Preface: I am writing this to help myself diamond hand during the squeeze and not to fuck myself over by selling too early, and not to fuck over the short squeeze rocket by removing some of it’s fuel too early. This is not financial advice for anyone, I’m just a dumb crayon eating ape.
Without the power of hindsight, it can be quite daunting to try and “time” the top. I am going to be faced with a situation like this picture below. Just a green rocket going up, and my thinking will be, “Well damn when’s the top? How high is it going to go? $10k sounds nice but what if it goes to $100k or $500k or $1 million?” In the case of Dryships Inc and their short squeeze, if I was in at $40k and the price rocketed to $336k, I might be thinking, damn it’s almost 10x, should I sell? How high will it go? Read on to find out the conclusion to $DRYS.
DRYSHIPS INC PRICE ACTION DURING SHORT SQUEEZE
That is why I am not relying on chance, but relying on common technical indicators to know when to sell, based on what happened to $DRYS.
This guide will be broken up into 4 parts, where to get technical charts, what is MACD, what is Stoch RSI, and how can I use all this to know when to sell $GME. And for those of you who don’t know what an “exit strategy” is, it’s basically a strategy of how to sell $GME without fucking yourself over, or fucking over other apes.PART I: WHERE TO GET TECHNICAL CHARTS?
If you’ve been trading without viewing technical charts. LOL. But yes, all you need is Trading View, and yes it’s free: https://www.tradingview.com/symbols/NYSE-GME/
Click on Full-featured Chart
Then, hover your mouse over the garbage can icon on the right bar to get a right facing arrow to appear. Click on the right facing arrow, then click “remove drawing and indicators” to clear the chart. Then, on the top bar, click on indicators, then type in and click on “Volume”, “Stochastic RSI”, and MACD.
Then you should get something like this:
Fuck paying for it. Don’t worry about it.
Now that ape has stick tool, moving on to part IIPART II: WHAT IS MACD?
TL;DR for MACDMoving average convergence divergence (MACD) indicates momentum reversals. You have 2 lines, the signal line and MACD line. Signal line is orange and MACD line is blue on Trading View. The bars show you the distance between these two lines. Green bars if MACD is higher than signal line. Red bars if MACD is lower than signal line. Basically big green bars show strong positive momentum. Big red bars show strong negative momentum.PART III: WHAT IS STOCHASTIC RSI?
TL;DR for Stoch RSI
- A StochRSI reading above 0.8 is considered overbought, while a reading below 0.2 is considered oversold. On the zero to 100 scale, above 80 is overbought, and below 20 is oversold.
- Overbought doesn’t necessarily mean the price will reverse lower, just like oversold doesn’t mean the price will reverse higher. Rather the overbought and oversold conditions simply alert traders that the RSI is near the extremes of its recent readings.
PART IV: WHAT DO I DO WITH THIS INFO AND HOW DOES IT HELP ME KNOW WHEN TO SELL GME?
One thing to note is that selling too early REALLY REALLY slows down the rocketship to andromeda, so I am definitely going to try and sell AFTER the peak and not before. Why? Because in a bidding war for GME up to infinity, I don’t want to supply more GME shares to them, because an increase in supply will decrease the price.
This is where using MACD and Stoch RSI comes into play:
What actually happened to $DRYS
So taking a look at the case study for $DRYS, if I sold $DRYS at $336k, I would have DEFINITELY missed the peak of $800k+ by ALOT.
From this case study what I see is that i am going to have my STOCH RSI at super high levels during the rocketing period, and my MACD indicator is going to be above the trend line and I have green bars.
That little fake out drop at $500k probably shook out a lot of paper hands, and I have the STOCH RSI going into the oversold region all the way to 0, but my MACD is still above the trendline and still near peak positive momentum. We also see the STOCH RSI picking back up.
Then as I approach the top and go past it, I have another drop in the STOCH RSI from 70 down to 0 and the price drop begins. This is also signaled by the MACD nearing to 0 and having weaker bars. So from this price action I can see that a good time to sell would have been when MACD approaches 0 WHILE the STOCH RSI was also heading down to the oversold region past 30. If I sold at that region on the chart where MACD was close to 0 while the STOCH RSI was down at the 30ish region, then I would have sold $DRYS for $725k, which is 90% from the top, which is not too shabby at all!! And if I had done this, then this was also great because I did not sell during the way up and I didn’t do anything to slow down the rocket!
BONUS EDIT: It was brought to my attention not to neglect volume so looking at the volume, we obviously know that as we are HODLING, the volume is gonna be very small and trading is dry. So historically that’s like maybe in the 10-30 million range. But, as the squeeze happens, volume will increase drastically, so looking at $DRYS, we can also see this is the case. We can see a brief increase in volume to double the price, then there was a period of HODLING, and the volume of basically non-existant (does that sound familiar, btw?). Then we can see on the 14th, BOOM, insane volume, and ladies and gentlemen, the squeeze is on! As the price increases, so does the volume, which peaks at around halfway into the squeeze. As more and more people cover, buying pressure is less and buying volume grows less. You can see the volume taper off towards the top and a little past the top. Meanwhile, the sell volume is basically inverse. There would be little to no sell volume during the squeeze (except for the paper hand bitches), but in general the sell volume will increase as you get to the peak, and spikes once the stock freefalls back to earth.
Now, again, this is just ONE case study out of many short squeeze examples. I haven’t done any more research on other case studies. But I think if smarter apes can aggregate data from all the other short squeezes maybe they can find better patterns and indicators about when to sell. That’s what I’m going to do during the rest of the week.
EDIT: No, this is not foolproof nor can we expect GME to mirror DRYS and behave in a similar fashion, but it’s just something to keep in mind though as GME holders play the same game of trying to sell near or slightly after the peak.
EDIT 2: It’s come to my attention that some of you more smoother brained apes think this entire price action for DRYS will happen in just a few hours. If you look at the time scale at the bottom, you can see that significant price spike from squeeze started from Nov 14th, hitting 500k on Nov 16th, and finally peaking on Nov 17th. In other words, DW, you’ll KNOW when the squeeze is happening, plenty of time from the squeeze to the very top.
EDIT 3: No idea why it shows the price of $DRYS in the hundreds of thousands. I honestly had trouble finding data on this stock and this is all I could find. If maybe someone else has a better resource for data on old stocks, I’d love to know it so I can research more short squeeze stocks.
EDIT 4: Volume added