correct. So stuff like that, occasionally I'll look at it, but for the most part, you know, price pattern in time, the three factors I followed, that's it.
Well, I do hear from another regular guest of mine that, uh, Uh, movements standard deviations from the mean is very important to him. So if something moves up or down like two, three standard deviations, even if the fundamentals are against that particular security, it's going to mean revert. Um, do you agree with that thesis?
That psychology? I do. I do. In fact, I use the, the, the analogy of a pendulum very often with my traders where. When a pendulum, if you hold a pendulum, right. And you pull it all the way to one side and you let it go, you know, it's really overbought on this side. Eventually it's going to swing all the way back and you'll see an equal ish oversold situation.
And then eventually kind of goes back and forth and you'll get moves back and forth until it kind of solidifies it. It's new price range. So absolutely. Okay. I, to interrupt you for a few minutes, I'll let you play the game and, uh, walk us through your, uh, walk us through how you're thinking through this.
All right. So I guess I can, I've never played this before, but I guess I can stay long or sell or take profits or, or go onto the next one. I say we stay long. Okay. And by the way, you can just press the black box. I think if you press buy again, you're, you're buying, you're buying more positions, but you could just give, you want to do nothing.
You can just, uh, stay log and press the black black box. Okay. Got you. Okay. Sorry about that. I didn't know that. That's okay. Yeah. You're still low right now. Okay. I can't see on a screen, but what's your PNL. It looks like down 40. Okay. Um, so I'm going to stay as long. All right. So just on a technical basis, as long as it doesn't take out this low here at 14, I don't know what price this is.
Maybe 13 and change will stay long. Let's see what happens. See that's right at the bottom. Let's see if it bounces folds there. There we go. And let's take one more. There we go. P and L of 29,000. And we'll stay long for one more. All right. We'll sell. Is there, okay. Now I can't remember. Did you select the day trading option with a swing trading option?
Swing trading is I believe I slept. Is it giving you a time or a date at the top? Um, not that I'm seeing, but again, I've never done this before, so I could be wrong. All right, let's continue then. All right, so, so how did I go to the chart? Well there, isn't the next chart. It's easy. It keeps going. Oh, okay.
Okay. I see what I see what you're saying. Oh, nice. Move up here. We'll move the chart along.
Nothing, nothing, nothing. Let's buy it here. All right. Moving average, it looks like it's trending up. Is that correct? That's right. Yeah. Notice where I bought it right here off of the moving average. It kind of kissed that moving average, here we go and get back into it. So what'd you do this in real life, Gareth, we, you, what you had, you had, you had, uh, just do nothing for a couple of training sessions.
Just feel out the market. I mean if I'm swing trading. Yeah. I mean, if I, so, so the key is it's, it's all about what your timeframe is. So as a day trader, sometimes I'm in and out of positions within, you know, minutes, um, versus swing trading. I like to let things breathe a little because I'm looking for the bigger move.
So basically just to analyze this, for those of you guys that are watching at home notice it's right on those moving averages. If it closes below, we'll actually this trade, otherwise, you know, you got to kind of let it roll and say, okay, well it's still holding support here. So let's see if it can't go up and see, now it's out, it's down.
So I'll, I'll ask, I see. This is where you and I, I would say while we're in the green, let's just take profits and start over, but you're, you're riding it out. Well, let's just say that, you know, to make us, you know, for me, I'm looking for those bigger moves on swing trades, right? So I'm looking for the big scores of 10 plus percent.
Um, I found that if I take too small and this is a, this is a great lesson for us as investors, is that. A lot of people are so eager to take those profits, but when they have a loss, it's going to be a bigger loss and you can't really go by that. You want it for me. I want to at least make 10% on a swing trade.
Now, if it's a day trade, obviously that's a different game. You're buying a much larger share size, taking much smaller gains, but you have to be able to look at yourself in the mirror and say, okay, well, you know, if I'm going to make a hundred percent a year, I don't want to lose a thousand percent on the right.
So, so for me, that's why I let them, you have a, you have a day trader mindset, David. Which is not a bad, I'm very bad at both. I'm very bad at both, which is why you're doing the training. And I'm asking you the question.
Tell us a bit about your, tell us a bit about your background while you're doing this. So we can learn about, uh, learn about you while we see you in action. Yeah, absolutely. So, so I mean, one thing I love to tell investors is that I'm no different than anyone else is that, uh, basically I started with $10,000 to day trade with that was it.
Um, I came from relatively humble beginnings. Um, my parents were both teachers. And, uh, I know they were never investors. And, um, when I decided to go into day trading, it was after, you know, in high school, I played this, you know, the, the stock market game or whatever, and it was in the late nineties. And that was when these, these, you know, it was kind of in the mid nineties, let's be fair.
And these, these stocks were just going nuts and I just fell in love with it. I fell in love with the ability to see it, to make money, like by clicking a mouse button, you know, in and out. Um, and when I started day trading again, I had about $10,000. I got leveraged from a prop firm. And they gave me 50,000 and I basically would lose money and I'd have to work three jobs to replenish it and then I'd lose money again.
