Understanding the Role of HFTs and Dark Pools for Day TradingNASDAQ:TSLA reports on Wednesday of this week, October 18th. Last quarter, it had a gap down on its earnings news based on Year over Year comparisons which triggered High Frequency Trading (HFTs) to gap the stock down. Quarter over Quarter, however, NASDAQ:TSLA has shown consistent growth this year.
The problem with determining if the HFT gaps are likely to gap down or up on the next earnings report is the very low Percentage of Shares Held by Giant Buy-Side Institutions (PSHI). TSLA’s CEO has lost the necessary confidence of the largest Buy-Side Institutions in the world. So it's institutional interest is extremely low for such an important US company. The Buy-Side Institutions want the Board of Directors to replace Musk with someone who is more focused on TSLA to help it grow. The PSHI is likely to remain low until a new CEO is chosen.
The highest the PSHI has ever been was in July 2020 when it reached a high of 71%. It dropped to a low of 43% in November of 2021 and the stock has been sideways with very low PSHI ever since. It is very rare to see such low PSHI in a young new technology company with such high growth potential.
With less support from largest most influential institutions, the HFTs, which use retail news as one of their 6 primary algorithm triggers for automated orders as Maker/Takers, often gap a stock down on earnings news that was actually not negative.
Smaller Fund Managers, who have a special SEC classification with lower reporting requirements, often have VWAP automated orders trigger on high volume surges. This is often mistaken by smaller funds and retail investors or traders as “Dark Pool high volume activity,” when it is not.
High PSHI creates a natural liquidity draw and thus more momentum and speculative price action. This is missing much of the time for NASDAQ:TSLA stock price movement.
The current sideways trend has existed since 2021, best seen on a Weekly Chart. The dimensions of the sideways trend and the irregularity of the price range determines whether the sideways trend is a Long Term Wide Trading Range, a Short Term Trading Range, a Wide Sideways Trend, or a Platform-Building Sideways Trend. This is a Long Term Trading Range due to the inconsistent highs and lows.
This is common in a stock that has PSHI below 60%.
On a Daily Chart, the fundamentals currently are within the rectangular shape outlined below. This area of price can be problematic for retail day traders as there are always portfolio adjustments going on by the Buy-Side Institutions who have ETFs and Index funds with TSLA as a component.
When the stock drops below that Buy Zone range, it quickly reverses and runs up into the lows of that fundamental range. This becomes a price range where there is conflict between retail day traders trying to trade on news and the Buy-Side Institutions accumulating inventory shares of TSLA for the Indexes or ETF Trust accounts that must maintain a value close to the ETF or index value upon which that ETF is based.
What happens intraday is a very choppy and indecisive price action up and down that causes whipsaw losses for day trading.
In order to successfully day-trade TSLA, these factors must be understood to use to one's advantage. This requires an understanding of how to identify a Dark Pool Sell Zone or a Dark Pool Buy Zone within the daily charts. It also requires an understanding of how HFTs trigger and how VWAP orders often cause whipsaw action as well.
Remember that Dark Pool data is not available during the trading day. That data is on Over-the-Counter Alternative Transaction Systems. Those orders are filled off the exchanges and are not transmitted to the National Clearing Houses until after the market closes.
Hence, ALL retail day traders are trading against an invisible entity whose orders they can’t see even on Level 2 screens. The art of day trading in harmony with Dark Pool activity requires what I call "Relational Technical Analysis."
Earningsanalysis
ZS Zscaler Options Ahead of EarningsIf you haven`t sold ZS here:
or reentered here:
Then analyzing the options chain and the chart patterns of ZS Zscaler prior to the earnings report this week,
I would consider purchasing the 175usd strike price Calls with
an expiration date of 2024-1-19,
for a premium of approximately $14.40.
If these options prove to be profitable prior to the earnings release, I would sell at least half of them.
Looking forward to read your opinion about it.
NVDA's Earnings Report: Strategic Positions to Consider Introduction:
It's time to rejoice as we dive into the exciting world of NVIDIA Corporation (NVDA) and explore the potential positions to consider after their recent earnings report. With the stock prices rising, let's embrace the positive vibes and strategize our moves to make the most of this profitable opportunity!
