Preface: Been asked by several apes to repost this DD I wrote 2 months ago in r/gme to here for newer apes and for visibility. I’ve made some slight edits / updates as well. And now, without further ado…
So you’ve been combating FUD, HODLing/buying during 30-60% dips, and reading DD nonstop cuz you like the stock. Congratz, you have been doing well on the front lines and you’ve been surviving. But this is actually just the easy part. The hardest part is actually knowing when/how to sell and actually turning those shares into tendies, because obviously it doesn’t matter how much we hold if we mess up during the squeeze and fail to capture most of the value of the shares. And that’s why we’re going to add a wrinkle on your ape brain today and discuss about your EXIT STRATEGY.
What is an EXIT STRATEGY, and why is it important?
An EXIT STRATEGY is your plan for how and when to sell your shares. This is arguably the most important part of trading, as this is the step that determines how much money you’re actually getting. Obviously we’re not going to rely on just emotions, or luck, or just YOLO / 360noscoping the sell button arbitrarily during the squeeze, but we’re gonna use our wrinkles to get a better educated guess as to when we’re going to sell our shares. Not knowing how to sell our shares well will not only give you as an individual less profit, but also might hinder the squeeze and rob the rocket of rocket fuel, meaning the squeeze won’t be as high as it could have been, and meaning ALL APES will have less profit. So read, learn, grow a wrinkle or two, and don’t fuck it up for the rest of us!
There is already two EXCELLENT DD’s on this, and just in case reddit dies during the squeeze, or if these posts gets deleted, here is the archived version as well; copy and paste the articles themselves or the links to save them just in case.
Wedges and Triangles:
Short Squeeze Case Study: $DRYS
Some new/repeated points that needs to be reiterated or may not have been covered above:
– GME holders don’t want to sell on the way up, but they’d **want to start selling after the peak on the way down**, to potentially minimize the regret of selling at $10k but seeing the stock hitting $10 mil, $20 mil, and beyond. Plus selling on the way down ensures the stock can reach it’s max price.
– **We don’t need to worry much about paper hands selling early** at like $5k or $10k because they make up only a small part of retail investors, and because of the short interest is estimated to be anywhere from 200% – 300% all the way to over 500%, it means our wallstreet bagholder shorters will need to buy these shares back multiple times to cover their position, so even if they buy all the paper hand shares, they’ll need to do it again multiples of times to even start to cover. They’ll buy multiple times to first cancel out the naked shorted positions, then lastly buy a final round to actually cover the legit short positions they have.
– The short squeeze isn’t going to last for 2 minutes and that’s it. From previous short squeezes, **the build up to the top will last for days, so you’ll have PLENTY of time to see it coming**. And even at the very top, the price will bounce around a bit before heading down again to earth, so you’ll have plenty of time to sell (by plenty of time I mean more than a few minutes, how much time actually I don’t know)
– **When you sell, sell with a limit order, not a market order**, because you don’t want some freak accident or some illegal shinnanigans where the stock price is worth $10 mil but because you did a market order sell, you somehow got only $50k for your share. From more reading, the bid/ask spread of GME during the squeeze could be stupidly wide, ie bid prices of $10k vs ask prices of $10 mil, so if you sell a market order you’ll hit the bid price of $10k. Another situation is your broker routing your orders through market makers like Citadel, and who knows what could happen once they receive your orders. From the DDs it’s possible your order won’t even make it to the market, and they’ll get swallowed up by Citadel instead and you just get back pennies compared to what your shares should be worth.
If your broker doesn’t allow you to do limit sells, it’s okay you can do market order sell, but expect there to be a difference (usually small but sometimes bigger during times of high volatility) between the market price you see reported on your brokerage platform vs the actual price you sell it at. The problem with limit order selling is that you have to manually view the price all the the time, waiting for the price to hit whatever level you were planning to sell at. Warning, in times of EXTREME volatility, if you set your limit too close to the current price, there is a chance it won’t execute. For example, if the stock is dropping from $1 mil, and you go and spend a minute to set up a limit set order at $990k, by the time you finish clicking and typing, the price could already be at $989k by the time you submit the order, and your order won’t fill. Best to have looser sell limit of like maybe 5-10% below current price, or even more, during times of extreme volatility. If you want to, you can also set a trailing stop limit order, which is something that limits how much you can lose but doesn’t cap the gain. The issue with setting a trailing stop limit order is that if you don’t set it properly, ie, not giving yourself enough room, then potentially any volatile spikes downwards on the rocket ride up could accidentally trigger those stop loss limits and make you sell prematurely, kicking you off the rocket before it arrives at andromeda. For example, in the $DRYS example in the linked DD, if you set your trailing stop loss to be 10%, then you would have gotten kicked off the rocket at only a little past half way. If you just use a plain old limit order sell, then that gives you the most control. I guess you could also set a trailing stop limit order sell at 10% below current price once the price goes past your target price. For more info: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-15
Another potential risk of everyone setting a trailing stop loss, especially at the early stages of the squeeze, is for the shorts to do a MOANS (Mother of all naked shorts) and drive the price downwards to trigger everyones trailing stop loss. I think this is what happened back in March where the price dipped 50% in a day. When the price is like WELL on it’s way to the moon, I’m pretty sure at that point the shorts will have no more ammo left to do any extreme funny business, so a trailing stop loss at that point (not too tight) could be suitable.