And I work my butt off again and save every penny I could. And I slowly over time began to develop a methodology where I was making money. Um, but my point is that no one starts. I as a pro, no one in the world is going to start as a pro. You're going to start, you're gonna lose money. You're going to take your lumps.
You're going to have to learn to control emotion. And by doing that over time, you will get better and better. So, so just remember that as you know, I know so many new investors are out there in this market now. Um, you know, it takes time, go small on share size because you're going to lose a few times.
And the point is to learn, use that as a learning experience, people often say to me, Oh, you know, I lost this much money. And I say, well, you know, if you went to be a brain surgeon, you'd be making half a million bucks a year, but you would have had to be in school for this long. You probably would have a half, a million dollars in, in school debt.
Um, if you're going to lose some money in the market, let's say you lose 50,000 learning how to do it. That's a cheaper education to make more money. I make more than half a million training folks. Um, so, you know, it's just, if that's the point there, keep, keep patient be patient and study. Great. All right.
Well, great lesson there. Great advice. Let's continue with the game. All right. So it's backable of those moving averages back into the moving averages from this is the tough one. It's retraced. I'm going to stay on the sidelines here. It looks like it's moving up here. Are you in right now? Where are you still on the sidelines?
Oh, I'm just watching here. Okay. I'm not seeing anything now. It's breaking down. If it can go a little bit lower, I'd be interested. Let's see if it not, not going lower yet. Why does it need to go lower? Uh, because I'm basically, I'm noticing this support right here, which we're now kissing, so right here, kissing support.
All right. So, um, I'm going to look, let's see. All right. Now I'm going to buy.
Yeah. I don't like that. Starting to make a bear flat in real life. You'd probably be factoring in some news as well. Right. Or it's possible, right? Yeah, absolutely possible. All right. So I actually did folks and the reason I did all right, so this is a classic bear fly with the moving average above. And so to me that tells me it's going to go lower.
And so far it looks like that next candle was, so that was a smart exit. Now frightened back up. Now it's back above the moving averages. Now it's pushing back. What's going on with this company, Gareth, this is a fun game by the way.
This is not my company. I remember, I remember I was first introduced to this game way back in, not in college, I studied finance. And so in an applied investments class, we had a professor who was a very, very much a fundamentalist. He doesn't, I don't want to say he doesn't believe in, in technical analysis, but he kind of just like, he doesn't understand it.
And so he brought on a technical analyst just to give a sort of a contrary opinion on how to invest so to speak. And he introduced us to this game and a lot of fun. Um, what are we at now? You, you closed, you closed the gate just ended. And I was up 5,000 bucks. 5%. Wow. Congratulations. What's your, what's your position size?
Um, I don't even know how to tell that. How do you tell that? What's the number of the, what's the, what's the number there? Oh, no, that's the shares. Yeah, I don't, I'm not sure. No, but no, at the top, at the top, uh, if you zoom in there at the top, it, it tells you the, your, uh, how much you were up and your initial position at the bottom.
Oh, okay. It says I was applied for 4% or 5,000, 5,000, $142. My cash is a hundred, 5,000. Now at the end of that trade, I guess. So you started with a hundred grand a year up five grand. Oh, good job. Good. If I could just say one more thing about education in terms of understanding and training. One of the biggest changes I made that made me a better profitable trade is a counterintuitive thing.
And what I did was I started to buy smaller, share size and leg into positions. And I started to do this because I realized that, and it was more of a humble thing. You know, once you lose a certain amount of times, you start to realize that the market. Is its own entity. And when I was a new trader, I came into the markets always saying, I'm going to be right.
This is the level of buy. And I'd put the whole position on, you know, a thousand shares of XYZ, whatever it may be. And sometimes I'd be right. And then sometimes I get smoked. And what I found is by learning to be humble with the market and legging in like starting with 200 shares. And then if it comes down a little bit more adding 200 shares, you become a better trader.
And it's been one of the best successful things that we have done as traders here and in the money, stocks.com or traders love doing this. Um, for instance, we had GE day as a day trade and we got in and it went a little bit lower. We got in, whether it be a little bit lower and we got in a little bit more accumulating a full position with a great average.
And ultimately that's the way I have found is a smart way to make better money. It's kind of counterintuitive because you think, Oh, I'm starting with a smaller share size, but remember be humble with the market. Understand that levels can get pierced full sides when you're trading technicals and by legging in you'll do much, much better.
All right, Garrett. I know I can, uh, I can talk to you all day, but I know you gotta go. So, uh, Oh, that's a go for now and I'll see you next time. Thank you very much. Thanks so much, David. And let's play this again next time. Let's play it again and we'll see if it can make more than 5%. That was already very good.
But yeah, we'll see if we can do better or there's gotta be a penalty. How about that? Yeah, but you can't, you can't practice at home because that would be cheating. No practicing. I won't even go to the website again. We need to get all right. Thank you for watching kicker news. I'm David Lynn, stay tuned for more coverage.