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Warden DD

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May 16th, 2021
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  1. Hey everyone! It's Warden. I'm here to show you all super EASY ways to avoid the fake dips during a short squeeze! The more apes who can hold through fake dips, the more potent this MOASS will be. I will be doing a collab stream with TradeSpotting on Monday covering this DD.
  2.  
  3. https://youtu.be/0MlcG0IbSbY
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  5. ​
  6.  
  7. The floor
  8. I'll keep this short. Why would anyone have a price target below 1k? That is not lifechanging money. My price target is at least several thousand. So if I see a price drop, even if it follow the selling patterns I'm about to explain below, I'm not selling. This stock is worth thousands.
  9.  
  10. The patterns I'm about to explain only apply after the price has exceeded the floor of several thousand.
  11.  
  12. How to time the peak using VWAP
  13. It's actually quite easy to learn where to set your stop order.
  14.  
  15. This is what a stop order looks like in ThinkOrSwim. When the price hits the specified price, a market order will trigger.
  16.  
  17. I will explain why later on we are using stop orders (essentially market orders) instead of stop limits.
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  19. https://preview.redd.it/03nlbrobedz61.png?width=2101&format=png&auto=webp&s=d0a35e6c49e6f6c4bb34223a99e9779072268bd7
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  22.  
  23. Let's start with a simple example. How do we time the peak of an ascending channel and sell on the way down?
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  25. https://preview.redd.it/t213m0uxddz61.png?width=925&format=png&auto=webp&s=fb92e4b3ee9090636e03e52c7fbd85b7e81be258
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  29. An ascending channel forms higher highs and higher lows.
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  31. https://preview.redd.it/opk2bfhwedz61.png?width=1812&format=png&auto=webp&s=c6795b3a3b2d994d3b971d5d440157d3c31c1fab
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  35. Marked here in the picture, if the price breaks below this 150 support line, this "invalidates" the ascending channel. Thus, it's reasonable to place a sell order slightly below this point just in case the price bounces back up. So perhaps 149 would be a reasonable point.
  36.  
  37. The bad news is that the short squeeze will likely be a lot more messy. It will likely not form a perfect ascending channel.
  38.  
  39. For example, just a couple days ago, GME looked like this:
  40.  
  41. https://preview.redd.it/4bphuh85fdz61.png?width=2064&format=png&auto=webp&s=abce7387e7295c7d42f627ecac8d627cbe08d6ba
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  43.  
  44.  
  45. It's very difficult to fit a single ascending channel to this rally. So how the heck do we figure out where to set our stop orders?
  46.  
  47. Introducing the Volume Weighted Average Price indicator (VWAP). This indicator simply tells you where the "volume supported price" is. Treat it as the "true price" of the stock.
  48.  
  49. In the world of day trading, pro traders love using VWAP to detect fake dips. Some stocks are mostly VWAP hard bouncers. The yellow line is VWAP.
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  51. https://preview.redd.it/z0p4nt3vfdz61.png?width=2062&format=png&auto=webp&s=3ea3260d641b98656023560fbe6d4102d7c2dae8
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  54.  
  55. Notice that during rallies, MVIS likes to sharply bounce off VWAP.
  56.  
  57. https://preview.redd.it/my6f00tzfdz61.png?width=2059&format=png&auto=webp&s=2163938d117c2500cce0a5efd1450325873cd0fb
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  60.  
  61. Other stocks like GME are mostly VWAP soft bouncers.
  62.  
  63. Notice that the price likes to dip slightly below VWAP before bouncing. GME can sometimes hard bounce, but if you are a conservative trader, you would rely on it soft bouncing.
  64.  
  65. We can use VWAP to help set our stop limit market orders. For soft bouncers, one should set their stops a decent distance below VWAP. This is because even if the price goes below VWAP, it does not invalidate the uptrend. It has a chance to soft bounce under VWAP.
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  67. https://preview.redd.it/zm3w3uvegdz61.png?width=1573&format=png&auto=webp&s=8ba2f35580efc9e9451b8ec334cf72e5bd85ce7d
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  70.  
  71. This will help many apes avoid a fake dip. The more apes that learn this strategy, the smaller the chance of the squeeze being dampened.
  72.  
  73. ​
  74.  
  75. The dirty tricks up the Market Maker's sleeve: stop hunting
  76. The market maker (Citadel) will likely be actively trying to fight apes during the squeeze. They'll employ a nasty tactic known as "stop hunting". This is basically where they purposefully tank the price below support levels, to trigger a bunch of stop limits that traders set.
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  78. https://preview.redd.it/ks3bb9ymgdz61.png?width=2066&format=png&auto=webp&s=b286d08002b0cea3c75c17547f8a1160f958899f
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  80.  
  81.  
  82. Notice how the market maker tanked the price slightly below this support line, and that resulted in a huge red candle. That's possibly because their stop hunting triggered a ton of stop orders that were placed a millimeter below that support line.
  83.  
  84. It is good practice to set your stop limits below VWAP, but also slightly lower than where the candles are wicking.
  85.  
  86. ​
  87.  
  88. https://preview.redd.it/yr492m23hdz61.png?width=1807&format=png&auto=webp&s=ea77a518fab56dba165c0008b3f51a54ef01b119
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  91.  
  92. The bottom wick of the candles below VWAP will tell you where the majority of the support line is.
  93.  
  94. I will set my stop limits a good distance below the wicks. If all the apes learn to set better stop limits, we may literally see an infinity squeeze. The market maker will shit their pants trying to stop hunt.
  95.  
  96. ​
  97.  
  98. What type of stop order should I use?
  99. The market will move too fast for your limit order to be executed. I'm sorry folks but I have to say the truth. I've gotten burned badly in the past from setting limit stop orders during short squeeze trades. The reason why is that oftentimes, your limit order will not be filled.
  100.  
  101. Typically after the peak of the short squeeze, you will see red candles form fast. This is called a "rug pull". If there are 1 million apes selling and you place a limit order, there is a very high probability your order will not be filled. You must use a market order.
  102.  
  103. If you want to criticize me I understand, but I prefer telling the truth over convincing others to foolishly set limit sells which will make the squeeze more potent for me, but result in others getting burned.
  104.  
  105. Yes it is true that if everyone uses limit sells, then the squeeze will be more potent, but unfortunately, a lot of folks are using simple "buy sell" apps without sophisticated tools to set precise stops. I use ThinkOrSwim and I have to do it with precision, constantly moving my limit as the chart changes.
  106.  
  107. For folks using an app with a more simple interface, I would recommend using Webull charts to see where VWAP is, and to place a quick market sell order if you see the price going where you determine your stop is on the chart.
  108.  
  109. If folks have a good solution for the "order not being filled" problem for limit sells, feel free to comment and I will respond.
  110.  
  111. ​
  112.  
  113. TLDR
  114. Sell when the price invalidates the uptrend. Basically, below the wicks of the candles below VWAP.
  115.  
  116. Use stop order or market sell when the price hits your stop area.
  117.  
  118. https://preview.redd.it/aea9uiz8jdz61.png?width=1675&format=png&auto=webp&s=07e2e427ba9cb439fd5b32915173ef2939c8986e
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  121.  
  122. Thanks for reading!
  123.  
  124. -Warden
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