GitLab didn’t just beat Q2 estimates on Tuesday.

It blew the doors off.

Revenue came in at $286.3 million, up 21% year-over-year and well ahead of the $273.1 million Wall Street was modeling.

Non-GAAP EPS hit $0.24, versus a consensus of $0.18.

That’s a 33% beat, and the fourth straight quarter GitLab has topped estimates on both lines.

The number that matters most, though?

Net ARR growth accelerated to more than 40% year-over-year.

That’s the company’s second-highest quarterly growth rate in the last four years.

Gross bookings hit a record. First-order activity more than doubled. And deals worth $500,000 or more jumped over 150%.

This strong performance prompted GitLab management to raise full-year fiscal 2027 revenue guidance to $1.13 billion, up from a prior range closer to $1.12 billion.

The market reacted immediately to this positive news, sending the stock more than 20% higher in after-hours trading to a fresh high near $54.

Why This Quarter Is Different

This isn’t a story about a DevOps tool for developers anymore.

GitLab is positioning itself as the orchestration layer for AI-driven software development.

And the numbers are starting to back that up.

More than 130 customers have already committed over $20 million combined to GitLab’s new Flex consumption model in its first six weeks alone, pushing paid AI consumption run-rate above $40 million.

The company’s Duo Agent Platform - - its AI coding agent - - grew paid consumption roughly 50% sequentially.

Wall Street has been playing catch-up.

Analysts have pushed price targets higher over the past two days as they digest the retention numbers, the AI consumption ramp, and a guidance raise that came in well above the Street.

And that means there could be a big trade in the making.

The Setup:

Here’s how I’m looking at GTLB after the company’s blowout second quarter earnings report:

Here are 3 potential scenarios for GTLB shares following its strong quarterly earnings announcement:

Scenario #1: Fill the Gap. GTLB could fill the gap and bounce off the 46.29 level. This is an aggressive entry level given the increased volatility in high beta growth stocks

Scenario #2: The next lower support level at 41.98 is a little more established. If the upper level fails, it could be worth taking a shot at this level. Stop losses should be kept tight, howver, since its a good size drop to the next level if this one fails.

Scenario #3: This level is just below the neckline. A pull back to this level in the 32 range would be the most conservative entry. But it’s a long way from the current price and might not get filled any time soon.

As usual, disciplined risk management is vital if considering a trade at any of these three levels.

But volatility creates opportunity.

And one well timed entry do wonders to your trading account.

As usual, ersistence, nimbleness, and discipline remain the key.

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John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before trading or investing.

By John McHugh, Equity Empire Stock Research and Trading

Somewhere in June, Expedia stopped being a “wait and see” travel stock…

… and started acting like a stock the market really believed in.

Shares were sitting in the mid-$230s in mid-June. Nothing dramatic. Just a steady grind, day after day, green candle after green candle.

But by late July, that grind had turned into a run.

The stock jumped 7% in a single session on July 27th, pushing into the high $270s, as analysts got out ahead of the earnings report with upgraded targets and investors started pricing in another beat.

Then came August 5th. And this time, the market didn’t fade the news.

It chased it.

The Quarter That Justified the Run

Revenue came in at $4.32 billion, up 14% year-over-year, comfortably ahead of consensus. Net income more than doubled to $878 million.Gross bookings rose 12% to nearly $34 billion.

The real story, though, is underneath the headline numbers.

Expedia’s B2B segment - - the white-label travel infrastructure business that powers other companies’ booking engines - - grew revenue 23% and just logged its 20th consecutive quarter of double-digit growth.

That’s not a cyclical bounce. That’s a thriving business model.

Management didn’t just beat the quarter, they raised the year. Full-year bookings guidance moved up to 8 - 9% growth, revenue to 9 - 10%, with margins expected to expand 150 -175 basis points.

That’s the fifth straight quarter Expedia has topped the high end of its own guidance.

The stock responded the way you’d want it to: up nearly 7%.

And it hasn’t looked back since, running to a fresh all-time high above $332 within days of the print.

Wall Street Is Playing Catch-Up

The analysts on Wall Street have been chasing Expedia’s growth story. Oppenheimer raised their target to $365. BTIG to $350. Even the more cautious firms - - Barclays, TD Cowen, Cantor - - all moved their targets higher, even where the rating itself stayed neutral.

These analysts aren’t setting the pace, they’re struggling to catch up to it.

So ignore what Wall Street has to say - - because they haven’t been saying much of value lately.

And focus on what the chart tells you instead.

Trade the Setup:

Here are three key support levels to consider for a potential bounce trade if EPXE starts to retrace some of its recent gains:

1. Buy Limit: $314.01
   Stop Loss: $303.19

2. Buy Limit: $294.74
   Stop Loss: $286.18

3. Buy Limit: $259.94

   Stop Loss: $249.97

And here’s my read on each level:

Trade setup #1 looks interesting for aggressive traders. It’s sitting just on top of the breakout point set in early January. If EXPE is going to continue its strong recent ascent, it may pull back briefly to this level before heading higher.

Setup #2 This second level offers even better reward/risk potential than level one. After breaking to new highs, stocks often return to levels just above or just below the breakout point. And this would be a more conservative entry point than setup #1.

Setup #3 has the highest reward/risk ratio of the three setups. But it has a different kind of risk - - the risk of not getting filled because its far below current price.

Three levels, three different risk appetites. Same underlying thesis.

Expedia didn’t run to a new all-time high on hype; it ran there on a quarter that beat guidance for the fifth straight time and a B2B business that just doesn’t quit. That’s the kind of breakout that tends to get bought on weakness, not sold into strength.

Which setup you reach for, if any, comes down to conviction and patience. Aggressive traders won’t want to miss the move and will lean on Setup #1. Those who’d rather let the market come to them have Setup #2 as the sweet spot. And if you’re willing to risk not getting filled at all in exchange for the best entry on the board, Setup #3 is your line in the sand.

The upside here is real - - but so is the risk. So if you decide to act on EXPE, make sure to define your stop, size accordingly, and let price come to you on YOUR terms, not the market’s.

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John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before trading or investing.

By John McHugh, Equity Empire Small Cap Research and Trading

Robinhood has put its shareholders through a gut-wrenching ten weeks.

If you were are feeling a bit bewildered after riding this one, I’m going to share a pro trader’s view on what just happened.

And more importantly - - how you can profit from the next big move.

Investors Take a Ride on the Robinhood Roller Coaster

June was the high. Shares climbed with real conviction, building toward highs near $120 by mid-July, and every green candle felt like confirmation that you’d bought right.

Then, quietly, the top started to form, a miniature head-and-shoulders pattern taking shape from June 9th onward.

It’s the kind of setup nobody notices while they’re still in a state of FOMO.

But then came July, and the floor cracked.

The pattern broke down on July 24th, days before earnings, shares sliding roughly 14% in five sessions.

You could feel the nervous anticipation ahead of the earnings report. The kind where traders check the stock price every 2 minutes.

Then, earnings hit on July 29th.

And for a moment it looked like relief was finally coming.

Revenue beat. EPS didn’t just beat, it demolished estimates. This was supposed to be the catalyst for a big move higher.

It wasn’t.

The stock fell anyway, closing down 3% at $89.84. And instead of stabilizing, the selling kept coming the next morning, dragging shares down to $87, a gut-punch 28% below high just weeks earlier.

If you’d bought the beat expecting a bounce, this was the moment that made you question everything you thought you knew about how markets work.

Then, slowly, August brought something like a breath of fresh air.

The stock found a bid, clawing back into the mid-$90s, up nearly 5% in a week. It wasn’t triumphant.

It was cautious, tentative, with the market still arguing with itself about what this company is actually worth.

HOOD shares closed this week just above 95. And investors now head into the weekend feeling like they just hopped off a rollercoaster ride.

Many investors will use the weekend to relax.

I’m taking time this weekend looking for some money-making trade setups for you.

Here’s what I see in HOOD right now:

The Setup:

1. Buy Limit: $86.76
   Stop Loss: $79.12

2. Buy Limit: $73.66
   Stop Loss: $63.31

And here’s my read on each level:

Trade setup #1 looks interesting. The last time the stock left this level, the stock surged 35% higher in just a few weeks. Using the resistance level as a target, the trade has 30 points of reward potential vs. just 8 points of risk. That’s a reward/risk ratio of nearly 3.8 to 1 - - the kind of trade setup that many pro traders would look for before committing capital.

Setup #2 This second level offers even better reward/risk potential for patient traders willing to wait it out. The catch: it sits more than 20 points below the current price, so it may not fill anytime soon, if at all. This one’s for the trader with a longer leash and no urgency to be in the trade today.

Two levels, two different kinds of patience.

The first rewards traders willing to act if price comes in modestly. The second rewards traders willing to wait for a real flush before stepping in.

Either way, the setup only works with the stop in place.

HOOD just just proved it can rip 40%+ in either direction inside a matter of weeks. So risk management isn’t optional here, it’s the whole game.

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John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before trading or investing.

By John McHugh, Equity Empire Small Cap Research and Trading

Cerebras Systems reported their second quarter operating results Wednesday after the close.

And the market responded with a selloff that’s creating a unique profit opportunity for nimble traders.

Core revenue came in at $210 million, up 103% year-over-year, comfortably ahead of the roughly $194 million Wall Street was modeling.

Adjusted loss per share of $0.04 beat the $0.17 - $0.21 loss consensus by a wide margin.

Management also raised full-year guidance to $880-890 million in core revenue, up from the prior $855-865 million range. guide. They also raised next quarter’s core revenue to $214 - 216 million.

The stock still fell 12% after rallying 11% into the print.

Let’s be precise about what happened, because the headlines will blur it.

Cerebras didn’t miss. It beat on revenue, beat on the bottom line, and raised the outlook for the rest of the year.

What spooked investors was margin math and a scary-looking GAAP number.

Core gross margin actually came in at 40.6% - - well above the 36-38% management itself had guided to just a quarter ago. But a wave of IPO-related stock-based compensation drove the GAAP net loss to $450 million, or $2.98 per share on a fully diluted basis. That’s a non-cash accounting issue tied to going public, not a sign the business is bleeding cash at that rate.

That’s a headline-number story, not a fundamentals story.

Growth Is Still Extraordinary

Core revenue more than doubling is not a company running out of runway. Core cloud and services revenue nearly quadrupled year-over-year to $127.7 million.

That’s a platform going from a niche AI-training alternative to a genuine second option for inference at scale, with new partnerships this quarter alone spanning AWS , AMD , CrowdStrike , Cognition, and Lovable.

Remaining performance obligations grew to $25.4 billion.

Management raised guidance, even while absorbing the cost of temporarily renting third-party compute to satisfy demand ahead of its own data centers coming online.

That’s the kind of detail that tells you the underlying demand is broadening.

And for aggressive traders, it might be an opportunity to buy the dip.