1. Riding the Momentum:
NVDA's earnings report has sent shockwaves through the market, propelling the stock prices to new heights. As traders, we can ride this momentum and capitalize on the upward trend. We can join the celebration by positioning ourselves to benefit from the stock's bullish run and potentially reap impressive profits.
1. Long-Term Growth Perspective:
NVDA has consistently proven its ability to innovate and adapt to the ever-evolving tech industry. With a strong focus on artificial intelligence (AI), gaming, and data centers, the company has positioned itself as a global leader. As the demand for these sectors continues to grow, NVDA's long-term growth prospects remain promising. Traders with a more patient approach may consider holding onto their positions, allowing them to enjoy the potential benefits of sustained growth.
2. Options Trading for Enhanced Gains:
For traders seeking a more dynamic approach, options trading can offer exciting opportunities. With NVDA's stock prices on the rise, options strategies such as buying calls or employing bullish spreads can help magnify potential gains. By leveraging these strategies, traders can amplify their profits while managing risk effectively.
3. Diversification for Stability:
While NVDA's recent earnings report has been impressive, it's always wise to maintain a diversified portfolio. By spreading our investments across different sectors, we can mitigate potential risks associated with any single stock. Consider exploring other promising companies in the tech industry or even different sectors, ensuring a well-rounded portfolio that can withstand market fluctuations.
4. Staying Informed:
As traders, staying informed is crucial for making sound investment decisions. Monitoring NVDA's news, industry trends, and quarterly reports will provide valuable insights into the company's performance. Additionally, monitoring the broader market sentiment and potential catalysts can help guide our positioning strategies effectively.
Conclusion:
With NVDA's earnings report driving its stock prices to new heights, it's an exciting time to be a trader. By capitalizing on the momentum, adopting a long-term growth perspective, exploring options trading, diversifying our portfolio, and staying informed, we can position ourselves for success and potentially reap significant profits.
Remember, trading is both an art and a science, and embracing a positive mindset while making informed decisions is the key to thriving in the market. So, let's celebrate NVDA's success and embark on this profitable journey together!
"Investors Await NVDA's Impressive Earnings PerformanceGet ready, traders! The highly anticipated earnings report from NVIDIA Corporation (NVDA) is just around the corner, and analysts are placing their bets on a target rise for this tech giant. If you want to make serious gains, now is the perfect time to consider going long on NVDA.
Analysts have been closely monitoring NVDA's performance, and the consensus is clear: they are expecting an earnings beat. This positive sentiment has fueled excitement among traders and for good reason. NVDA has a strong track record of delivering impressive results, and this upcoming report is expected to be no different.
With the demand for graphics processing units (GPUs) soaring, NVDA has been at the forefront of this technological revolution. NVDA's products have become indispensable in various industries, from gaming to artificial intelligence and data centers. As the world continues to rely on advanced technologies, NVDA's growth potential seems limitless.
But what does this mean for traders like you? Well, it presents an incredible opportunity to capitalize on NVDA's success. By going long on NVDA, you can potentially ride the wave of its target rise and reap the rewards.
So, how can you take advantage of this exciting opportunity? It's simple. Consider adding NVDA to your portfolio and position yourself for potential gains. With analysts betting on an earnings beat, now is the time to act.
Remember, trading involves risks, and you must do your due diligence before making investment decisions. However, with NVDA's solid fundamentals and a promising outlook, going long on this stock could be a strategic move that pays off.
Don't miss out on the potential gains that NVDA may bring. Take action now and position yourself for success. Whether you're a seasoned trader or starting NVDA, target rise is an opportunity you won't want to miss.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Trading involves risks, and it's essential to consult a professional financial advisor before making investment decisions.
ARIS - A water company consistently rising LONGARIS on the daily chart is consistently rising with big earnings beats both
in the past month and early May. The ZL MACD is curling up towards a cross
of lines under the low amplitude histogram. The dual time frame RS indicator
shows consistent lines above the 50 and the lower TF line in green above
the higher TF line in black. Stock is 20% higher in 3 months a decent return for
a utility stock while the market is in chaos possibly teetering on a crash.
Utility stocks are slow and steady with a low beta and lack of general market
responsiveness. I will take along stock trade here and check as to the possibilities
for a call option.
