Qullamaggie Stream Notes: 8 June 2023

Another EP class, strength in AI and quantum, and market filter and newsletter recommendations by Kristjan

Stream overview

This was a longer stream (1:18:11) with, once again, plenty of wisdom from Kristjan, as well as a few practical recommendations by him. Today’s notes cover:

• Kristjan’s positions, including details on his two new positions since the previous stream (5 June 2023) and $CVNA, which he added to during this stream;

• Kristjan’s views on the market action and sentiment;

• A simple yet effective market filter you can use in TradingView;

• Kristjan’s insights into the strength of the AI and quantum computing themes, and the weakness of crypto;

• Yet another class in studying EPs, including a bunch of charts; and

• A pre-market newsletter recommendation by Kristjan.

Kristjan’s positions

• AI

• APLD

• ARQQ

• CVNA (added to it during the stream, 9:45 EST/19:00)

• DNA

• GSIT

• GTLB (new since the previous stream)

• IMGN

• IOT

• MNDY

• PLTR

• QBTS

• RGTI (new since the previous stream)

No new positions during this stream. No positions closed since the previous stream (5 June 2023).

Kristjan mentioned that his biggest positions (at the time of this stream) were $CVNA and $PLTR.

$GTLB, $RGTI and $CVNA are discussed in more detail below.

$GTLB

Operates GitLab, a DevOps software package for developing, operating and securing software. There’s also an AI theme, though I don’t believe this name is on Kristjan’s list of AI and quantum stocks.

(He has added three more names to that list since 5 June, including $MDB. I don’t believe he showed the full list during this stream, so couldn’t identify the other two new names.)

Industry: Software — application
Sector: Technology
Market cap: $7.0B (mid cap)
ADR: 5.9%
Timestamps: 6:31; 18:02

$GTLB — a software name, so in a leading industry (in addition to the AI theme) — had an earnings EP on 6 June 2023 on good volume, but was yet to make much progress at the time of the stream:

Kristjan bought $GTLB on EP day at the ORH, around the high $45s, to which I’ve added a blue line and arrow on the 5-minute chart below (11:05–11:09 EST). I’ve also added an arrow to the higher volume for good measure.

On the day of the stream, Kristjan’s stop is at $43.22 (see the white line in the screenshot above). Since the LOD of 6 June would have made for a quite a wide stop (>5%, so approaching that day’s ADR), and given that $43.22 was a technically sensible level for a stop on the intraday chart, this may well have been Kristjan’s original stop too.

At the time of writing (15 June during market hours), the chart looks really good (see below). The stock has now started to really move, plus it hasn’t gone anywhere near the 8 EMA (red line) yet, so Kristjan is presumably still holding it. However, he has likely moved up his stop by now, and quite possibly taken partial profits too.

$RGTI

Develops quantum-integrated circuits for quantum computers. Had (relatively) recent PRs about quantum computing, e.g. here and here. Also featured on Kristjan’s AI and quantum list.

Industry: Computer systems
Sector: Technology
Market cap: $141.6M (micro cap)
ADR: 21.8%
Timestamps: 6:32; 35:04

Kristjan’s screen:

Not the best zoom, so here’s my screen:

I assume he bought the breakout on 6 June 2023 around $0.96, where I added the blue arrow. The breakout was accompanied by some nice volume, plus the stock bounced nicely off the 10 EMA (visible on Kristjan’s chart; I prefer the 8 EMA). His original stop was probably the LOD ($0.87), and at the time of this stream was $0.92.

As this is an illiquid stock, Kristjan holds this name in his small tax-free Swedish account. However, like he said during the stream, this stock has ten-bagger potential, so you don’t really need a big position.

$CVNA

Online used car dealer.

Industry: Specialty retail
Sector: Consumer cyclical
Market cap: $2.8B (mid cap)
ADR: 14.3%
Timestamps: 2:45; 19:00

Kristjan: “Carvana is finally starting to go. I’ve been in this thing for a month now.” (It was gapping up on news about improved guidance, on huge volume.)

In the pre-market, when the screenshot below was taken, Kristjan mentioned that the stock is right where it topped on 2 February 2023. (He also bought it a couple of times in January 2023.)

When asked by someone in the chat about how he would handle the gap up, Kristjan said he’d moved his stop up a little. At the time of the stream, he had two stops: at $13.32 and $15.47. This is presumably because he bought some in May, then added some on 1 June (“if it can’t go now, it’ll never go”).

Kristjan also said that he may even add to his position if $CVNA holds the gap — which in fact he did at 9:45 EST/19:00, with a third stop, at $18.08.

Later on this day, he also talked about this stock on Twitter. The day after, he tweeted that he adds to positions when there’s a setup.

During this stream, he remarked that $CVNA could double over the next few weeks — we’re in an uptrending market, which is precisely the right type of environment for it.