Lockup and Options Expire at the Same Time

Friday brings two forces converging on the stock at once.

First, options expiration on Friday could create additional volatility.

Second, and more consequential:

Friday is also the next stage of Cerebras’ IPO lockup release schedule. That’s tens of millions of shares held by early investors, employees, and insiders getting their first chance to sell since the May IPO.

Layering a lockup release on top of an options expiration in the same session, right after a headline-driven selloff on an otherwise strong quarter, is the kind of setup that can produce an overshoot to the downside.

For a company that just beat on revenue, beat on the bottom line, expanded gross margin ahead of its own guidance, and raised the full-year outlook, that combination is worth watching closely for a potential bounce trade.

Here’s the Setup:

1. Buy Limit: $221.00
   Stop Loss: $200.68

2. Buy Limit: $184.88
   Stop Loss: $159.10

And here’s my read on each level:

Trade setup #1 looks interesting. When a stock drops after reporting quarterly results that exceed management’s sales and margin guidance, sometimes it just retraces the move higher going into the report. CBRS already bounced 10 points off this 221 level after gapping down Thursday morning. It may be worth another shot if 221 is tested again.

Setup #2 has better reward/risk potential for patient traders. But because it’s so far below current price it may not get filled any time soon, if all.

Walking the Tightrope: Where Fear Meets Fortune

Recently issued IPOs can offer a real edge for active traders - - if you know how to read them.

Here’s what most people miss:

Many fund managers deliberately sit on the sidelines after an IPO, waiting to see how a company actually performs before committing real capital.

Market makers know this. And in that vacuum, they swing the stock around, testing where the “looky-loos” turn into real buyers.

That’s not a theory.

That’s exactly what has already happened to CBRS. The stock ran from $380 down to $160, then clawed back to $210, all in the span of three months.

Most traders see that chart and get scared off.

But volatility like that isn’t chaos that you need to avoid.

It’s opportunity - - if you’re patient enough to wait for it.

And disciplined enough to have a plan going in.

Lockup expirations. Thin early trading ranges. A single earnings report landing on a stock the market hasn’t figured out how to price yet.

Any one of these can swing a name 10% - 20% in a single session.

But early IPO price action is driven by sentiment and short-term positioning far more than it’s driven by fundamentals.

That’s the edge for you to profit from.

The fundamentals always eventually catch up.

But in the meantime, nimble traders can make real money trading the gap between perception and reality.

And right now, CBRS is showing exactly that kind of profit potential.

Just one thing before you jump in:

If you’re going to trade CBRS in the near term, know your maximum risk ahead of time - - not after you’ve already entered the trade.

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John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before trading or investing.

By John McHugh, Equity Empire Small Cap Research and Trading

Quantum computing has been one of the most polarizing trades of the year - - all hype, no earnings.

And today, Quantinuum gave the bulls their first real evidence - - sending shares ripping more almost 30% higher on its first earnings report as a public company.

Quantinuum builds full-stack quantum computers - - hardware and software - - aimed at problems classical computers can’t touch:

Drug discovery, materials science, cybersecurity, and optimization.

It’s the kind of technology that’s easy to hype and hard to prove, which is exactly why today’s report mattered so much.

Riding the IPO Roller Coaster

The company IPO’d on Nasdaq back in early June, pricing at $60 a share and opening for trade at $68.

Shares spiked as high as $86 in the first month - - a 43% pop off the IPO price.

But as fast as you can say “gravity,” the entire quantum computing sector turned risk-off in late July, dragging QNT below $50.

Today’s earnings just reversed that selloff.

Quantinuum reported Q2 sales up 279% year-over-year to $8 million, alongside a net loss of $596.5 million - - more than ten times the loss from a year ago.

On the surface, that looks ugly.

But investors zeroed in on two things instead:

Revenue actually showing up.

And cash burn coming in lighter than feared at $168.3 million so far this year, against a balance sheet still holding roughly $677 million in cash versus $246 million in total liabilities.

Despite the big losses, the market cheered the first sign of revenues.

Quantinuum stock ripped higher.

Shares climbed from a close near $51 on July 31st to $71.74 today - - a roughly 41% move in less than two weeks.

And QNT shares are now trading back above their opening print from IPO day.

That’s a full round trip: IPO pop, post-IPO crash, and now a sharp reclaim.

All inside two months.

This kind of roller coaster price action can leave traders feeling more than a little queasy.

But investors are now apparently buying into the idea that QNT’s growth can start can start to justify its valuation, even if losses remain enormous for the near to intermediate term.

The question now is whether the stock can keep running, or whether it’s gotten ahead of itself again.

Here are a couple technical support levels to consider for a bounce trade if the stock starts to pull back:

The Setup:

Here are the key support levels I see:

1. Buy Limit: $57.24
   Stop Loss: $53.80

2. Buy Limit: $50.55
   Stop Loss: $47.70

And here’s my read on each level:

Trade setup #1 looks interesting. When a stock jumps after reporting quarterly earnings, it often pulls back to retest the level just before the report. QNT would have to pull back 14 points to get to this level, which would seem extreme for most stocks. But QNT is a wildly volatile IPO and a return to test and bounce off of this level would not be unrealistic.

Setup #2 has better reward/risk potential for patient traders. But because it’s so far below current price it may not get filled any time soon, if all.

Balancing Risk and Reward

IPOs can offer a real edge for active traders:

Fresh IPOs get outsized volume and volatility in their first weeks, and mispricing is common. There’s no earnings history yet to anchor a “fair” valuation. And the stock’s markers frequently swing the stock around trying to find long term institutional buyers.

That’s exactly the market dynamic in action that let QNT swing from $60 to $86 to under $50 and back in two months.

But that same lack of history cuts both ways.

Lockup expirations, thin early trading ranges, and a single earnings report can move the stock 20-30% in a session.

Early IPO price action tends to be driven more by sentiment and short-term positioning than by fundamentals.

The risk is straightforward:

You’re trading a story that hasn’t been tested yet. So position sizing and having a clear stop loss level matter more with IPOs than with an established stock.

Nimble traders can make lots of money trading IPOs.

And QNT is showing lots of profit potential.

But as always, disciplined risk management will be vital.

So if you’re going to trade QNT, stay frosty my friends.

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John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before trading or investing.

Boring, reliable data storage just became the AI trade nobody saw coming.

And this week, Everpure proved it - - landing a second hyperscaler win that sent the stock ripping to fresh highs.

Everpure builds the all-flash storage platform that sits underneath the world’s biggest data centers.

It’s the unglamorous infrastructure the AI buildout actually runs on.

The company used to be called Pure Storage. It rebranded to Everpure in February 2026 as its business shifted from selling hardware arrays to managing data across on-prem, hybrid, and public cloud environments for hyperscalers and enterprises.

And this week, the company landed another big win nobody was fully pricing in.

Everpure disclosed a design win with a second top-five hyperscaler - - a customer type that can move the growth needle for years once it’s fully ramped.

The market cheered the news.

Everpure stock ripped higher.

Shares ran from around $65 in mid-July to a close of just under $98 on Monday. The stock opened up more than 8% again today, filled the gap and then climbed the rest of the day to close at an all time high of $109.

That’s a stock that’s nearly doubled in a matter of months.

So investors are clearly buying into the idea that Everpure has become a key picks-and-shovels play on AI-driven data infrastructure.

The question now is whether the stock can keep running, or whether it’s gotten ahead of itself.

Here are a few key support levels to consider if Everpure shares start to retrace a portion of their recent gains:

The Setup:

Here’s three potential trade setups using these levels:

1. Buy Limit: $104.97
   Stop Loss: $102.10

2. Buy Limit: $99.50
   Stop Loss: $97.12

3. Buy Limit: $90.02
   Stop Loss: $85.17

And here’s my read on each level:

Trade setup #1 is aggressive - - a bit too aggressive for my liking.

Setup #2 has better reward/risk potential. After gapping up 8% at the open, the stock filled the gap and immediately bounced off this level. So we know there has been support at this price at least once without many orders actually being filled.

Setup #3 has the best reward/risk ratio. But it’s also the least likely to get filled since it’s a long way from the current price. Patient traders may consider the level, however, since it would fill Monday’s opening gap to get there. And the level is just below the breakout point from the previous high set in mid-May.

These are just a few considerations for constructing a trade on a stock that has been showing relative strength during a challenging earnings season.

The stock is telling a great story.

And it’s providing several interesting support levels for potential trades.

Just make sure you write - - and adhere to - - your own risk management rules.

Stay frosty, traders.

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John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before trading or investing.

Bending Spoons went public on July 1, 2026.

Since then, it’s been one of this year’s strongest performing IPOs.

Bending Spoons buys established consumer software apps - - such as Evernote and WeTransfer - - and runs them lean and profitably with a small team.

And on August 4th, the company made another big acquisition.

Bending Spoons announced it was buying Airtable for $1.3 billion in cash - - its first acquisition since going public.

Pre-acquisition, Airtable’s annualized recurring revenue was growing over 20% year-over-year. And the acquisition price was a massive discount to Airtable’s 2021 peak valuation.

The market cheered the deal.

Bending Spoons stock ripped higher.

Now let’s be precise about what happened, because the headlines will blur it.

Shares have run from around $36 in late July to a 52-week high of $58 today, before finishing the day just above $51.

That’s up more than 38% since the Airtable announcement alone.

And the stock is already up 76% from its IPO price just 5 weeks ago.

So investors are certainly buying into the Bending Spoons acquisition-driven growth story.

The question now is whether the stock will continue to run, or if it will pullback and consolidate recent gains.

First Public Earnings Report Coming This Week

Bending Spoons will host its first quarterly conference call as a publicly-traded company on August 13th. It will be the first real chance for management to build on the momentum already showing up in the chart.

Demand for BSP shares since the company’s IPO has been vigorous, so that quarterly earnings call could be the next real catalyst.

Here’s the Setup:

BSP is sitting on top of a key support level that formed at the end of last week. It’s also at the breakout point from the high price hit on the company’s IPO day.

Aggressive traders can consider placing a buy limit at 45.51 and a stop loss just below the support level.

Target will be today’s (Monday) high around 58.

This trade has 12 points reward potential and 4 points risk, or a favorable 3:1 reward/risk ratio.

Traders who want to trade BSP but don’t want to take that much risk can either use an entry point somewhere lower in the support level (green shaded area) or simply reduce the number of shares.

Frequent readers may note that I normally have multiple support levels to choose from. But since BSP has only been trading for a little more than a month, this is the only level I would consider presently.

Trading IPOs can be tricky, especially around earnings reports.

And conservative traders may want to wait for new support levels to form after the company’s earnings report before trading BSP.

But IPOs like BSP can also offer nimble traders a chance to achieve big, quick gains.

Emphasis on the word “nimble” … and add the word “disciplined”.

Stay frosty, traders.