TSLA — Bulls, This Is Your Chance to Punish The Club-Footed OnesTesla over the weekend said its first much anticipated Cybertruck came off the electric vehicle maker’s production line in Texas. The debut of the long-delayed, futuristic-looking pickup truck comes in the lead up to Tesla’s second quarter 2023 earnings call.
Tesla CEO Elon Musk first introduced the Cybertruck in 2019, but vehicle production has repeatedly been delayed. The truck was initially scheduled for production and delivery in 2021, but Tesla has pushed back the timing since then, citing shortages in sourcing components.
In July 2022, Musk set a new production schedule for summer 2023. During Tesla’s first quarter 2023 earnings call, the executive also promised to host a delivery event for the Cybertruck towards the end of Q3.
Musk said at Tesla’s 2023 annual shareholder’s meeting in May that the automaker could deliver between 250,000 to 500,000 units per year once production begins. Mass production is scheduled for the end of this year.
Analysts will be on the lookout Wednesday during the automaker’s Q2 earnings call for firmer details on production, delivery and specs.
While Tesla has attributed Cybertruck delays to standard supply chain issues, leaked documents have revealed other fundamental flaws in the vehicle’s basic design and engineering. In January 2022, a whistleblower leaked 100 GB of files to German outlet Handelsblatt that showed preproduction prototypes had serious braking, powertrain, suspension, sealing and structural issues. The report, which detailed unfulfilled promises from Tesla, reminded many of the first Cybertruck reveal event, when the vehicle’s designer cracked the supposedly unbreakable armor glass windows.
As of November 2022, the Cybertruck had over 1.5 million reservations, according to a report from Electrek. Tesla customers have been able to put down a $100 refundable deposit to pre-order since 2019.
Tesla originally estimated the truck would start at $39,900 for the single motor and rear-wheel drive model, which would have a towing capacity of 7,500 pounds and more than 250 miles of range. That model is now expected to start at about $50,000, according to Kelley Blue Book. The dual-motor, all-wheel drive version could start at around $60,000, and it should have a towing capacity of more than 10,000 pounds and over 300 miles of range. The priciest version, starting at around $70,000, will have three electric motors and all-wheel drive, a towing capacity of 14,000 pounds and battery range of over 500 miles.
Tesla usually changes prices in the middle of a model year, so these prices may shift again before the end of 2023. Cybertruck buyers may be eligible for the U.S.’s $7,500 federal EV tax incentives.
Tesla’s pickup truck launch will bring the automaker into another profitable EV segment in the U.S. The Cybertruck will have to compete with electric pickups like Ford’s F-150 Lightning, which is available now with a starting price of around $60,000. Other upcoming pickups include the Chevrolet Silverado EV and the Rivian R1T. The Silverado EV Work Truck starts at $77,905 and can go 450 miles on a charge. Delivery is expected in the fall of 2023. The Rivian starts at $74,000, with deliveries for certain trims starting this summer.
Technical picture in Tesla stocks NASDAQ:TSLA indicates that bearish trend is over, and this is the last chance to jump on the footboard of Tesla rocket.
Bulls, This Is Your Chance to Punish All The Club-Footed Ones
X United States Steel Corporation Options Ahead of EarningsIf you haven`t bought X here:
Then analyzing the options chain and the chart patterns of X United States Steel Corporation prior to the earnings report this week,
I would consider purchasing the 26usd strike price Calls with
an expiration date of 2023-10-20,
for a premium of approximately $1.24.
If these options prove to be profitable prior to the earnings release, I would sell at least half of them.
Looking forward to read your opinion about it.
$WMT Outperforms $SPY and $XLP: A Weekly Comparative AnalysisDetails:
Walmart ( NYSE:WMT ): Over the weekly time frame, Walmart saw an impressive gain of 22.51%, highlighting a strong trend in its stock performance.
S&P 500 ( AMEX:SPY ) : This ETF tracks the S&P 500 Index, a benchmark for 500 of the largest companies in the U.S. stock market. During the same period, AMEX:SPY recorded a gain of 16.17%.
Consumer Staples ( AMEX:XLP ): AMEX:XLP represents the Consumer Staples sector of the S&P 500, focusing on necessities like food, beverages, and household goods. It rose 15.61% in the weekly time frame.
Comparative Analysis:
NYSE:WMT vs. AMEX:SPY : Walmart outperformed the broader market ( AMEX:SPY ) by 6.34%.