EDIT: Some have told me they can’t set limit sell orders below current market price. If that’s the case maybe it’s better to set a stop loss sell order so when the price hits that stop price, the order will fill. Problem with that is your order won’t execute right away if the price remains higher than your stop price. Or just do a market sell order and hope the actual sell price is close to the reported sell price when you submit the order. Each brokerage behaves a little differently so it’s best to get to know the ins and outs of your own particular brokerage.
Another method if you really have market sell orders only available for your broker is to sell 1 single share at a time. If nothing shady happens, then you can keep on proceeding to sell your shares a couple at a time with your market order. But if you sell a share and you get back like $10k instead of $10 mil, then obviously you’d want to hold off of selling the rest of your shares and figure out how you can sell using alternative options (maybe changing the routing? Ask your broker)
– **Don’t panic when the price halts**. It’s supposed to halt when there is a drastic change in price, either up or down. Because of these price halts, you’ll have even more time to react when the price sky rockets.
Just halts alone on the way to the peak is gonna take up hours of trading time.
– Make sure your brokerage actually allows you to sell your shares at your price target. I’ve heard some brokerages have a limit on how big your order can be or maybe have limits to your account itself. Example, if the brokerage has a limit on transactions being less than a mil, then you’d be screwed if you’re trying to sell GME for more than a mil. Also, it’s a bit different than being allowed to set limit prices at like a mil while the current price is still $200. Even for the broker I use, they said there is a limit to what price you can set a limit sell order at, and that limit changes depending on the stock price. So if GME rockets, so should the limit sell price cap.
– Watch the volume as well. It’s expected the volume to increase signicantly during the squeeze, probably being at it’s max around half way into the squeeze, and tapering off towards the top of the squeeze. Conversely, the sell volume will be almost non-existant in the middle of the squeeze, and will increase gradually as we get to the top and then down on the other side back to earth.
– While OBV (On-Balance Volume) is good for seeing a bigger picture of the general trend of a stock (ie: GME OBV = we’re HODLing very well), the way it’s calculated is looking at day to day volumes. Meaning it’ll still be good for monitoring the squeeze process over the course of a week or two (not sure how long it’ll really last), but OBV is pretty much useless if you want to see intra-day activity. Correct me if I’m wrong. For intra-day momentum indicators, MACD and Stoch RSI is still your best friend. Although ,they are known as lagging indicators, so they won’t be able to exactly capture changes in momentum in real time.
– Also, make sure you have access to multiple ways to access your account to sell. IE: Don’t rely on your ghetto phone at like 3% battery left on the day of the squeeze to sell on your app. Have multiple devices ready, phones, laptops, desktops, all set up to log in quick and to issue sell orders at a moment’s notice, all fully charged.
**- lastly, the peak will not be whatever number you want it to be, or whatever number we all want it to be. It could, or it could not. The peak will simply be the peak. Don’t just blindly hold to a certain number thinking that it’s gonna be the peak. You must always check all the indicators as the squeeze is happening and monitor carefully so you don’t miss the peak. All the prices we’ve been asking for are theoretical. None of us are prophets. Do your own due diligence during the squeeze, don’t rely on others.**
– Have multiple ways of monitoring GME price movements / doing TA on GME. I’m just paranoid that during MOASS the powers to be will shut down Yahoo Finance, Trading View, Think or Swim, etc, so that we’re trading blind. You’ll need multiple backup methods of monitoring stock price + momentum indicators. If anyone has a list, then by all means let’s brainstorm and get a list going. Personally my broker also offers this service so if worse comes to worse I’ll just use my broker’s ghetto UI chart for GME.
