Today felt like a bloodbath even with the indexes down about 1%. Why? Because the names we were actually trading—rare earths, nuclear, quantum—got obliterated. When a theme goes parabolic and then flips into distribution, the unwind always looks the same: fast, slippery, and mean.
Bottoms Are a Process (Not an Event)
If you’re bagholding, don’t. These won’t V-shape back to highs next week. You’ll likely see bounces, lower highs, and months of repair. So we trade them—we don’t marry them.
My Two-Track Plan
Track 1: Gap-Down Oversold Bounce (Day Trade Only)
- Prereqs: Gap down 5–10%+ into a major level (prior breakout, 50SMA, big round numbers).
- Trigger: Undercut → remount (VWAP/9EMA) with volume.
- Execution: Scale in on confirmation, sell into rips, don’t overstay.
- Candidates: USAR/“rare earth crew,” QBTS/QVTS, RGTI, ASTS/RKLB-style movers.
- Mindset: Date the trade. Tops in these themes are likely in for months.
Track 2: No Gap? Shift to Quality
Hunt relative strength and 50-SMA taps on liquid, cleaner names:
- GOOGL: Tight box; options work best.
- DELL: Second green close, absorbed dips, holding trend/20.
- Oil pockets: PAR, DK look surprisingly solid—watch for tight flags.
- Reversal tells: That big U…U…U engulfing reversal matters; UAMY showing absorption.
Setup Notes (Pizza Congeal Rule)
Everyone wants first slice. Wait a beat. Let the pattern tighten and confirm. When the cheese congeals, it’s glorious. Jump in too early and it slides off the crust—on charts and in life.
Bounce Trade Rules So You Don’t Die
- Location > everything. I want an oversold gap into real support.
- Confirmation > prediction. Undercut/remount beats catching knives.
- Scale and sell. Take pieces on the way up; bounces fail fast.
- Hard stops. Don’t turn a scalp into a swing by accident.
- One theme at a time. If the first two bounce attempts are duds, rotate.
When the bounce starts on a stock always watch the FIRST PULLBACK PATTERN
If your having trouble with all this volatility here is a great article on how to manage your risk in these moments
Final Word
This isn’t about being a hero; it’s about execution. If we get the gap downs, I’ll long the oversold bounces and sell the rips. If not, it’s back to quality and the 50SMA.
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Kunal Desai is the founder of Bulls on Wall Street, a veteran trader, and mentor to thousands of students worldwide. He specializes in day trading strategies, risk management, and helping traders grow small accounts into consistent performers.