NYSE:WMT vs. AMEX:XLP : Walmart's growth outshines the Consumer Staples sector ( AMEX:XLP ) by 6.90%.
Technical Indicators:
50-Day Exponential Moving Average (EMA): At present, NYSE:WMT is trading above its 50-day EMA, located around the $156.00 price mark. This divergence from the mean value might point to an overextension, particularly since the stock has reached all-time highs for the past five consecutive days.
Bollinger Bands & RSI: Walmart's stock is brushing against the upper Bollinger Band, hinting at possible overbought conditions. This is further corroborated by an RSI nearing 70, signaling that a pullback might be on the horizon.
Conclusion:
The combination of strong weekly gains and the current technical indicators presents a complex picture for $WMT. While the stock's performance has been robust, some signs point to potential overextension. Investors and traders must weigh these factors carefully and consider their strategies accordingly. The data and analysis presented here serve as valuable tools for understanding the stock's dynamics and planning future moves.
$ZOM Potent investment opportunityObserving the trading chart for this particular equity, it's evident that the security has been encapsulated in a range-bound, or "rectangular," pattern since 2018, with the central pivot point firmly established in the $0.20 vicinity. This technical analysis, combined with strategic stock purchases by the CEO and other insiders, signals a strong vote of confidence in the company's prospects.
When we scrutinize the fundamentals, the recent earnings report paints an encouraging picture: a robust 43% surge in revenue, bringing it to $6.0 million, bolstered by an impressive gross margin of 67%. Additionally, the company's liquidity position remains strong, with $142.4 million on hand, providing ample financial flexibility.
Given this confluence of positive signals, both from a technical and fundamental perspective, there's a compelling case to be made for this stock as a potent investment opportunity at this junction.
Fortinet FTNT Overreaction - What now?Slightly after earnings Fortinet Gapped down. Which are my favorite kind of stocks to trade because 9 times out of 10 Gaps close.
Fortinet had many analyst reiterate Bullish price targets some up to $70. I'm looking for a retest at $60.
Forecasting out to nov 2nd. The next earnings should be interesting.
Williams, MACD, & RSI are all showing Oversold in this situation. This could be a solid entry for someone to start a small position.
This is not financial advice.
Trade Responsible,
#TradeTheWave 🏄🏽♂️🌊
PG The Procter & Gamble Company Options Ahead of EarningsAnalyzing the options chain and the chart patterns of PG The Procter & Gamble prior to the earnings report this week,
I would consider purchasing the $152.5 strike price Calls with
an expiration date of 2023-8-4,
for a premium of approximately $2.97.
If these options prove to be profitable prior to the earnings release, I would sell at least half of them.
Looking forward to read your opinion about it.
Displacement Technology Watch: $QSWith a lot of attention ahead of its earnings report, NYSE:QS had a volatile reaction to the report yesterday, but it is one of several companies vying for dominance in Solid State Battery technology. Auto parts are a niche sub-industry of Electric Vehicles to pay attention to for both short term and long term.
From the weekly chart: The stock is building a bottom after a huge speculative run up after it IPO'd and is now in a basing bottom formation.
QuantumScape was on the NASDAQ Private Market before it IPO'd. Plenty of banks underwrote it and many Preferred Clients, aka Giant Buy Side Institutions, invested during its NASDAQ Private Placement. So it had a respectable amount of investment money to start moving forward faster.
On the daily chart, we can see NYSE:QS had a pre-earnings run that hit resistance which was followed by profit-taking ahead of the report. Pro traders started the run up out of what looks to be a Dark Pool Buy Zone and smaller funds chased, which is often a precursor to a volatile earnings reaction. The stock has a low Percentage of the Shares Held by Institutions at this time, which is another factor that contributes to heightened volatility, but it's one to watch as the EV landscape expands.
Is the SNAP Sell Off overreaction a Reversal Setup?Yes, I think that it is. On the 15-minute chart, the price action of the post-earnings
drop is seen The earnings beat the analysts. Price has started a low momentum
recovery. The dual time frame RSI shows the low/blue line RS rising above the
high/black line. SNAP is in the deep oversold and undervalued territory in the area
of the lowermost intermediate-term anchored VWAP lines. The mass index indicator
triggered a reversal in the pre-market hours today. I will take a cautious long trade
here expecting a price appreciation to 11.8 at or below the mean black VWAP.or about
10%.