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John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before trading or investing.

Datadog reported their quarterly operating results this morning.

Revenue came in at $1.12 billion, up 36% year-over-year, comfortably ahead of the $1.08 billion Wall Street was modeling.

EPS of $0.65 beat the $0.58 consensus by seven cents.

Management didn’t just meet the moment. They also raised full-year guidance to $4.45 - 4.47 billion in revenue and $2.50 - 2.54 in EPS, both above where analysts had them.

The stock still fell about 19%.

Let’s be precise about what happened, because the headlines will blur it.

Datadog didn’t miss. It beat on revenue, beat on earnings, and raised the outlook for the rest of the year.

What it didn’t do was blow the doors off enough to justify a stock that had nearly doubled off its lows heading into the report.

That’s a valuation story, not a fundamentals story.

Those are very different setups, and the market is currently pricing them as the same thing.

Growth Is Still Robust

36% revenue growth is not a company running out of room. It’s a company adding customers, adding usage, and layering AI-native products - - GPU monitoring, Bits AI, and its recent Adaptive ML acquisition.

That’s on top of a platform that was already the default for infrastructure observability.

Investors were spooked by a usage pullback from its single largest customer this quarter.

Management raised guidance anyway.

That’s the kind of detail that tells you the underlying demand is broad, not concentrated in one whale account.

And for aggressive traders, it might be an opportunity to buy the dip.

Here’s the Setup:

DDOG is sitting on top of a key support level that formed in mid to late June.

Aggressive traders can consider placing a buy limit at 224 and a stop loss just below the support level.

Target will be the previous high set just yesterday.

This trade has 60 points reward potential and 20 points risk, or a favorable 3:1 reward/risk ratio.

Traders who want to trade DDOG but don’t want to take that much risk can either use an entry point somewhere lower in the support level (green shaded area) or simply reduce the number of shares.

Frequent readers may note that I normally have multiple support levels to choose from.

But in this case, DDOG was so strong on the way up earlier this year that only one support level actually formed.

So if you like to make fewer decisions, today’s setup is for you :)

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John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before trading or investing.

Backblaze didn’t just beat Q2 estimates on Monday.

It obliterated them.

Revenue came in at $42.7 million, up 18% year-over-year and well ahead of the $39.9 million Wall Street was modeling.

That’s the fastest revenue growth Backblaze has posted in six quarters.

Non-GAAP EPS hit $0.08, versus a consensus of $0.02 - - a sharp turnaround from the $0.01 the company posted in the same quarter a year ago.

The number that matters most, though?

Backblaze operates a cheap, simple cloud storage service it calls B2 for storing and pulling large amounts of data.

(You can think of B2 as a low-cost alternative to Amazon’s cloud storage that AI companies and developers use to stash and access their data.)

And in the second quarter, Backblaze’s B2 Cloud Storage revenues grew 34% year-over-year.

This strong growth prompted Backblaze management to raise full-year 2026 revenue guidance to $172 - 174 million, up from a prior range of $161 - 163 million

The market reacted immediately to this positive news, sending the stock 17% higher in after-hours trading to $18.27 - - a new 52-week high.

Why This Quarter Is Different

This isn’t a story about a scrappy backup provider anymore.

Backblaze is positioning itself as infrastructure for the AI era - - and the numbers are starting to back that up.

Backblaze’s storage layer has started trending upward at exactly the moment AI workloads need somewhere cheap and reliable to live.

Wall Street has been playing catch-up.

Analysts have adjusted their price targets higher over the past several weeks as they digest a big new deal with CoreWeave and the accelerating B2 numbers.

And that means there could be a big trade in the making.

The Setup:

Here’s how I’m playing BLZE after the company’s strong second quarter earnings report:

There are three potential scenarios I’m planning for with Backblaze shares following its strong quarterly earnings announcement:

Scenario #1: Gap and Go. BLZE shares could gap up and continue heading higher past the 18.25 resistance level. But given the increased volatility in small cap growth stocks recently, I’m going to avoid this aggressive trade.

Scenario #2: The gap fill (to blue dotted line). After an early gap higher, BLZE shares could retrace back to Monday’s closing price and bounce higher from there. While this trade is less aggressive than scenario one, I’m still going to look for a lower entry price if the opportunity arises.

Scenario #3: Retrace to the controlling swing low. Here’s the entry I’m most interested in. If BLZE shares can pull back to the controlling swing low around 12.60, an entry between 12.60 and 11 with a stop a small increment below 11 would provide an attractive 2.5:1 or greater reward / risk profile with a 17.50 target.

Aggressive traders will find this setup too conservative.

And BLZE might not pull back anywhere near this entry level.

But I’m okay with that.

Because this is the kind of market that rewards preparation and patience.

And that’s the kind of setup I’m sharing with you today.

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

By John McHugh,

Equity Empire Small Cap Stock Research and Trading

It’s been a wild week in the stock market, and lots of traders and investors are feeling a bit bewildered here at the end of the week.

So I’m writing this article to help you clear up some of the pain and confusion you might be feeling right now.

You probably saw lots of red when you checked your portfolio during the week.

You probably looked for a reason for the selling from the financial media and couldn’t find one.

No bad news, no earnings miss, nothing.

The stocks just... dropped. 5%, 10%, and in a few cases much more.

But you couldn’t find a logical explanation.

So you closed the app.

Maybe you opened it again ten minutes later anyway.

We’ve all done it.

But here’s the thing most people get wrong about weeks like this:

They treat it as something to survive. Something to grit their teeth through until it eventually goes away.

It doesn’t have to be so painful.

It can actually be a chance to profit.

Because with a simple mindset shift and a new strategy, selloffs like we’ve had in the past few weeks can actually be opportunities that most traders are too rattled to see.

The Market Isn’t Crazy. It’s Just Voting.

Benjamin Graham - - the man who taught Warren Buffett how to think about stocks - - said it better than anyone ever has:

In the short run, the market is a voting machine. In the long run, it’s a weighing machine.

Most people see this image and decide to ignore the short run.

That’s the wrong takeaway.

The short run isn’t noise to tune out. It’s the single most tradeable part of the entire market.

Because a voting machine doesn’t measure truth.

It measures emotion.

And emotion is far more predictable than people think.

Two Emotions Are Running the Show - - And Both Are Chances to Make Money

Zoom out on any wild swing you’ve felt in your gut this year, and it almost always traces back to one of two forces:

Greed and FOMO - - when everyone’s suddenly convinced the good times never end, and prices get bid up on vibes instead of fundamentals.

Tulip mania in the 1600s. Dot-com boom in the late 1990s…

And every AI mega-cap rally headline this year.

Same story, new stock tickers.

Fear and Panic - - when one piece of bad news (a soft earnings print, a scary headline, a rate scare) turns into a stampede for the exits, and perfectly healthy companies get dumped right alongside the weak ones.

Here’s what most investors miss:

Neither of these forces is random.

They’re crowd behavior.

And crowd behavior repeats. It overshoots. It reverses.

It creates the exact same setups over and over again, just with different names attached to it.

A trader who understands that isn’t waiting for the storm to pass.

They’re positioning for it before it hits, and again when it breaks.

Volatility Isn’t the Risk. Having No Plan For It Is.

Every violent swing in this market - - every single one - - is the crowd’s emotion getting priced in faster than the underlying business is actually changing.

And the gap between sentiment and reality is where the big money gets made.

But only if you have a strategy built for it going in. Not one you improvise in the middle of a 5% drop with your heart rate at 150.

That means knowing the following, before the volatility hits:

What you’re actually trading and why - - is this a sentiment-driven overreaction in a name with real fundamentals underneath it, or is the crowd finally catching up to something that was always broken?

Where you get in - - panic and euphoria both overshoot. The trade is rarely at the first sign of fear or the first spike of greed.

It’s in recognizing when the move has become unhinged from anything real.

Where you get out - - plan for the reversion, because the voting machine doesn’t stay in one mood forever. And the traders who profit are the ones who aren’t still deciding what to do when the mood flips.

Without that framework, volatility just feels like chaos, and chaos makes people do the worst possible thing at the worst possible time:

They sell the panic, chase the euphoria, and hand their money to the traders on the other side of the trade who had a plan.

The Crowd’s Emotion Is the Edge - - If You’re Ready For It

The market’s mood swings aren’t a flaw you need to wait out.

They’re the mechanism.

Every panic-driven selloff and every greed-driven melt-up is the voting machine doing exactly what it does - - and every one of them creates a window for traders who showed up with a strategy instead of their veins pumped full of adrenaline.

The noise you’re feeling right now isn’t a reason to close the app.

It’s a chance to find a trade setup that could change your financial future.

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

Every trader has lived this moment.

Your favorite stock slides 20%.

You step in thinking you’ve nailed a great price.

Then it slides another 20%.

So you add some more

And then it continues dripping lower day after day for several weeks.

Now you’re staring at a position that’s been cut in half (or more) and second-guessing whether you jumped too early - - or wondering if adding even more here is actually the smart move since it “can’t possibly go much lower.”

If that’s happened to you, then you have lots of company.

Nearly every successful trader I know has lived through this early in their career.

But is doesn’t have to stay that way.

And all it takes is a simple mindset shift to turn your results around.

Here’s the key:

Stocks don’t have built in floors.

A stock that’s already lost a third of its value can just as easily lose half … or more.

And although a big drop in price may feel like a signal to buy, it isn’t evidence that the decline is finished.

So the mistake isn’t buying weakness. It’s buying weakness in a name that hasn’t proven that it can regain its strength.

Now, the answer isn’t to avoid pullbacks altogether.

It’s just to be far pickier about which ones you’re willing to step into.

A Lower Price Tag Doesn’t Always Mean Better Value

A name that’s dropped from $100 to $60 isn’t automatically a deal - - it’s just a stock trading for less than it used to.

And the problem is that you don’t know if the sellers who are pushing the stock lower still have more selling to do.

A pullback within a rising trend, however, behaves more like a breather - - a brief pause until the buyers jump back in and drive the stock higher.

Traders who consistently profit from entries in uptrends don’t fixate on how much a stock has come off its highs.

They ask a sharper question: is the trend still pointed up, and is this pullback just a brief pause before heading higher?

Confirm The Stock’s Strength Before You Commit Capital

Here’s the process disciplined traders employ to catch stocks as they are climbing - - and to keep their downside contained when they’re wrong.

• Establish that the broader trend is intact first. A pattern of higher peaks and higher lows, price holding above a rising 50-day or 200-day average - - that’s your baseline requirement. Skip this step and you’re not timing an entry within strength; you’re guessing at a bottom in something that might keep sinking.

• Let price come back to a meaningful zone. With the broader trend confirmed, wait for a retreat toward a level that actually matters - - a former breakout point, a climbing moving average, an old ceiling now serving as a floor. Lighter volume on the way down than there was on the way up is a good sign. A violent, high-volume drop suggests the story has changed.