Also, as a reminder (44:27): if you seek alpha, buy “pieces of s**t in a hot sector” that people really hate, such as $CVNA, $AI, and (to lesser extent, because it is growing) $PLTR. Those are the ones with big potential.

Market outlook

Kristjan commented at 9:36 EST/9:38 that stocks appeared to be digesting the previous day’s (7 June 2023) little pullback well — so far, at least. They are finding support on the rising 10 EMA. However, multiple times during the stream, Kristjan also called it a “really slow day” (e.g. 17:05).

Indices

Kristjan remarked at 27:34 that it’s interesting how $IWM (Russell) is super weak on this day, whereas it was really strong the previous day:

On the other hand, $QQQ was okay on the stream day, but really weak the previous day:

But zooming out a little, Kristjan said that we need some sort of pullback, or at least some sideways action, so the moving averages can catch up.

He also reminded us that this rally in $QQQ and $SP-500 has been mostly fuelled by the top few stocks — in other words, there’s been a lack of breadth. However, that the $IWM has woken up a few days ago is definitely good: that means more stocks are participating, which means more opportunities.

Sentiment

Kristjan mentioned at 1:02:29 that sentiment is still not great — there’s a lot of scepticism about the recent rally — “yet we’ve been in a bull market for the past eight months”.

But Kristjan also added that he understood that. “If you weren’t in the big 5–7 stocks — like the [mega caps] in [$FNGU] — I get it: your portfolio’s […] probably not doing very well.”

A simple market filter

Kristjan has mentioned this before, during the 18 May stream, but it’s worth repeating: you need a market filter — a way of determining the market environment, and whether or not you should be trading.

I won’t repeat the details of what I already wrote in last month’s stream notes, so let’s just jump straight to a simple market filter Kristjan showed us during only this stream at 58:21, applied on the $IWM:

This filter was made by someone in TradingView, basically just using the 10 and 20 MA crossover on the daily time frame. If the 10 MA is above the 20 MA, you’re in a green zone and can take on positions. If the 10 MA is below the 20 MA, you’re in a black zone and therefore in cash, which would’ve kept you out of harm’s way in bear markets (Kristjan specifically talked about some examples from 2008). The filter also takes into account the slope of the MAs.

Beware that this isn’t perfect, but works 80% of the time (or thereabouts). Plus, this is a very simple market filter that Kristjan described as “good enough”, so it’s definitely a good option for traders who struggle with assessing the market conditions.

Other market filter options are Stockbee’s Market Monitor and looking at things like breadth.

Theme observations

The two hottest themes: AI and quantum computing

Kristjan (again) talked about how quantum computing and AI are the two hottest themes at the moment, and snorted at someone in the chat who called AI a “fad” (which, by the way, always happens with new technologies, like electric cars and iPhones back in the day).

AI is already being used by hundreds of millions of people on a daily basis. Moreover, it’s already having a huge impact on companies, either completely changing the way they work or putting them out of business altogether — and this is probably only the start! As Kristjan pointed out: AI is only going to get better, and it’s already “pretty damn good”.

Not mentioned during the stream, but this strongly reminds me of an important lesson from the late, great William O’Neil: the biggest winners — in terms of making huge moves that play out over several months, quarters or even years — are the companies that change the way we live, work or play.

AI is clearly going to do all three. As Kristjan said (14:55):

“[AI] is already changing our world. How can it be a fad? Doesn’t even make any sense.

“Like, you could make an argument that the new Apple headset goggles are a fad, because pretty much no one is using it.”

Clearly, the same thing cannot be said for AI.

Interesting-looking quantum name: $IONQ

Kristjan said that $IONQ — the leading quantum name — is looking “interesting”:

Kristjan has highlighted this name before, during the 23 May stream as a quantum computing company that actually has real revenue and customers (most quantum names are speculative stocks). He also bought $IONQ on 30 May, but was stopped out of it during the 2 June stream.

During this stream on 8 June, he set an alert at the trendline I added the blue arrow to.

Other quantum names

Kristjan said he believes that a bunch of quantum names are only just getting started. For example, take $QBTS (in his portfolio):

Notice how its recent rally has been fuelled by big volume every single day (I added the blue rectangles for clarity). This is a sharp contrast to typical rallies in these types of speculative names, where you get big volume on day 1, and then it pretty much dies off.

You can see the same thing in $RGTI, which I discussed earlier. We’ve also seen this in speculative AI names like $AI, discussed in the 18 May stream notes.

Finally, Kristjan also mentioned that several such speculative quantum (and AI) names haven’t gone — yet. But to quote from the 1 June stream notes: “they’ll all eventually go”.

Lagging sector: crypto

Kristjan mentioned, in response to a question in the chat, how crypto has been lagging this market rally — e.g. see $MARA:

Remember that it’s always best to steer clear of lagging stocks and sectors. Leaders lead. Laggards lag. As William O’Neil said in How to Make Money in Stocks:

“Studies show that 37% of a stock’s price movement is directly tied to the performance of the industry group the stock is in. Another 12% is due to strength in its overall sector. Therefore, roughly half of a stock’s move is driven by the strength of its respective group.”