Can CMG recover from the post earnings drop?CMG had earnings today which were a beat but apparently less than expectations
of investors and traders. On the 15-minute chart, the indicators support a reversal
with a bounce on the dual time frame RS lines showing a bit of bullish divergence.
Decelerating bearish momentum on the MACD with lines converging under the histogram
suggests a reversal is impending. Further, the mass index indicator is in the reversal
zone but not yet triggering the signal with a drop below the zone. I will take a
long trade of CMG. They say trade what you know, My local CMG is always buzy and
a love either food. I believe that CMG is ready to give me a big rebate on my
patronage. I will take a call option expiring 8/18 striking $2100. I expect to realize
a large profit having done a similar trade on CMG more than once in the past. The expected
premium of $7300 will be about $700 of risk given a stop =loss but I expect a reward
of 4-6 times that if not more.
SNAP Options Ahead of EarningsIf you haven`t sold SNAP here:
or ahead of the previous earnings:
Then analyzing the options chain and chart patterns of SNAP prior to the earnings report this week,
I would consider purchasing the 13usd strike price Calls with
an expiration date of 2023-7-28,
for a premium of approximately $1.34.
If these options prove to be profitable prior to the earnings release, I would sell at least half of them.
Looking forward to read your opinion about it.
TSLA close analysis 7/20/2023Earnings brought forth a pretty big sell off. In hindsight, the oscillator cross yesterday was initial indication a short was the right play, but ER could have gone any which way making that a signal lacking confidence.
What happens now is the question. We've cleaned up this chart a bit:
My long trade was wrapped up on 7/17
2 gaps are gone
3 larger gaps remain as support
I still think gap + momentum analysis is the best approach with TSLA on this 65m chart. Note how we temporarily stalled at open right on the gap from July 12th.
Right now we're waiting for support. I've marked prior gaps with arrows. Most of those seem pretty far away.
Good chance support is right here in the lower 260's but there needs to be some confirmation as TSLA has in the past had many consecutive sell off days.
Why support? I had many old fib levels all in this 257-263 zone and expect for now it will hold as there's a lot of choppy price action with traders wanting to go every which way in this zone. The 6/30 gap is what I'm watching along with the 260 level. I'd like to see this act as support and go long after the oscillator bases and crosses but I'm also very willing to see it fail. If 260 fails, I will be looking for us to retest the mid 230's.
Will post a new idea once I see an actual trade form.
BAC Bank of America Corporation Options Ahead of EarningsIf you haven`t bought BAC here:
Then analyzing the options chain of BAC Bank of America Corporation prior to the earnings report this week,
I would consider purchasing the 30usd strike price Calls with
an expiration date of 2023-9-15,
for a premium of approximately $0.83.
If these options prove to be profitable prior to the earnings release, I would sell at least half of them.
Looking forward to read your opinion about it.
Lockheed Martin Closing Gap?Lockheed martin earnings play. This stock has my interest with multiple contracts with the government and missing 1 of the last 5 earnings.
Lockheed is no stranger to getting multiple contracts. A lot of constant contracts coming in with government agencies and commercial airlines.
For a month it has been consolidating jun-jul and recently broke out of consolidation.
coming up on earnings July 18th with price targets ranging from 498 to 579 and a strong out look from 1- 5 out of 5 its sitting at a 5 for earnings beat from Earnings whispers.
Im Bullish looking for at least a gap fill at $475
Trade responsible,
#TradeTheWave
Is the WDFC earnings pop sustainable?WDFC, the manufacturer of WD-40 ( sprayable graphite) had a great earnings beat and
a celebratory pop of 5%. My question is whether it can continue? On the 15 minute chart
I have added four indicators and what they might indicate:
(1) the Lorentzian Machine Learning Alert System with default settings with a few removed which shows the initial buy signal of July 6th. No sell signal has been printed since earnings.
(2) the MTF RSI indicator of Chris Moody showing the RSIs one hour in black and 15-minutes
in blue presently topped out and the lower TF in blue decreasing showing a bearish divergence.
(3) The MACD shows K / D lines rising in parallel but very extended above the zero-line showing
very high amplitude.
(4) The volume indicator showing that volume did not get a relative spike with the post-earnings
price pop.