• Define your exit before you enter. If price breaks below the recent swing low, or closes under the moving average that defines the trend, your original idea has failed. Close it out - - no adding to a loser, no waiting it out, no rationalizing.

Why This Approach Actually Pays Off

The gap between randomly buying dips and buying them only within a confirmed uptrend comes down to a simple question: who’s actually stepping in to support the stock when its dropping?

When the broader trend is genuinely strong, a retreat toward support draws in two groups - - traders who missed the initial move and want exposure, and traders who already profited and want to add on a discount. Both have real incentive to defend that price with capital.

When the broader trend is weak, a “bounce” off so-called support just attracts trapped holders looking to exit into any strength, plus sellers piling on with every uptick. There’s no natural buying pressure defending that level - - the price action has already told everyone the setup failed.

So instead of trying to catch every random dip, confirm an uptrend first and you’ll be trading with the wind at your back.

Sure, you’ll give up a little performance to the trader who randomly nailed the exact low. But over a large number of trades, you’ll outperform the trader who constantly tries to catch the bottom by a wide margin.

Because the goal was never picking the perfect bottom.

It’s making sure the bottom is already behind you before you put money to work.

Today’s Chart Setup:

The chart below is an example of using key support levels and defined stop losses to buy a potential dip in the current uptrend in Unity Software :

Here’s three potential trade setups using these levels:

1. Buy Limit: $29.03
   Stop Loss: $27.53

2. Buy Limit: $26.20
   Stop Loss: $23.70

3. Buy Limit: $17.96
   Stop Loss: $16.32

And here’s my read on each level:

Trade setup #1 is aggressive but the entry is still below the previous high set in late May. Retracing back to the controlling swing low after breaking out is a great way to pick up additional buyers at lower levels before moving up to set another higher high.

Setup #2 is intriguing because the stock already bounced off of this level five times but none of the selling moved the stock into the lower half of the zone.

Setup #3 has the best reward/risk ratio, but the stock would have to shift to a downtrend to get to this level. And that would be a strategic break for traders who want to focus on dip buys in clear uptrends.

Because there isn’t any technical resistance on the daily timeframe until the 40 price level, all three of these trade setups have extremely favorable reward-to-risk profiles.

That said, there’s lots of nuance required when trading in volatile markets around earnings reporting season.

And the most conservative way to trade is to wait for the company to announce their earnings before putting on a meaningful position.

But either way you play it, finding the key levels of potential institutional interest ahead of time is a great way to be prepared for a bounce trade if the share price starts to drop.

Let’s Connect !

I’ve been trading for more than 30 years, and I’m always looking to connect with traders who share my passion for the stock market.

I also welcome suggestions for posts on different setup strategies or stocks you would like me to assess technically.

In the meantime, happy hunting in your trading week ahead.

Best,

John

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

“Buy the dip” gets treated like one easy, catch-all strategy.

It shouldn’t be.

There’s a version of it that’s worked for a hundred years - - and a version of it that’s quietly wrecking trading accounts as you read this today.

The difference isn’t the size of the dip.

It’s the trend it’s happening in.

The Uptrend Dip: Let Upward Momentum Work For You

A stock in a genuine uptrend doesn’t fall because something broke. It falls because it got ahead of itself, and buyers stepped back momentarily to let it cool off.

Higher highs. Higher lows.

A pullback to a level that’s held before.

That’s not a sign of weakness. That’s a market simply taking a breath.

Buying that dip means you’re leaning on a trend that’s already proven it wants to go up.

The dip isn’t the story. The trend is the story.

When you buy a dip in an uptrend, you’re just getting a better price on something the market already wants to send higher.

The Downtrend Dip: You’re Fighting Gravity

Now take the same-size drop in a stock that’s already making lower highs and lower lows.

It looks identical on a percentage basis. “Down 15%” reads the same on both charts.

But after a multiyear uptrend has shifted into reverse, a dip in a downtrend often isn’t just a pause.

It’s a continuation with a rest stop.

There’s no higher low to lean on. No proven floor. No trend doing the work for you.

Buying it means betting that this is the bounce that finally holds - - with nothing on the chart to suggest why this time is different.

Most of the time, it isn’t.

The stock rests, then keeps doing exactly what it was already doing - - dropping.

Why This Distinction Gets Ignored

Percentage drops don’t come labeled “uptrend” or “downtrend.”

A 20% decline feels the same in your stomach either way.

That’s the trap.

Investors price the size of the drop and forget to price the direction of the trend it’s happening in.

“It’s down a lot, so it must be cheap” is a feeling. But this feeling is missing vital context.

The stock doesn’t know your cost basis, and it doesn’t care that the last dip in this name worked out.

Each dip has to be judged against the market conditions and trend that produced it - - not against how big the drop looks on the screen.

How to Tell Dips Apart Before You Buy

• Check the structure, not just the drawdown. Has the stock been making higher lows over the past several months, or lower lows? A dip inside an uptrend has a floor to reference. A dip inside a downtrend is testing a floor that hasn’t been built yet.

• Look at what the dip is retracing. In an uptrend, a healthy pullback usually gives back a portion of the last leg up - - not the whole move. Two steps forward, one step back. In a downtrend, “dips” tend to erase gains faster than rallies built them. And most of the plunges are deeper than the recoveries.

• Respect the probabilities, not the rare exception. Yes, downtrend dips sometimes mark the exact bottom. That’s exactly why they’re tempting - - everyone remembers the one that worked. Respecting probabilities means asking which outcome is more likely across a hundred setups like this one, not whether this one could be the exception.

Don’t Try to Be a Hero

A dip-buying strategy isn’t judged by the best trade that happens just once. It’s judged by what happens when you let it play out over and over across a large number of trades in a broad range of market environments.

Buy dips in uptrends, and the trend is doing a share of the work for you on every single trade.

Buy dips in downtrends, and you need to be right about the reversal every time, with nothing backing you up if you’re not.

Traders who buy dips successfully with frequency aren’t just watching the price.

They’re watching the trend while the price is dipping - - and they already know which kind of dip they’re willing to buy before the chart ever shows them one.

Today’s Chart Setup:

The chart below is an example of using key support levels and defined stop losses to buy a potential dip in the current uptrend in Pinterest :

Here’s three potential trade setups using these levels:

1. Buy Limit: $21.87
   Stop Loss: $20,63

2. Buy Limit: $19.20
   Stop Loss: $17.89

3. Buy Limit: $17.48
   Stop Loss: $16.39

And here’s my read on each level:

Trade setup #1 is aggressive but the entry sits right at the breakout point where a new higher high was established. This is often a reliable entry point in strong uptrends so there could be plenty of buyers to support the stock at this level.

Setup #2 is intriguing because the stock already bounced off of this level dramatically just four weeks ago.

Setup #3 has the best reward/risk ratio, but the stock would have to shift to a downtrend to get to this level. And that would be a strategic break for traders who want to focus on dip buys in clear uptrends.

These are just a few considerations for constructing a trade on a stock that has been showing relative strength in a volatile, choppy market.

That said, there’s lots of nuance required when trading in volatile markets around earnings reporting season.

The best way to navigate the current volatile market environment is to wait for the chart to establish an uptrend before looking for dips to buy.

And that means continually listening and adjusting to the market’s ever-changing moods.

Let’s Connect !

I’ve been trading for more than 30 years, and I’m always looking to connect with traders who share my passion for the stock market.

I also welcome suggestions for posts on different setup strategies or stocks you would like me to assess technically.

In the meantime, happy hunting in your trading week ahead.

Best,

John

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

You know the feeling.

You buy the dip. It dips more.

You sell to stop the bleeding. It rips higher the next morning.

You chase the rip. It rolls over again.

Repeat that cycle a few times and it’s not just your account that’s whittling away.

It’s your confidence that’s being ground down too.

That’s what a choppy, correcting market does.

It doesn’t just take your money - - it takes your discipline first, and then helps itself to the rest.

This Isn’t a “You” Problem. It’s a Market-Structure Problem

If you feel like you can’t get a read on this tape, it’s not time to freak out.

It’s time to start sharpening your skills.

A clean uptrending market gives you clean signals. The stock falls, it finds a level, it turns and heads higher..

But a choppy correcting market gives you noise dressed up as signals - - broken support, fake-out breakouts, one-day wonders in both directions.

You buy too early, and it keeps falling.

You wait for confirmation, and it rips higher without you.

You chase the rip, and it immediately plunges once again.

Every reaction feels justified in the moment.

But that’s the whole problem.

In chop, every signal looks convincing.

For about a day and a half.

Just long enough to get you to commit before it heads in the opposite direction.

The Real Trap: Trading with Your Gut Instead of a Sticking to Your Strategy

Green day, you feel like a genius for buying.

Red day, you feel like an idiot for not waiting.

A correcting market manufactures emotion faster than it manufactures action-worthy information.

Most of the day-to-day whipsaw is just forced selling, repositioning, and short-term traders flipping the same shares back and forth. It has almost nothing to do with what is actually going on with the company whose stock you’re trading.

React to every swing, and you can’t grow your account because you’re not trading with a plan.

You’re just feeding everyone else’s moodiness.

The Fix: Set Your Gameplan Before the Chop Starts

The only way to trade a choppy tape without it trading you is to already calmly know precisely what you’re waiting for.

Before the volatility shows up and makes that decision for you.

That means having a trading plan which includes the following:

• A price zone, not a headline. Choppy markets are loud. Headlines during a correction are designed to make every drop feel like it’s “different this time.” Your entry should be tied to something more durable - - a valuation level, a support zone, a range the stock has respected before - - not to how scary or exuberant the news cycle feels that morning.

• Allow room for the market to keep chopping. Assume you won’t catch the exact low. Assume the stock will violate your first level and bounce, then violate it again. Scaling in across a few pre-set levels means the chop works for you instead of against you - - every fakedown is another chance to add, not a reason to panic.

• Have a line that price cannot cross. Sometimes the drop is just correction - - the whole market coming in together, dragging good stocks down with bad ones. But sometimes it’s company specific. The best way to deal with this uncertainty is to decide in advance what price and what news would tell you its time to get out. Below that line, you get out. No questions asked. No debating it emotionally in the moment.

Conviction Isn’t the Hard Part. Waiting Is.

Most investors don’t lose money in a correction because they picked the wrong stock.

They lose money - - or worse, miss the recovery - - because they let the chop dictate their decisions instead of sticking to their plan.

The traders who come out of a correction with a great cost basis or lots of available capital to keep trading aren’t the ones who called the bottom.

They’re the ones who identified their price levels while the market was still calm enough to think clearly - - and then just let the chop do the work of getting them there.

