HGSI Doc Top Down Review 1.31.2021

Published earlier on the HGSI Community Forum. For earlier access subscribe at the HGSI Community Forum.  


What a week in the market.  After a strong start to the week on Monday, we saw steady selling the rest of the week as the major indices fell 3-4%.

The markets have been on a significant run since March 23, 2021, and we were due for a pullback.  Many of us saw an increase of interest in the markets among our non-trading friends who started to have some FOMO.  I have had more conversations with my millennial son in the past couple of weeks than in years as he has become a trader who has been a positive upside for me.  As we saw in past market tops, as the markets become topics on the nightly news and the number of new traders rises, we might be nearing a Top.

This week was beyond compare.  The Democratization of trading has become popular.  A concerted effort among many traders on a Reddit forum successfully drove several heavily shorted stocks to levels not even imagined.  It has put Hedge Funds holding sizeable short holdings in a difficult position.  I believe this has bled over to the markets as a whole, as ultimately, there will be some significant losses, which may result in margin calls and forced liquidation of other positions.

Please join me on my Top Down Review; I look at current markets and identify some attractive chart patterns.  Bitten by the WSB bug, I have also identified a couple of heavily shorted stocks that might seem ripe for a squeeze as well. 

Have a great week.  Ensure you know when your position’s earnings are due; we are entering another busy EPS week for the market.