Overall, with heavy consideration of lack of volume with the price pop and the bearish
divergence on the RSI, I will not take a long trade on this post-earnings WDFC. In fact, if
I can find a good entry on a 3 or 5-minute chart, I will take a short trade. I price rise
with a good volume spike might potentially convince me otherwise.
Semiconductors in Focus: Top or Not?NASDAQ:NVDA has shifted sideways since the huge earnings breakaway gap, a pattern that tends to provide strong support for profit-taking. Unlike NASDAQ:AMD , the trend doesn't appear to be at risk of shifting into a downtrend at this time.
While there has been some negative news pertaining to China for NVidia, the chart patterns don't indicate any concern from the largest Buy Side Institutions yet.
NVDA reports again near the end of August. By the end of this month, the big Buy Sides will have made adjustments to their holdings depending on their expectations for earnings, a time to watch for any shift in the technical patterns.
AMD reports early August. This short-term M top is at risk of testing support level highs below.
MU Micron Technology Options Ahead of EarningsIf you haven`t bought MU here:
Or sold here:
Then Analyzing the options chain of MU Micron Technology prior to the earnings report this week,
I would consider purchasing the 64usd strike price Puts with
an expiration date of 2023-6-30,
for a premium of approximately $1.54.
If these options prove to be profitable prior to the earnings release, I would sell at least half of them.
Looking forward to read your opinion about it.
$HOOD - A New Generation, A New Bull MarketState of the Stock
Robinhood’s time in the stock market has been an arduous one and not one without controversy. The stock went public in a hotly anticipated IPO at about $36.41 on July 29th, 2021. It saw tremendous interest in the first week of trading reaching an overly lofty value at ~$85 a share before starting to sell off. This sell off has relentlessly continued and in many places, you will find negative commentary on the stock.
I personally believe that the stock’s price action bottomed on June 17th, 2022 at about $6.84 a share. Since then the stock has been slowly plodding along and striking higher lows, which I will illustrate later in the charting.
I also believe that the stock’s story is close to turning around and could get more positive attention in the later half of this year. I am going to talk about the balance sheet, cost cutting, charts, and the controversy.
I will be limiting my comments on the balance sheet to lines that I believe deserve notice. For this post, I will be comparing Robinhood to their old school rival, Charles Schwab.
The Balance Sheet
(See Robinhood's Financials)
Overall, I read Robinhood’s balance sheet as being quite strong. Particularly in the amount of cash and sort term investments that the company is carrying. At 5.46 Billion in cash and 1.52 Billion in short term investments the company can cover operating expenses (excl. COGS) for about 3.5 years.
The company has also shared that the short term investments are in <1 year term treasuries. Which is quite a good decision given the current rates. I only wish they had purchased a little more than 500 million or so.
As of this writing (6-11-23), Robinhood carries a market cap of ~$8.5 billion as well. Their cash position is nearly the size of their entire equity. In comparison,
SCHW
(Charles Schwab) has about $75 billion in cash and a market cap of 100 Billion. I believe that the market is underestimating how Robinhood can deploy that cash.
Lastly, Robinhood is very close (9.41 market) to their book value per share (7.83). In comparison,
SCHW
has a book value per share of 15.36 and is trading at 55.0 in the market. I believe this illustrates that Robinhood is quite cheap, even after the June ’22 bounce when it was cheaper than the book.
(See Robinhood's Financials)
Next, the cashflow at Robinhood is quite good and turned positive in Q4’22. Whereas their rivals are experiencing negative free cash flow during this same period. Robinhood, on a relative basis for this metric, looks to be outperforming during the banking crisis.
During their earnings calls they have also reported a net increase in deposits as well as assets under custody (AUC) increasing by an impressive 26% due to the run on stocks in 2023.
What I find most interesting about this is that customer cash in Robinhood has steadily grown to $11 billion from $2 billion at IPO. It has been on an impressive path of growth. I believe this is the result of their strong “Brokerage Cash Sweep” program and the rates they’ve been able to offer.
They have been able to effectively remove the friction between treasury yield and their customers. This also creates a beneficial situation where their clients can deploy capital quickly, while maintaining some yield from their cash. Effectively, creating productive reserves for their customers who can choose to deploy it at any moment right on their app.