Today’s Chart Setup:

The chart below is an example of using key support levels and defined stop losses to buy the recent dip in Guardant Health with discipline:

Here’s three potential trade setups using these levels:

1. Buy Limit: $132.07
   Stop Loss: $121.98

2. Buy Limit: $120.15
   Stop Loss: $113.84

3. Buy Limit: $98.47
   Stop Loss: $91.60

And here’s my read on each level:

Trade setup #1 is an aggressive entry but still far enough from current price to present attractive upside potential. The stock spent three full weeks in this trading range before launching higher, so there could still be lots of buying demand to support the stock at this level.

Setup #2 is intriguing since the level sits right atop the breakout point. Every week I see stocks that are pulling back during an uptrend bounce off the breakout point. It’s a long way down to the next level, however, so I’d definitely have a stop just below the level.

Setup #3 has the best reward/risk ratio. It’s near the origin of the most recent uptrend, but it’s also the least likely to get filled. Since it’s a such a long way from the current price, I would actually consider this level an investors’ level than a traders’ level.

These are just a few considerations for constructing a trade on a stock that has been showing relative strength in a volatile, choppy market.

That said, there’s lots of nuance required when trading in volatile markets around earnings reporting season.

The best way to navigate the current volatile market environment is to trade with patience and precision.

And to continually listen and adjust to the market’s ever-changing moods.

Let’s Connect !

I’ve been trading for more than 30 years, and I’m always looking to connect with traders who share my passion for the stock market.

I also welcome suggestions for posts on different setup strategies or stocks you would like me to assess technically.

In the meantime, happy hunting in your trading week ahead.

Best,

John

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

Every Investor Wants to Buy the Dip. Few Know How to Buy It Right.

You’ve been watching your favorite stock climb for several weeks.

And you tell yourself: “I’ll buy it if it pulls back.”

It sounds disciplined.

Patient, even.

The problem is that when the pullback actually shows up, you find it difficult to press the buy button.

I know, because I used to experience this same hesitation a lot when I first started trading.

That’s because “I’ll buy the dip” was never an actual strategy.

It was a feeling, with no price attached to it.

A Feeling Isn’t a Strategy

Here’s the solution.

Ask yourself what price you’re waiting for.

“Somewhere lower” is too vague.

It isn’t a strategy.

It’s a mood.

And moods don’t survive an actual falling chart.

When a stock is climbing, buying feels safe.

But when that same stock drops 15%, your psychology flips instantly.

There’s a headline attached to the move now.

A reason for the drop.

And without a predetermined price level to anchor the decision, you’re stuck scouring the newswires for reasons for the drop

And that leaves you improvising.

Under stress, with a red screen in front of you, trying to decide on the fly whether “down a lot” means “down enough.”

In the emotion-charged moment, it almost never does.

So you wait for it to come down more. And more.

Until it rips back higher without you.

The Only Solution Is a Price, Written Down in Advance

A real dip-buying strategy isn’t “Buy the Dip.”

It’s a specific number set while the stock is calm.

It’s a number that doesn’t move when your emotions do.

That means defining the following price levels, before the drop:

• The exact entry price - - tied to something concrete: a valuation multiple you’d consider cheap, a technical support level, a prior consolidation range, a moving average. Not vaguely “lower,” but a number you could write on a sticky note to paste onto your computer screen today.

• A ladder of levels, not one line in the sand. Bottoms are rarely called on the first try. You could just chose one level and give it a shot. But pre-committing to different price points - - a third at level one, a third at level two, the rest at level three - - takes the pressure off nailing the exact low and replaces it with a system you just execute.

• The price at which the thesis breaks, not just the stock. A dip on no fundamental news is a different animal from a dip because the story changed. Decide in advance what price and what conditions would tell you the drop is information about the business, not just noise about sentiment. And if that price level breaks, you get out no more questions asked.

Precision Beats Conviction

Conviction says “I believe in this company.”

But most investors’ conviction is nothing more than a few positive data points which support an emotional desire for the stock to go up.

Precision says “I buy at $42, add at $38, and walk away below $31 if the thesis is broken.”

The investors who buy dips most successfully aren’t the ones who wanted it most.

They’re the ones who set up the trade ahead of time and already knew the number before the market gave it to them.

Today’s Chart Setup:

The chart below is an example of using key support levels and defined stop losses to buy the recent dip in VitaCoco with discipline:

Here’s three potential trade setups using these levels:

1. Buy Limit: $67.47
   Stop Loss: $63.02

2. Buy Limit: $51.70
   Stop Loss: $49.49

3. Buy Limit: $47.70
   Stop Loss: $44.44

And here’s my read on each level:

Trade setup #1 looks quite interesting. VitaCoco just reported strong quarter earnings and increased their guidance for the full year 2026. But after gapping up, the stock closed the trading day lower. This could be an attractive level for aggressive traders to consider, but given the recent volatility in aggressive growth stocks, I’d definitely use a tight stop if trading at this level.

Setup #2 has greater reward potential, but the stock would have to drop dramatically to get to the level. And the trend on the daily timeframe would reverse to a downtrend too. I prefer to enter positions that are near the start of an uptrend, not after a recent trend break. This support level does look interesting, however, given that it would be a “gap-fill” that often presents traders with bounce opportunities.

Setup #3 has the best reward/risk ratio. But it’s also the least likely to get filled since it’s a long way from the current price. It does look like a promising support level, however, since it is at the base of the 80% surge higher from late-April to mid-June. And the stock has already bounced off the level twice suggesting more interested buyers at this price level.

These are just a few considerations for constructing a trade on a stock that has been showing relative strength in a volatile, choppy market.

That said, there’s lots of nuance required when trading in volatile markets around earnings reporting season.

But volatility is the friend of nimble traders, and this is a great market to sharpen your trading skills.

Let’s Connect !

I’ve been trading for more than 30 years, and I’m always looking to connect with traders who share my passion for the stock market.

I also welcome suggestions for posts on different setup strategies or stocks you would like me to assess technically.

In the meantime, happy hunting in your trading week ahead.

Best,

John

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

We’ve all had to deal with this frustrating market scenario at some point.

You buy the dip.

The stock keeps dropping.

Now you’re down double digits and staring at your screen wondering if you should’ve waited.

Or if you should double down because the stock is now so cheap that you think it can’t fall much farther.

Sound familiar?

Well, every trader I know has had similar thoughts at some point in their career.

And you can’t avoid every falling knife.

But you can avoid getting cut badly by knowing exactly where you want to buy and exactly when to bail if the trade doesn’t go as expected.

Here’s a strategy that professional traders use to buy the dip - - but still keep their losses small if the stock continues to fall.

How to Buy the Dip Like a Pro

Buying a dip is a well-known technique used by traders to enter a stock after a pullback, rather than chasing it at new highs.

But while most traders like to buy the dip, few of them have a disciplined process for when to buy and when to sell.

Today I’m going to show a simple strategy that many top traders use to maximize gains and avoid big losses when buying after a stock pulls back in price.

It’s less a single pattern than a discipline - - a way of using prior price behavior to define where buyers are likely to show up and support the stock.

And most importantly … when to admit you’re wrong if they don’t.

Key Elements of The Setup:

• The support level - - a price zone where the stock has previously found buyers, often visible as a prior low, a round number, a moving average (the 50-day or 200-day are common), or a level where volume spiked on past bounces. The more times a level has been tested and held, the more traders treat it as meaningful - - though every test also raises the odds it eventually breaks.

• The dip - - a pullback from a recent high or an uptrend down toward that support zone, ideally on lighter volume than the preceding advance. A controlled, orderly decline is read as profit-taking rather than a fundamental shift; a sharp, high-volume plunge is read as something more serious.

• The entry - - traders buy near the support level, not below it, giving the level room to hold. Some wait for confirmation - - a bounce, a reversal candle, a stabilization in volume - - rather than buying the first touch.

• The stop loss - - a predetermined sell price placed just below the support level, often a few percent under the recent low. If the stock closes below support, the trade thesis is considered wrong, and the position is closed automatically, regardless of conviction or story.

Why it Works (when combined with good risk management)

Support levels work because they reflect real buying and selling history - - clusters of investors who bought at that price before and are inclined to defend it, either by buying more or by refusing to sell.

A bounce off support isn’t guaranteed, but it gives a trader a logical, low-risk place to enter, because the distance to a sensible stop is small relative to the potential upside if the level holds.

The stop loss is what makes the strategy viable over a large number of trades.

Professional traders don’t try to be right every time - - they try to lose small when they’re wrong and let winners run when they’re right. A stop placed just under support means a failed dip-buy costs a defined, limited amount, while a successful one can run much further.

That’s the key to the strategy - - limited downside, open-ended upside.

Focusing on trade setups where the reward potential is greater than the risk is the actual edge, more than any technique for trying to pick the exact bottom.

It’s a favorite entry technique because it turns “buying the dip” from a gut call into a rules-based decision:

You set a specific price to buy, a specific price to sell if wrong, and a risk that’s known in advance rather than discovered after the fact.

Today’s Setup:

The chart below is an example of using key support levels and defined stop losses to buy the recent dip in Reddit with discipline:

Here’s three potential trade setups using these levels:

1. Buy Limit: $160.35
   Stop Loss: $151.38

2. Buy Limit: $143.71
   Stop Loss: $133.82

3. Buy Limit: $125.04
   Stop Loss: $118.24

And here’s my read on each level:

Trade setup #1 looks quite interesting. Nimble traders who like to buy pullbacks while a stock is still in uptrend might give it a shot. But given the recent volatility in aggressive growth stocks, I’d definitely use a tight stop if trading at this level.

Setup #2 has greater reward potential, but the stock would have to break the uptrend to get to the level. I prefer to enter positions that are near the start of an uptrend, not after a recent trend break. The support level does appear robust, however, given that the stock bounced off the top of the zone in both late April and late May.

Setup #3 has the best reward/risk ratio. But it’s also the least likely to get filled since it would have to drop substantially from the current price to get filled. And if the stock were to reach this level, it would be deep in a downtrend which would make buying feel like catching a falling knife.

** Note - - RDDT is scheduled to report second quarter earnings on Thursday July 30 after the market close. Long term investors hold through earnings reports all the time. But holding trading positions into earnings reports adds an element of short term randomness that many pro traders avoid. So if you trade RDDT and plan to hold through earnings, be prepared for the possibility of extreme near term volatility.

Now, obviously there’s a lot of nuance to trading.

And these are just a few considerations for constructing a trade on a stock that has been showing relative strength in a volatile, choppy market.

Let’s Connect !

This is my second post about how to look for trade setups with a time-tested strategy that many pro traders use consistently.

Going forward, I’ll point out different ways to set up trades using different strategies.

If you like this new trading post format, hit the like button and/or let me know in the comments.

I also welcome suggestions for posts on different setup strategies or stocks you would like me to assess technically.

In the meantime, happy hunting in your trading week ahead.

Best,

John

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s deep dive small cap stock research and top trading ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

What’s up traders?

