An Illiquidity Event Coming - Trading Journal (1.26.21)

in LeoFinance3 months ago

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The markets have reach a point where specific stocks are rising exponentially.

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We are witnessing this first hand in the likes of GameStop (GME) as of today it closed near $147 and after hours reached $249 as a high. Note worth because last Friday it closed at $61 and two weeks before that it was under $20.

Big Players Long and Short

As many have already ready about Wall Street Bets increasing retail traders going long GME just today two big well known tech entrepreneur join in on the fun. Mr Chamath Palihapitiya and Elon Musk to be exact.

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On the short side it is not as obvious but yesterday a merger of interest that relates to players who are short GME broke.

Citadel, Point72 Back Melvin With $2.75 Billion After Losses

Melvin is a hedge fund that is or was short GME. The fund is currently down 30% as of today's market open. Since GME literally doubled in price I would hope Melvin is already out of the GME shorts. Citadel is one of the biggest market makers in the markets while Point72 is lead by Michael Cohen with a portfolio under his control worth $16 billion.

Then not to forget the faithful Citron Fund lead by Andrew Left prior to GME parabolic move had publicly stated Citron is or was short GME.

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Andrew Left even planned to publicly point out why GME was a perfect short only for it to back fire within literally hours as GME's over 130% short float interest crushing shorts and making Wall Street Bets retail traders millions.

Parabolic moves comes gaps

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On January 13th GME broke out and on the 19th it had reach $40 with Citron coming out they were short. The next few sessions of trade had GME pretty much holding off at $40 but by Friday the stock has exploded to reach a high of $80 and close above $60ish. What followed is what we are currently witnessing, a type of bull run that can be defined as a parabolic. The issues with parabolic moves is that there is likelihood of price air gaps in the stock when it moves too quickly.

We witness price air gaps over the past few days in GME. Like for instant this morning around 11ish the price hit $145 and only to drop under $120 within minutes. This lead to a trade halt as the stock moving up or down 10% within 10 minutes. It happened on that $145 to under $120 drop.

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Circle in red are areas where the ticker halted during trading hours. After hours no such thing for halt and the stock simply ramped out. What is in question now is when will there be no liquidity at a price peak that will quickly drop the GME price to a point where not even the extreme call buying from retail traders and big fishes can pull the stock higher? It will happen when it is least expected.

It will happen as the frequency of the smaller drops that is halting GME from trading is occurring more often and later during this parabolic move. Prior day, Monday, the stock was rising so quickly that it was halted in both up and down moves. Today as of Tuesday it was only halted during down moves. This shows at the very least impulse moves to the upside is whining. The price is still moving up but ever so slowly. When the time comes where there are no buyers left the price may fall into an air pocket much greater than the 10% and hence the stock continuously gets halted until it recovers from a bounce. Where that price point will be is unknown but the fact that more trade halts are occurring due to swift drops it is clear that the potential for a massive correction is more likely than not.

A final note using Fib Retracement that next level for GME to possibly hit is $423. Yes $423 dollars. Will that happen, who knows? What will be certain is that there will be a point in time GME will have to retreat because in a fast parabolic move there is more likelihood to have air pockets where price discovery will always come to fruition. It is only a matter of when. Best of luck and stay safe which ever side you are on.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!

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The gme is a betting arena. The entire stock market is a one big casino