EXIT STRATEGY EXAMPLE
I’m sitting here masturbating and suddenly the price jumps from trading sideways at $200-$300 to $400. I know something’s up. So I now actually stay paying attention to the price. The price goes up past $1k. Okay, maybe it’s a gamma squeeze, and it’s transitioning to a short squeeze. There has been a LOT of halts along the way, but it’s fine, because as the price is rising, in my head I’m thinking that the share will go past $100k minimum, so if there are slight dips along the way I don’t panic. After several hours, the price has hit $5k and the trading day ends. My portfolio is now sitting at over a mil of unrealized gains. Now I’m fighting myself. Should I sell? I mean, a mil is a lot, more money than I’ve ever seen in my life. A mil can make my parents retire not too shabbily either. Or, should I wait until tomorrow? Everyone will have inner struggles at this point with their inner paper hand demons. But at this point I take a look at the overall volume. Multiple times higher than pre-squeeze, but is it enough for all the shorts to have covered? If not, then why sell? Shorts still are buying to cover. What are the MACD and RSI saying? I’d wait until the next day. Next day, a bit of a sell off due to paper hands. Expected. After a 15% dip, the buying continues and stutters and gaps it’s way up to $20k, and the trading day ends again. Same thing, now I think to myself, damn I have over $5 mil I can just pocket immediately. Probably don’t have to work for the rest of my life if I’m careful of spending. Should I sell? This is a personal question, only you, fellow ape, can answer. But I’m holding to bankrupt the DTCC so I’m not selling at this point. Rinse and repeat until the price gets REALLY interesting.
I am also keeping an eye on technical analysis indicators in the above linked DDs to try and guess where the top is. Let’s say the price has reached $1 mil, and it paused there, and the indicators are starting to point to a reversal. Whether $1 mil is the top or not, we don’t know, but we can still wait to see if it breaks out and rockets up further. At that point I could:
- Put in a 10% trailing stop limit sell order on my 10% of my shares at $1 mil. If it goes up, then I will still on the ride to the top. But if it goes down 10%, then it’ll fill my sell order. At that point, I have 90% of my shares left. I can set another stop limit sell order with 10% of my shares at 10% below the new current price. If the share goes back up past a mil on it’s way to the peak (which I still don’t know what it is), then I’m still on the rocket with 90% of my shares left. If the stock continues to go down and my 2nd order is filled, then I’m going to rethink how much I plan to sell next. And I don’t think at that point near the top there would be any more volatile movements of 10% or more, but this is pure speculation. One thing for certain is I’m not going to fire all my bullets at a single shot and sell everything. Chances are you’ve failed to pinpoint the exact peak, and the real peak is at a different price point. Selling in smaller chunks lets you have more chances of actually reaching the peak instead of blowing your load at like 20% on the way up.
PS: Before you all accuse me of anchoring the price at a mil, $1 mil per share is just an arbitrary price point I picked to illustrate an example. Could be 100x higher , could be lower, no one knows. I don’t know how high it’ll moon, that’s why this post exists in the first place, so you do the DD and know the technicals so you can guesstimate where the top is when it happens. The numberes can change, but the strategy won’t. $1 mil is just an easy number to type.
# Warning, the ULTIMATE FUD is coming, and the ONLY way to combat it is to have a solid exit strategy NOW.
With the way things are going on our sub, I almost can guarantee when the squeeze starts and when the price hits $1000 or higher, we’re gonna be FLOODED with fake DD’s saying that it’s the peak and here’s why, with lots of technical charts and crayons and lines and fancy trading language and other bullshit to try and trick people into selling. If you don’t sufficiently do your DD now and understand why $1000 will NOT be the peak, then I can guarantee you you’re gonna paper hand and sell at $1000. Knowledge is power, and HFs know that. That’s why posts like this gets downvoted to oblivion as soon as it comes out. EDUCATE yourself, form your exit strategy NOW, and stick to it through thick and thin, through the FUD FLOOD armageddon that will come.
Adding to this, as mentioned by another user, while r/superstonk bans gain p0rn until the whole thing is over, r/wallstreetbets and other subreddits will not, so you’re going to see a whole flood of people posting gain p0rn after selling at $1k or $2k, and buying various articles of luxury maybe, like lambos. You have to prepare yourself now for that day when reddit front page is just all GME gain p0rn. Are you also gonna FOMO and paper hand it before GME truly reaches the stars, because the shill tactics then is making it look like everyone else is selling,and you’re afraid of being a “bag holder”?
EDIT 2: Some are saying not to sell on the way down because there is no more demand and you’ll be caught holding the bag, thus you should only sell on the way up. This is only correct if you assume that the very last few shares hedgies need to buy, the last shares out of all 300%+ of outstanding shares, is bought at the very peak, and after that, demand drops to exactly 0% and there is not a single person buying anymore after the peak. But is that a realistic assumption? Up to you to decide. My thinking is that there will be sellers who sell on the way up, and there will be buyers as well on the way up. But some people will wait until the peak and sell on the way down, just like there may be buyers who wait until after the peak and buy on the way down. I personally don’t believe there is a hard cut off at the peak where the buy volume suddenly drops to 0. The amount of buyers and sellers at each price point during the squeeze should follow a gaussian distribution curve, imho.
Ape ask: WHERE PEAK?
Fellow ape answer: Ape need read DD. What’s gonna help you is actually knowledge obtained from reading, no shortcuts unfortunately.