Do you like chart setups with favorable reward/risk ratios ?

If so, here’s a promising setup for you to check out.

The Cup and Handle

The cup and handle is a bullish continuation pattern popularized by William O’Neil, founder of Investor’s Business Daily and creator of the CAN SLIM system. He identified it by studying decades of the market’s biggest winners, and it became a centerpiece of his 1988 book How to Make Money in Stocks.

The shape:

• The cup - - a rounded, U-shaped decline and recovery, typically over several weeks to months. Ideally it’s smooth and gradual rather than sharp and V-shaped, showing controlled selling rather than panic. Depth usually runs 12-33% off the prior high, though deeper cups can work in volatile markets.

• The handle - - after the stock climbs back near its old high, it drifts sideways or slightly down in a tight range for one to several weeks. This is where late sellers and profit-takers get shaken out. The handle should be shallow (often less than 12-15% deep) and low-volume - - a sign supply has dried up.

• The breakout - - the stock pushes through the old high (the “pivot point”) on a surge in volume, ideally well above average.

Why it Works (when combined with good risk management)

The cup represents a stock working off an overextended move or a broad market correction, with weak holders gradually being flushed out.

The handle is the final shakeout - - a tighter, lower-volume pullback that clears out the last of the nervous sellers right before the stock is ready to run.

When the breakout comes on strong volume, it signals institutional buyers stepping in with size, which O’Neil considered the real fuel behind sustained advances since institutions move the kind of volume that can drive a multi-month uptrend.

It’s a favorite entry signal because it defines a precise, low-risk buy point - - right at the pivot - - with a natural stop just below the handle’s low.

The chart below of insurance platform operator Everquote (EVER) is a good example of using a cup and handle chart formation to set up 3 potential trades:

Here are three potential trade setups using these levels:

1. Buy Limit: $26.16
   Stop Loss: $25.07

2. Buy Limit: $24.24
   Stop Loss: $22.53

3. Buy Limit: $18.70
   Stop Loss: $17.06

And here’s my read on each level:

Trade setup #1 is quite aggressive. Maybe a bit too aggressive. Fast moving, nimble traders might give it a shot. But I’d definitely use a tight stop if trading at this level.

Setup #2 looks like a good risk/reward compromise. It’s right at the breakout point which is a common retracement level. Because it’s a wider-sized zone, risk can be normalized by reducing the share size of the trade.

Setup #3 has the best reward/risk ratio. But it’s also the least likely to get filled since it would have to drop substantially from the current price to get filled.

Now, obviously there’s a lot of nuance to trading.

And these are just a few considerations for constructing a trade on a stock that is showing relative strength in a volatile, choppy market.

In future articles, I’ll point out different ways to set up trades using different strategies.

In the meantime, happy hunting in your trading week ahead.

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks.

To learn more about Equity Empire and get ongoing access to John’s top small cap ideas, visit:

https://myequityempire.com/elite-yearly-subscription/

What if “buying the dip” isn’t the foolproof strategy you’ve been led to believe?

You’ve got cash to invest and a sharp eye for a story you like.

You also know not to blindly jump on every “hot” stock tip.

But here’s the catch:

Even a great company can sink your portfolio if you’re buying it at the wrong time, sized like every other position in your account.

That’s especially true in today’s volatile market.

Between AI-bubble chatter, geopolitical shocks, and a market that keeps bouncing wildly on every new news headline, 2026 has turned “read the money flows” into the closest thing Wall Street has to a survival instinct.

Lucky for you, Stanley Druckenmiller - - the man who compounded at roughly 30% annually for three decades without a single down year at Duquesne Capital Management - - cracked this code before most of Wall Street knew there was a code to crack.

Here’s the secret to his strategy:

He doesn’t just buy the dip.

He buys the dip at the right moment, in the right size, for the right reason.

Guided by a process that today’s sharpest investors practice every day, quarter after quarter.

Are you ready to invest like the man who made a billion dollars betting against the Bank of England?

Here’s how Druckenmiller turns a stock idea into a wealth-building opportunity.

And even more importantly … how you can do it too.

Step 1: Position for Where Things Will Be, Not Where They Are

Druckenmiller doesn’t start by reacting to today’s headline. He starts by asking where conditions will be 12 to 24 months from now.

Not the current market price, not this week’s Fed statement, not this quarter’s earnings beat.

That forward lens is what let him get out ahead of moves other investors were still debating.

It’s also the step that decides everything else in this process:

You’re not trading the news.

You’re trading the world that today’s news is about to create.

Ask yourself this before you think about anything else:

If you’re right about where this market or this stock is headed two years out, do you need to rush in a buy right now? Or are you willing to do the research to figure out the ultimate time and price level to buy?

That question is the foundation Druckenmiller builds every other decision on top of.

Step 2: Read the Liquidity Before You Read the Earnings

Once he has a forward view, Druckenmiller checks it against the macro backdrop - - specifically, what central banks are doing to the money supply.

His view, blunt as it gets: “Earnings don’t move the overall market; it’s the Federal Reserve Board and the growth of money supply.”

Think about what that means before you buy anything in 2026.

Fed policy, rate expectations, and global liquidity conditions set the tide. Every stock is just a boat rising or dropping with the tide.

Most retail investors skip this question entirely and go straight to a company’s quarterly earnings call.

Druckenmiller made his fortune by masterfully forecasting earnings. But he treats the macro backdrop as the second filter, right behind his forward view, not an afterthought.

Before you fall in love with a chart or a story, check the money supply tide. It decides which boats are going to float … and which ones are likely to sink.

Step 3: Don’t Diversify Away Your Best Ideas

Druckenmiller has never been shy about how he feels on classroom diversification advice.

He targets a handful of high-conviction positions instead of forty mediocre ones.

His favorite line on this, borrowed from Mark Twain:

“Put all your eggs in one basket and watch the basket carefully.”

That’s not recklessness. It’s the opposite.

It’s the discipline of only acting when you actually have an edge, then sizing like you mean it instead of hiding behind a spreadsheet full of small positions you don’t really believe in.

Diversification for its own sake is what you do when you don’t have a real thesis.

Druckenmiller’s process assumes you do the work first, then bet big when you have a real edge.

Step 4: Size According to Conviction, Not to Comfort

Once Druckenmiller has the forward view, the macro tailwind, and the company-level thesis lined up, he doesn’t nibble.

He goes big.

His words on it: “When you have tremendous conviction, you have to go for the jugular.”

This is the step most individual investors get backwards. They put their biggest dollars behind their least-researched ideas because those are the ones that feel exciting in the moment. And then they starve their best-researched ideas of capital because sizing up feels scary.

Flip that.

If you’ve done Steps 1 through 3 properly, your highest-conviction idea should also be your largest position - - not your smallest.

Step 5: Cut Losses the Moment the Thesis Breaks

For Druckenmiller, being wrong isn’t the problem.

Staying wrong is.

He’s built his entire career around the idea that markets are liquid and forgiving to those willing to admit a mistake quickly.

“It’s liquid, and you can wipe the slate clean on any day.”

A dipping stock might tempt you to average down out of stubbornness.

That’s generally because the financial media has convinced the investing public that “buy the dip” is what smart investors do.

Druckenmiller likes to buy high quality stocks when they dip.

But his process asks a different question first:

Has anything about the original thesis actually changed?

If the answer is yes, the position gets cut - - not nursed, not rationalized, not held out of ego.

A great idea alone isn’t enough. Druckenmiller built his record by combining forward positioning, macro timing, concentrated conviction, and the discipline to fix what goes wrong fast.

Skip any one of those, and you’re just gambling with a stock market cliché.

Confirm the bottom before you buy

Buying high quality stocks after they have dipped in price is a time-tested investment strategy.

But a dip only qualifies once the stock has formed a base of deep-pocketed, well-informed buyers that actually holds.

I went deeper on this topic here:

How to Trade Safely When It’s Raining Falling Knives

Having the discipline to wait for price to stop making new lows before you step in can help you avoid jumping in too early and seeing losses pile up quickly.

Putting It All Together: Druckenmiller’s Buying Checklist

Before you hit “Buy” on that next idea, run it through Druckenmiller’s lens:

1. Are you positioned for 18-24 months out, or are you narrowly focused on today’s headlines?

2. Is liquidity working for you or against you? Check global monetary conditions before you rush to buy a stock.

3. Is this a well-researched, high-conviction idea? If not, why are you sizing it like one? Or better yet, why are you even considering buying it at all?

4. Are you sized for conviction? Your best idea should be your biggest position.

5. Has the thesis changed? If yes, cut it. Don’t fall in love with a stock that’s changed its personality. The last thing you want is to be holding a stock with a big loss hoping to get back to breakeven - - and missing out on the next Nvidia or the next Tesla.

The Shift That Changes Everything

Here’s the part most investors never get to experience:

Once this process clicks, you stop reacting to the market and start reading it.

You stop asking “should I buy this dip?” and start asking “where is this going to be in a year or two, and have I done the research to back up my conviction?”

That shift - - from reactive to forward-looking, from scattered to concentrated, from stubborn to disciplined - - is the same shift that turned a kid from a steel town into one of the greatest traders alive.

It’s not a secret. It’s a billionaire investor’s playbook.

And now you can use the playbook too.

Too Complicated? We’ve Got You Covered

Mastering Druckenmiller’s process takes time and know-how.

So if you feel like you don’t have the time or experience to apply his strategies, here’s the good news:

At Equity Empire, we do the heavy lifting for you.

Every day, our research team spends the time doing the unglamorous part - - assessing market conditions, gathering deep company and industry insights, delivering world class investment ideas, and cutting the ones that don’t play out as expected.

Our subscribers get access to a Druckenmiller-style stock research process without having to spend all day running it themselves.

We do the digging. You get the edge.

Click the link below to join the elite Equity Empire subscriber community and secure your research edge today:

myequityempire.com/elite-yearly-subscription

There are only a limited number of subscriptions available so act now to secure your spot.

See you on the inside.

John McHugh

Editor, Equity Empire Small Cap Opportunities Report

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

Subscribe now

You bought the dip. Then it dipped again.

Now you’re staring at a position that’s down 30%, refreshing the chart every hour, and wondering if you should average down one more time or just accept the loss.

You’re not alone.

Almost every novice trader has a stock like this sitting in their portfolio right now - - the one where you thought you were“getting in cheap” but it just keeps getting cheaper.

It’s a painful experience.

But it doesn’t have to be that way.

You just need to pay attention to an age old market saying:

“Don’t catch a falling knife.”

It’s simple advice.

But I know it’s easier said than done.

Because when I first started trading, I was told not to “catch a falling knife.”

I had a big ego, however, and I had to learn the lesson the hard way.

Unfortunately for my trading account, the hard way meant dealing with the pain of trading loss after trading loss.

But eventually I swallowed my pride and took the time-tested market adage to heart.

