Stock Market Distribution Phase: How to Trade the Chop

What's up, Studs? Today was a flat day, but it tells us a lot about the current market environment. We have officially shifted from a "Run-Up Phase" to a Distribution Phase.

I have been trading since 2008, and this cycle is classic. You get 2-3 months of a "perpetual bonanza" where you feel like a genius, followed by 3-4 months of a grind. We are in the grind now.

What is a Distribution Market?

In a distribution market, the easy money is gone.

• The Signs: Spikes in hot names (like MicroStrategy ($MSTR) or $AVGO) get sold off fast. Breakouts that look perfect suddenly fail or fade.
• The Adjustment: You must reduce your trade frequency and hold time. If you normally hold for 2 hours, cut it to 30 minutes. Be ready to go both long and short.

Trader Note: If you are struggling with choppy markets, check out our guide on Risk Management Strategies  to protect your capital during distribution phases.

The Watchlist: TSLA vs. The "1 AM Setups"

We have a mix of strong relative strength and "desperation" charts today.

The Outlier: Tesla ($TSLA)

Tesla is the strongest stock in the mega-cap space. It dipped at the open and ground its way back to yesterday's low.

• The Setup: It is eyeing a massive breakout over $500.
• The Warning: Don't swing trade this just because it feels good. In a distribution market, chasing swings at highs often leads to a "rude awakening."

The "1 AM Setups" (UAL, BA, RIVN)

Be careful with stocks like United Airlines ($UAL), Boeing ($BA), and Rivian ($RIVN).

• These are what I call "1 AM Setups." They only look good because it's "Last Call" and there are no other options.
• Rivian specifically is messy—it needs "Invisalign" to fix those jagged wicks before it's tradeable.

Earnings & Shorts

Micron ($MU) Earnings

Micron reports earnings tomorrow (Wednesday). The AI trade is tired.

• The Plan: If $MU gaps up on earnings, I am looking to fade it on a short-term timeframe. The "easy money" in semis has been made.

Roblox ($RBLX)

This is a "turd" structure. It put in an Inside Day today after a downtrend.

• The Trade: If it breaks the 2-day range lows, I am targeting a flush down to $50.

ARM Holdings ($ARM)

This stock is getting stretched to the downside.

• The Rubber Band Trade: If $ARM gaps down **$2.50 or more** tomorrow, it will be outside the Bollinger Bands. I will look for a snap-back bounce to the 9 EMA.

Disclaimer: This is for educational purposes only and not financial advice. Trade at your own risk.

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Big Thing when the market gets dicey guys is to look for stocks that got news out. Both up and down. Here is a great blog on the news sources I personally use! Check it out HERE: Stock Market News Guide

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About the Author: Kunal Desai

Kunal Desai is the CEO and Head Trader at Bulls on Wall Street. A day trader since 2008, Kunal has navigated the 2008 financial crisis, the crypto boom, and the post-COVID bull market. He specializes in momentum trading, swing trading, and market psychology.

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