(See Robinhood's Financials)
Lastly, the company itself is quite close to profitability. The next 4 quarters are projected by broader WallStreet to come in at an EPS of about -0.01 to -0.03. Any positive change in their costs or earnings could lead to a surprise profit. Such as cash from treasury yield, cost cutting measures, new products, or increased business. The company itself continues to stress, that they are becoming leaner as time goes on. I believe that to be true.
Cutting Costs – The Layoffs
In 2022, Robinhood performed several rounds of lay offs. This allowed them to cut Q2 ’22 and Q3 ’22 operating expenses significantly (excl. COGS). This does not appear to have impacted their revenue growth and has given them the added benefit of being ‘right sized’. And to the best of my knowledge, no further lay offs are currently on the table. In fact, their revenue is now higher than it has ever been since IPO at $447 million and is pushing them ever closer to profitability.
“Robinhood Is Laying Off 9% of Its Full-Time Employees”
– Wall Street Journal, Apr. 29, 2022
www.wsj.com
“Robinhood Lays Off 23% of Staff as Retail Investors Fade From Platform”
– Wall Street Journal, Aug. 2, 2022
www.wsj.com
2023 Road Map – 4 Catalysts
Now that we’ve talked about cost cutting, let’s take a look at the road map and see if there are opportunities for fundamental growth. I will list out 4 that I believe can have a positive impact on their business.
Options Trading in Cash Accounts
Margin Outside Gold
Futures Trading
UK Market Expansion
Lets tackle the first two on the list.
Options Trading in Cash Accounts should continue to grow their existing business. This should increase their revenue generated per user as more current customers have access to more products. Options trading is particularly popular among Robinhood’s customer demographic.
Margin Outside Gold I find personally controversial. I personally don’t believe in using margin. Regardless, it should also increase their revenue generated per user.
While both of these are improvements that could turn the company profitable for EPS. They are not as major as the next two items.
Futures trading would open an entire new market for the Robinhood user. I believe it is an incredibley potent catalyst for their user base and will allow their customers to trade more often and in new ways.
Robinhood advancing offerings for active traders
In March, we applied for a Futures Commission Merchant license and, if approved on a typical timeline, we
expect to launch futures trading by the end of 2023.
s28.q4cdn.com
UK Market Expansion should allow them to acquire a significant number of new users.
Robinhood continues to explore growth opportunities, expands access globally
With an experienced team leading and an existing license in place, we believe we’re on track for our
ambitious goal of launching brokerage services in the UK by the end of the year.
s28.q4cdn.com
To summarize, I believe expanding into a new country, the UK, and providing futures trading to their existing customers they expand their business significantly over time.
Lets take a look now at the charts and see what we can find in the price action.
Charting A Path
The first thing of note on Robinhood’s stock chart is that a series of higher lows have been put in. The price action, for the first time since IPO, is showing an increasing pattern in the price. I believe the stock has a classic Falling Wedge which I interpret as bullish. I believe the wedge has formed because of the positive developments in the balance sheet, cost cutting, and the future outlook.
Examining the MACD on the 1D time scale we also see higher lows put in as well as an MACD crossover onto the positive scale. Overall, I read the charts as having increasingly positive momentum. I also believe that momentum is growing, albeit slowly.
Lastly, on the 2D time scale my favorite indicator, DMI, shows the bulls having taken control on ~May 24 2023. I don’t think it’s any coincidence that was the low after the most recent earnings report. I believe the majority of the bears have left the stock as evident by their strength at ~11.5. We also have seen the natural termination of the ADX which implies, to me, that the previous trading trend for the stock has come to an end. A new trend does appear to be forming. It could fizzle out, but that’s up to Robinhood’s management.
I believe all of the necessary setups are currently there for them to succeed as both a company and a stock.
Closing Thoughts & Possible Risks
The Demographic & The Controversy
By discussing Robinhood here, I feel that I must mention reddit’s r/wallstreetbets. The community there has a significant impact I believe on Robinhood’s success or failure.
The community has a significant following and many of their members use the app. I believe they are an opportunity for Robinhood as well as a possible risk. The 14 million members are potential customers for the Futures trading introduction as well as the increased margin offerings.
However, the community has aligned itself with being against the Robinhood app and have been in a ‘boycott’ of the app since the
GME
trading saga of early 2021. While the community is very vocal on the matter, many of the posts continue to show use of the Robinhood app. At a minimum, it remains controversial, but still in use.