And once I finally stopped trying to catch falling knives, my trading performance started to improve dramatically.

The good news is that you don’t have to experience the pain I did to improve your trading performance.

And that’s why I’m sharing this message with you today.

Stop Doing This One Thing … And Watch Your Trading Account Grow

The stock you’ve been watching is down 40% from its highs two months ago.

It feels cheap.

That feeling is the trap.

It’s down 20% this week.

30% this month.

Somewhere in your gut, a voice starts whispering: this is a gift.

The stock that was $80 is now $45.

The stock “feels” cheap.

Your social media feed is full of high-profile traders calling it “oversold.”

Someone posts a valuation table showing it trades below its historical average multiple.

You tell yourself you’re being disciplined. Buying quality on sale. Doing what Buffett would do.

So you buy.

And two weeks later it’s $30.

Falling knives cut deep.

The Knife Doesn’t Care How Cheap It Looks

A knife that’s falling doesn’t slow down because you decide it’s reached a fair price.

It doesn’t stop because you’ve done the math and concluded it’s “too cheap to ignore.”

It keeps falling until it hits the floor.

The floor where the big buyers step in and halt the drop.

But if you reach out to grab it on the way down before the big money steps in, you don’t get a discount.

You get cut.

Buying a stock just because it has dropped is falling into a trap:

Legendary trader Jesse Livermore described the traps the stock market sets like this:

“The stock market is never obvious. It is designed to fool most of the people, most of the time.”

And the biggest misperception about a stock in freefall is this:

It’s easy to think the market has it wrong.

But the price you see isn’t wrong.

It’s the market’s real-time verdict on what the stock is actually worth.

Not just based on everything currently known.

But also based on everything currently feared.

Your valuation model says $45 is cheap.

The market is telling you, in real dollars, that $45 might still be too expensive.

Winning traders don’t fight the market.

They listen to what it has to say.

Why Pro Traders Avoid the Bottom-Guess

Amateurs constantly guess at bottoms.

Professional traders don’t.

When amateurs buy a stock that’s down 40% because “it has to bounce eventually,” they are essentially betting that all of the bad news is already fully priced in.

But even more importantly, they’re betting that there’s nobody left that still wants to sell more shares than they’re willing to buy.

Successful traders avoid making that bet.

They’ve mastered the ability to assess when the balance of supply and demand starts to tilt toward the buyers before buying a stock.

And that’s not the case when a stock is still falling.

Instead of buying a stock just because it’s down a lot, learn how to identify when the buyers are ready to take control back from the sellers first.

And soon you’ll be trading like a pro.

Beware Knives That Fall Without Reason

Every falling knife has an underlying story.

Something breaks the thesis - - a guidance cut, an accounting question, a lost customer, a downgrade nobody saw coming.

These factors are relatively easy to understand.

But the falling knives that confuse most novice investors are the ones that don’t have an obvious catalyst.

One of your favorite stocks has been dropping for weeks.

You check for company press releases, media reports, and analyst commentary.

Nothing.

So you ask yourself: “Why is the stock price falling when there’s no news to trigger the selling?

Often, the answer is that market “sentiment” has shifted.

The buyers who drove the stock up in the previous weeks and months either ran out of reasons - - or money - - to keep buying at higher prices.

When the prevailing bullish market narrative gets called into question, or when the buyers’ money starts to run thin, the stock only has one direction to go.

And that’s down.

How to Actually Avoid Getting Cut

You don’t need to swear off ever buying a beaten-down stock.

Some of the best investors in the world buy stocks this way.

The trick is knowing the difference between a falling knife and a stock that’s actually found its floor.

Wait for the knife to hit the ground. Stop trying to guess the bottom in real time. Wait for price to stop making new lows - - actually stop, not “the drop seems to be slowing.” A base that holds for weeks tells you more than any valuation spreadsheet.

Watch volume on the down days versus the up days. A stock that’s basing shows selling volume drying up and buying volume picking up on green days. If every rally is on light volume and every selloff is on heavy volume, the knife is still falling, no matter what the story tells you.

Size the position like you might be early. If you decide to step in before the base is fully confirmed, treat it as a starter position, not a conviction bet. Leave yourself room to add once the market actually agrees with you.

Separate the story from the tape. The turnaround story might be completely true. The new CEO might be the real deal. The product might genuinely be great. None of that matters if supply is still overwhelming demand. Let the tape confirm the story before you bet on it.

Have a level where you’re wrong. Before you buy anything down big, decide the price where you admit the thesis failed.

If you don’t have that number before you buy, you’ll find every reason in the world to keep holding after you should have sold.

Pro traders know they can’t be right all the time.

So they always have an exit plan for when a trade goes against them.

The Discipline That Keeps Pro Traders in the Game

Everyone wants to say they bought the exact bottom. It makes a great story to tell our friends.

But the traders who actually build wealth over decades aren’t the ones bragging about nailing the bottom.

They’re the ones who let the knife finish falling, waited for the floor to actually hold, and bought the confirmed turn instead of the hopeful guess.

The market doesn’t reward conviction. It rewards being right about supply and demand.

The falling knife will always look cheapest right before it cuts you.

Let it land first.

Experience Matters

It takes a lot of time and practice to become a successful trader. And experience matters. Getting access to Wall Street quality stock research and trade alerts can help you reach your goals faster.

I believe the next 18 months will be the biggest opportunity to achieve financial freedom in the past decade.

Start here today by getting access to the world class stock research and trade alerts from the experts at Equity Empire:

Subscribe to Equity Empire → myequityempire.com/elite-yearly-subscription/

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small-cap stocks. This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

By John McHugh, Equity Empire Small Cap Research

The financial media had the public fully convinced SpaceX would rocket after its IPO … and that every stock in the space economy would ride along for the launch.

So investors piled into innovative, fast growing companies like Rocketlab , AST Spacemobile , Planet Labs , Redwire , Firefly Aerospace , and many more

For months, the media blasted us with headlines hyping the SpaceX IPO.

The $1.77 trillion valuation.

The $86 billion raised.

The largest company IPO in market history.

The public bought into the media narrative hook, line, and sinker.

And SpaceX stock did launch like a rocket.

For a few days.

On its third day of trading, SpaceX shares briefly touched 225 - - 90 points above the IPO price.

But as fast as you can say “gravity” … the stock came back down to earth.

And by Friday’s market close, SpaceX shares had dropped to 145.

5 points below the stock’s opening trading price of 150.

That means that anyone who bought SpaceX shares after they started trading publicly is now sitting on a paper loss.

Investors’ heads are certainly spinning after such a volatile stock market debut.

But there’s a lesson to be learned from this wild roller coaster ride.

And its a lesson we all learned in Econ 101:

Supply and Demand Doesn’t Care About The Media Narrative

This is a market dynamic I’ve watched play out consistently during my 30+ years trading the markets.

And my deep understanding of this dynamic has helped me and my subscribers make big stock market profits year after year.

Amateur investors think they can make money when they hear an exciting growth story.

Pros know its all about supply and demand.

When a $2 trillion new listing hits the tape, it doesn’t create new money.

It redirects existing money.

I warned readers about the potential effects of this market dynamic the day SpaceX went public exactly one month ago:

Every dollar that flowed into SPCX on June 12 was a dollar that had to be moved from somewhere else first.

For years, small-cap space investors had no way to own SpaceX directly.

So they built synthetic exposure instead - - by investing in the space economy stocks that already traded on major public stock exchanges.

For many fund investors, these stocks were proxies.

Placeholders.

The next best thing to own before the SpaceX IPO.

The moment the real thing listed, these investors dumped the placeholders and bought SpaceX.

Rocket Lab fell almost 11% on the day SpaceX opened for trading.

That wasn’t a coincidence.

That was capital jumping from little rocket to big rocket.

One Month Later, the Scoreboard Tells the Real Story

I pulled the numbers from IPO day - - June 12 - - through Friday

Here’s where the space economy actually stands, using closing prices from June 11 - - the last trading day before SpaceX priced - - against the most recent close available:

Read that last line again.

SpaceX - - the stock everyone rotated into - - is the “winner” of this trade, and it’s still down from its first day of trading as a publicly-traded company.

It popped 19% on debut, ran toward $225, and has since round-tripped all the way back to roughly where it opened, pressured partially by a $20-25 billion bond deal to fund the AI buildout nobody priced in ahead of time.

Meanwhile the rest of the sector is doing even worse.

It’s bleeding.

And it’s not because of a change in company fundamentals.

This Isn’t a Fundamentals Story … for Now at Least.

Here’s what you should know if you own any of these names.

Planet Labs posted record quarterly revenue during this exact stretch.

Raised full-year guidance.

Grew backlog.

The business got better.

The stock still fell 15%.

That disconnect is the tell.

This isn’t a story about bad quarters or broken business models.

It’s a liquidity story.

A positioning story.

A supply-and-demand story - - the same one I wrote about heading into the SpaceX listing.

When a mega-cap IPO absorbs a disproportionate share of sector-dedicated capital, the good businesses get sold right alongside the weak ones.

Nobody stops to check the earnings on the way out the door.

We’ve Seen This Movie Before

Dot-com IPOs overwhelmed the market’s ability to absorb them, and the Nasdaq gave back 78% of its gains once the supply tap finally shut off.

SPAC supply overwhelmed absorption in 2020 and 2021, and the average de-SPAC was down 40% within two years.

The pattern is always the same:

The offering isn’t the peak of the selling pressure.

It’s the starting gun.

What follows is months of grinding, secondary-driven weakness while the market works through the excess supply and the capital rotation finishes playing out.

Historically, this kind of proxy unwind around a mega-IPO takes weeks to mean-revert - - assuming nothing else disrupts it.

But sometimes it can take much longer.

SpaceX’s staggered lockup structure means fresh insider supply keeps hitting the tape in waves from now through year-end.

And this means we could be facing more volatility in the weeks and months ahead, not less.

Where I’d Be Looking to Buy

This kind of dislocation and widespread investor confusion is exactly what I look for.

When investors sell every stock in a sector indiscriminately, the high quality stocks in the group can become oversold … even while the fundamentals are improving.

A stock getting punished for a rotation, not for a broken business, is a different animal than a stock getting punished for missing numbers.

One is temporary. The other isn’t.

Planet Labs growing revenue 42% while the stock drops 15% is the kind of gap that closes eventually.

The question is timing.

And more importantly - - what timeframe you have based your expectations on.

It may still be a little early to start building positions in small cap space economy stocks.

But that said, when I see a growth story developing, I’d rather be early to a potential re-rating than late to it.

Just before the crowd rushes in and their demand starts to overwhelm the stock’s supply.

Like earlier this year when I issued a buy alert to our subscribers at Equity Empire on satellite operator Spire Global before the crowd rushed in to the space economy trade.

Because I was able to spot the opportunity early, many of our subscribers were able to book gains of greater than 50% on this specific space economy trade.

