A Powerful Day Trading Strategy for Pre-Market Selloffs
Dear Traders,
I’m writing this newsletter at 15,000 feet (4,572m) as I prepare to head to Ojos del Salado, a dormant volcano in Chile, this weekend. First, I want to wish everyone a very happy Valentine’s Day! Also, a quick reminder: the U.S. stock market will be closed on Monday, February 17, for Presidents’ Day.
Now, let’s talk about today’s crazy market action.
Earlier this morning, I went for a quick acclimatization run. It was cold, but when I was back, opened my laptop, and boom! Breaking news hit. One of the biggest companies in the world, NVIDIA, made a major move. They dumped their investment in SoundHound AI (SOUN), which is a voice AI company focusing on conversational intelligence solutions.
This news was a shocker: just before the market opened, SOUN dropped over 30%. It was clear that many investors were panicking and dumping their positions because they viewed NVIDIA’s investment as a stamp of approval for the company’s value. Without NVIDIA in the picture, confidence tanked, and so did the stock price.
Rising Devil Strategy in Action
These kinds of massive pre-market selloffs are perfect setups for a strategy that my friend and mentor, Brian Pezim, introduced to us, the Rising Devil.
Let me break it down:
When a stock gets hit hard, like SOUN did today, it often experiences a small pop at the open, approaching VWAP (Volume-Weighted Average Price). That’s because it’s so oversold that short sellers start covering their positions quickly, causing a brief bounce. This little pop is where the opportunity lies.
The Rising Devil setup is all about shorting into that early pop, right near the VWAP, and then riding the next leg down as more panic selling kicks in after the open. These plays can be fast and wild, so you need to be quick and manage your risk well. Stocks with this much bad news can squeeze above VWAP, so your stop-loss should always be placed right above that level.
How I Traded SOUN
As soon as the market opened, SOUN popped up a little, right into VWAP. I started shorting there, and most of my orders got filled just below VWAP. It never really broke above VWAP, and within the next few minutes, it dropped significantly, just like we expected. I started covering into that drop, locking in some great profits.
You can see the trade details in the screenshot below.
These setups happen often when big negative news hits a stock, so understanding this strategy is key. You’ve got to be prepared to short quickly and manage your risk if the stock squeezes above VWAP.
Check Out My Recap
I posted a quick recap of this trade on my Instagram. Unfortunately, I couldn’t upload anything to YouTube because my laptop battery was running low, and our generator was having issues powering both my laptop and Starlink at the same time. I know, it’s a bit ridiculous, but that’s my reality up here.
So, if you’re interested, check out my Instagram for the full recap.
Pier also made a replay recap breaking down how we traded the Rising Devil strategy on SOUN today. Be sure to watch it and learn key insights into this powerful day trading strategy!
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That’s all for now, I’ll be off the grid as I take on the challenge of climbing Ojos del Salado. Wishing you all a great long weekend, and I’ll see you after the climb!
Trade safe,
Andrew