So always keep a stock’s theme and industry in mind. Stack the odds in your favour, play like the house and not the gambler, etc. — pick whatever cliché you want, but the point stands.

EPs

During this stream, Kristjan was asked to do a swing trading school in EPs, to which he responded that he’d pretty much been doing that every stream (true — I seem to be writing about EPs in every Qullamaggie stack I put together). In particular, the 18 May stream was a masterclass on EPs.

In this stream on 8 June, he showed us a scan for studying EPs (20:25), but I’ve already covered it extensively in the notes above, so won’t repeat myself here. (Click here if you want to skip straight to my scan discussion in the 18 May notes.)

Tight entry window

One thing that was new from this stream is that Kristjan specifically said (39:11) that most good EPs have their entry window 3–10 minutes after the open. There are exceptions, like $GTLB discussed earlier, but most EPs require you to enter quickly, within that early time frame. The massive volume that is key for a good EP is usually also obvious by then.

Study charts to build conviction

There was also a good quote (well, minor rant) from Kristjan in this stream, at 22:31, on studying stocks. For context, he opened with saying that you need to look into which stocks from the scan made big moves, and the type of news and volume they had.

“You need to do the work yourselves, guys. Look at […] what kind of entry method would’ve been the best, what kind of exit method would’ve been the best. Is it best to sell into strength after 3–5 days? Or is it best to sell some into strength, and then trail the rest with the 10 or the 20 moving average?

“You need to do it yourself. You’ll never have conviction if you just take someone’s word for it. It’s not about being perfect, it’s about building conviction in your […] own skills, right?

“Because people are always saying: ‘Oh, […] can you help [prevent me from] selling too early?’ […] Well, actually, I can’t. You can — by studying stocks! By studying these setups! And if you’ve gone through, say, 500 setups, and you’ve convinced yourself [about] the best method, then you won’t have a problem anymore [with] selling too early.

“You need to build the skills yourself. I’m just here to give you some ideas with […] what type of things work in the market, but you need to put your own personal flavour on it.”

I personally find that last bit about learning from your teachers but not (fully) copying them, instead adapting their lessons to suit your own needs, really interesting. That’ll probably be the main topic of a future stack.

Going back to EPs, the below charts came up during this stream.

$SOFI

American online personal finance company and online bank focused on personal loans, credit cards, mortgages, investment accounts, banking services, financial planning, etc.

Industry: Credit services
Sector: Financial services
Market cap: $7.1B (mid cap)
ADR: 6.6%
Timestamp: 12:48

This one was a “huge miss” for Kristjan. $SOFI had an EP on 30 May 2023, due to the news about the tentative debt ceiling deal. Kristjan commented that, at the time, he really didn’t understand how big that news was for this stock.

At the time of writing, this stock still looks great. Very nice price action, but the volume is also impressive — there’s still so much volume coming in, more than two weeks after the EP:

$YEXT

Provides a cloud-based platform for organisations to manage their digital knowledge and sync it to around 200 services. Has an AI theme (see e.g. here and here), and is on Kristjan’s list of AI and quantum names.

Industry: Software — infrastructure
Sector: Technology
Market cap: $1.2B (small cap)
ADR: 4.8%
Timestamp: 17:41

$YEXT had a five-star earnings EP on huge volume on 7 June 2023, coming out of a base. Kristjan’s girlfriend traded it, but Kristjan himself passed on it because it was too thin for him.

At the time of writing, the chart still looks good — moving sideways after the big gap up:

$IOT

During this stream, Kristjan mentioned that $IOT had a four-star EP he traded, which I’ve already discussed in more detail in the 2 June 2023 stream notes (he actually bought this stock during that stream).

Newsletter recommendation by Kristjan

At 48:06, Kristjan said that he’s been subscribed to the Options Hawk newsletter by Joe Kunkle for the past 6–7 years, which is a “really good” pre-market newsletter on earnings, news, etc.

Kristjan also specifically mentioned that Joe has “a lot of good stuff” on his Twitter.

More stream notes

All my Qullamaggie notes are available here.

And just for the record: my Qullamaggie stream notes are not, and never will be, paywalled. No matter how long it takes me to put them together (these kept me busy for around 7 hours), and even though I do add value, Kristjan generously streams for free, making me feel that notes based on those streams should also not be paywalled.

Other trading resources

The Trading Resource Hub’s full archive is available here, which includes some recent posts relating to quantitative analysis, statistics, and how to use them as psychological aids in your trading.

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More about Qullamaggie

To learn more about Kristjan Kullamägi, aka Qullamaggie, and the way he trades, visit qullamaggie.com.

All past streams are available on Kristjan’s YouTube channel.