This has led me to believe that most of the drama has faded and because of the high quality product Robinhood offers, has started to draw users back to the app. I believe this is well illustrated in their MAU and NFA graphs. There’s a unique opportunity here for them to either win back this community or lose them forever.
This could also be related to the flurry of trading activity seen in stocks related to AI in the past few months.
Heavy Insider Selling
An additional risk is that the insiders, specifically Tenev Vladimir, CEO & Bhatt Baiju, Chief Creative Officer, continue to sell large numbers of shares. This is creating an immense downward pressure on the stock price. If this pattern continues, it could contribute negatively to the stocks performance.
However, I believe that’s a non-issue if the company becomes profitable. I hope that we are approaching the end of the insider selling.
Crypto & SEC Action
Additionally, due to recent events, Robinhood has pulled 3 of their crypto offerings. I believe this is another mixed risk. While they will take a revenue hit by delisting those tokens, they may end up gaining users if customers of Coinbase or Binance decide to take their business elsewhere. It could end up being beneficial to Robinhood, but there’s no way of knowing at this time.
At the time of this writing there has been no report that I can find of Robinhood receiving a notice on the matters affecting Binance and Coinbase. Robinhood instead chose to remove the 3 affected securities voluntarily.
I believe this is the responsible thing to do and well advised. By taking pre-emptive action they are protecting their business from getting entangled in the matter and remaining compliant with the SEC. This is a value the company has stated a number of times during their earnings calls. I believe their actions demonstrate that value and is representative of good governance from the company leadership.
That said, the SEC could still take action against the company if they choose to do so. Therefore, it still carries some risk and must be considered.
Macro & Last Thoughts
So, here we are. It’s June 11th, 2023. Costs are significantly reduced and being controlled, notable Roadmap 2023 objectives are close, plans for new markets and offerings are approaching, and revenue continues to grow. The company is just a few pennies away on EPS from breaking even or potentially turning a profit. There is also significant distance from the drama surrounding GameStop, Robinhood, and WallStreetBets.
The charts are showing higher lows being put in place. More positive momentum looks to be coming into the stock via the MACD. Additionally, the bulls appear to have taken control via the DMI on ~May 24th, 2023.
I believe this is a case where a significant breakout could occur. It remains to be seen if it will, but I believe there is a potential trade here to the upside. It is not without downside risk though and that must be taken into consideration.
Current thinking in the market is that we may be entering a new bull market based off of recent SP500 closing levels. However, the macroeconomic picture still remains unclear. Particularly in regards to inflation, interest rates, and consumer spending.
If it is a new bull market, Robinhood may benefit from increased trading activity, but if the macroeconomic picture deteriorates it could degrade Robinhood’s business and affect the stock.
Either way, I personally believe the stock is in an interesting position within the market.
Trade carefully, trade wisely.
~Kryptonite
As always, please consult the appropriate professionals for any financial decisions. I am not a professional. I am an amateur hobbyist. These are my own personal opinions that I’ve expressed regarding the market and the companies mentioned above. I am not responsible for any decision, trade, or investment you may make.
You should assume that as of the publication date of any report, post, or communication referencing any publicly traded security or asset that Kryptonite Research (myself) may have a position in the security or asset and I might stand to realize significant gains if the price of the stock moves. Following publication of any report, post, or communication, I intend to continue transacting in the securities covered therein, and Kryptonite Research (myself) may be long, short, or even neutral at any time thereafter regardless of Kryptonite Research’s (myself) initial position. I reserve the right to alter my position at any time without notice.
Images are sourced from the TradingView app, Adobe Stock photos, and Robinhood’s Investor Relations. I do not claim ownership.
As an additional disclaimer, at the time of this writing I am a Robinhood customer and holding a position in Robinhood’s stock.
VISHOP holdings LongAfter positive sentiment within the market following into early June VIPS is still pushing resistance and staying at a price target of $19.00. They have a grade A price momentum with 21.56% within the last three months, the stock has been profitable for a mere 68.56% YTD yet, the RSI index indicates that the stock is beginning to become over bought as it reaches (RSI 70.65, RSI MA 53.64). This is also Indicated by an avg. rate of Suprise on earnings of 41.8%.