Which shows how important it is to be ahead of the crowd when it comes to trading big market narratives.

And at Equity Empire, that’s the exactly what we do.

Timing Big Moves is What We Do Best

I co-founded Equity Empire with Colin to spot exactly these kinds of big market moves - - and to get out before the crowd figures out why a good stock is falling for reasons that have nothing to do with its business.

Over the past few years, I’ve called Vertiv before it soared 800%. I wrote about Nebius before it rose nearly 1,000% … and long before it became an investor favorite.

I recommended Credo Technology before it rocketed 1,200%.

The space economy could have similar long term investment potential.

And it just handed us a textbook case of capital rotation mispricing rapidly-devleoping businesses.

That’s not a reason to rush into the sector.

It’s a reason to get precise about timing it.

Because when the next share price re-rating comes, forward thinking investors who understand the market dynamics that I’ve discussed in this article will stand to make big profits.

If you want the research and the alerts before the next big re-ratings happen - - before the crowd rushes in - - get started here today:

Subscribe to Equity Empire → myequityempire.com/elite-yearly-subscription/

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small-cap stocks. This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

If you want to get alerts about the next big potential moves in space economy stocks, join the fast growing Equity Empire subscriber community today:

myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

Most investors want to always be right.

The best investors want to be paid for being right.

There’s a difference.

A big one.

Being right 60% of the time with equal-sized wins and losses makes you average.

Being right 40% of the time with massive wins and tiny losses makes you a billionaire like Vinod Khosla.

Khosla Ventures was one of the earliest institutional backers of OpenAI - the parent company of ChatGPT.

While the crowd was still debating whether AI was science fiction, Khosla saw a team and a technology worth betting on. That early position is now one of the most valuable private investment calls of the last decade.

The math didn’t require a perfect record.

It just required one massive win to swamp years of losses.

Conversely, Market Wizard trader Kristjan Kullamägi doesn’t hold anything for a decade.

He’s in and out in days.

Sometimes hours.

But the logic underneath his trades is identical:

Find setups where the potential loss is small and the potential gain is large.

Cut the loss fast. Let the winner run.

Same principle. Same edge. Different timeframe.

This is how the best trades and investments work — and how you find them, whether your horizon is five years or five days.

THE ONLY RATIO THAT MATTERS

Forget the jargon. Here’s the real concept:

The best opportunities are situations where you can lose a fixed amount and potentially make a multiple of that amount.

If you risk $1 to potentially make $10, that’s a great bet.

If you risk $1 to potentially make $1.10, that’s a bond.

If you haven’t assessed the risk at all, that’s a lottery ticket dressed up as an investment.

I’ve been trading for more than 30 years, and one of the most frequent questions I get is what my win rate is.

That’s the wrong ratio to focus on.

Because the reward-to-risk ratio matters more than the win rate.

What really matters is how much your trading or investing account is growing.

A trader who wins 30% of the time but makes $5 for every $1 lost prints money over time.

A trader who wins 70% of the time but doesn’t define the max risk of a trade can go broke overnight.

Khosla has said publicly that he expects most of his investments to fail.

He doesn’t care.

Because he’s hunting for the ones that don’t - - the ones that redefine entire industries and return 50-100x.

You can get rich by catching a stock like Sandisk or Micron early, even if you’ve been losing consistently.

It only trades on great investment to change your life.

Kullamägi talks about the same thing but in a different language.

In his trading, a losing trade gets cut at 7-8% max. A winning trade gets held through multiple legs of a move - - sometimes 30%, 40%, 50% - - or sometimes much more.

He’s not trying to be right all the time.

He’s trying to make sure the wins are far bigger than the losses.

That’s the whole game. Everything else is execution.

THE LONG GAME: How Khosla Finds MOONSHOTS Like OpenAI

Khosla’s framework starts with a simple question:

“What has to be true for this to be worth 100x?”

He doesn’t start with what’s predictable.

He starts with what’s possible - - and then works backward to ask whether the team, the technology, and the timing could plausibly get there.

This is a crucial inversion.

Most investors look for certainty. Khosla looks for magnitude.

His early bet on OpenAI required believing that a small research lab could build artificial general intelligence, attract the compute and talent to do it, and eventually monetize it at scale.

None of that was even close to certain when Khosla first wrote the check.

But Khosla thought the potential payoff was enormous - - a technology that could reshape every industry on earth.

And his bet has paid off massively

Three filters Khosla consistently applies to long-horizon bets:

1. Technology risk vs. market risk. Khosla prefers technology risk. If a technology actually works, he wants a large and inevitable market waiting for it. He doesn’t want to solve both technology and market adoption at the same time.

2. You can go against the crowd - - but you have to be right. If everyone agrees the opportunity is real, the valuation already reflects it. The biggest returns live in ideas that smart people disagree about. The crowd’s favorite trade is rarely the big one.

3. The right team for the moment. A transformational opportunity with the wrong team is not a good risk-reward bet - - it’s a lottery. Khosla bets heavily on founders who have a specific and unusual insight about why the world will be different.

The patient, long-term investor isn’t predicting the future. They’re identifying where the future is already being built.

And - - most importantly - - buying in before the price reflects it.

Datacenter cooling equipment maker Vertiv is a perfect example of this logic. I recommended Vertiv to my subscribers when data center infrastructure was an ignored category. The stock was $38 at the time of our report.

Today the stock is trading at $331.

Our subscribers who bought after our original report and held and currently up more than 770% !

My time horizon is much shorter than Khosla’s.

But I have a long track record of spotting megatrend opportunities early like I did with Vertiv.

Such as spotting the AI supercycle in 2023 before it became obvious to everyone.

The reward wasn’t for being smart.

It was for being early.

THE SHORT TERM TRADING GAME: How KULLAMÄGI Finds Winning Swing Trade Setups

Kullamägi operates on a completely different timeline, but his process is just as disciplined.

Swing trading is pattern-based.

You’re not analyzing a decade of market adoption or making forecasts about revolutionary technologies.

You’re reading price structure, volume behavior, and market context to identify setups where a defined entry offers a small, capped loss and a large, open-ended gain.

His core framework, consistent across years of documented trades:

The Setup

Look for stocks in strong fundamental uptrends breaking out of tight, well-formed bases. The tightness signals institutional accumulation. The breakout signals that buyers have taken control from sellers.

The Entry:

Buy as close to the breakout point as possible.

The further from the ideal entry, the worse the reward-to-risk. A stock that has already run 15% past its breakout is not the same trade - - the potential gain has shrunk while the potential loss has stayed the same.

The Stop:

Define your exit before you enter.

Always.

A stop at 7-8% below entry means you know exactly what you’re risking. That capped downside is what makes the trade worthwhile - - because the upside is theoretically open-ended.

The Exit:

This is where most traders fail.

Kullamägi lets his winners breathe. He doesn’t take profits at 10% because “it’s a winning trade.”

He uses price action and volume to determine whether a position is still working. A stock that continues to act well - - holding gains, not reversing on heavy volume - - stays in the portfolio.

The result is a portfolio where losses are small and frequent.

And while wins are less frequent, they are substantially larger than the average losses.

Most novice traders always want to be right. So when they have a loss, they hang on and pray they get back to breakeven.

Over time, they end up with a portfolio of large losses and a few gains.

They’re like bad gardeners.

They trim the flowers and water the weeds.

The most successful traders are good gardeners.

They pull out the weeds quickly and let the flower flourish.

This isn’t complicated.

It’s just hard to execute.

Kullamägi focuses on setups where the reward potential far exceeds the risk.

An then he executes mechanically, consistently - - and hardest of all - - without ego.

WHAT BOTH APPROACHES HAVE IN COMMON

Strip away the timeframes.

Ignore the asset class differences.

Here’s what Khosla and Kullamägi actually share:

Losses are capped. Khosla constructs his portfolio so that no single loss - - no matter how bad - - crushes his account. Kullamägi uses hard stops so that no single trade destroys his account. The capital preservation discipline is identical.

Winners are allowed to run. Khosla doesn’t sell a position after it triples because “it’s gone up a lot.” Kullamägi doesn’t exit a breakout because “he’s up 15% or 20%.” Both understand that the entire model depends on allowing winners to compound fully.

Position sizing is deliberate. Neither man bets everything on a single idea. Khosla diversifies across portfolio companies because he knows most will fail. Kullamägi manages position size relative to account equity so that no single trade can cause catastrophic damage.

The math only works with sizing discipline.

Go early or go home. The best reward-to-risk setups appear before the crowd shows up. For Khosla, that means funding companies before they’re fundable. For Kullamägi, that means buying breakouts before the move is obvious - - not chasing after everyone else already knows.

Process over prediction. Neither investor claims to know the future with certainty. Both follow a repeatable process that, over large sample sizes, produces a positive returns.

The edge is in the process - - not the prediction.

HOW TO APPLY THIS AS A RETAIL INVESTOR

You don’t need Khosla’s fund or Kullamägi’s pattern recognition to think this way.

You just need a framework.

For the long-term investor:

Ask what’s the market is missing … or simply ignoring. The best setups in public markets come from companies or sectors the crowd has either missed or dismissed.

I focus on undiscovered small caps with new products or services that have the potential to drive a massive acceleration in sales and profits. My key is spotting these opportunities well before the crowd jumps in.

Define your thesis.

What do you believe that the market is not pricing correctly? Be specific.

“AI is going to be big” is not a thesis - - it’s already in the price of everything.

“This specific company in AI infrastructure is misunderstood because the market is focused on the wrong metric” - - that’s a thesis.

Size the position to survive being wrong.

If you’re right and the stock goes up 10x, you want to own enough to matter.

But construct the position so that if you’re wrong, you don’t break your portfolio.

The math only works if you stay in the game.

For the swing trader:

Never enter without knowing your exit first.

Define your stop before you buy. If you can’t articulate exactly where you’re wrong on the trade, you’re not ready to enter.

Study the setups that work.

Kullamägi’s edge was built over years of observing what works and what doesn’t. The patterns that produce big reward, small risk trades - - tight base breakouts, volume confirmation, market context - - are learnable.

But they require study and repetition, not shortcuts.

Your biggest enemy is your own psychology.

The discipline to cut losers fast and hold winners long is straightforward to understand … but brutally hard to execute.

Most people do the opposite instinctively.

The disciplined trader has to override that instinct - - every single time.

THE MOST IMPORTANT PART OF THE PROCESS

Before any trade. Before any investment. Before any capital deployment.

Ask yourself:

How much can I lose, and how much can I make?

If the answer is “I can lose 50% and maybe make 60%,” walk away. That’s not a good bet. That’s a coin flip.

If the answer is “I can lose 8% and potentially make 40-50% if the setup plays out,” you have the foundation of a real trade.

If the answer is “I can lose this position but the company could be worth 20x in five years if I’m right about the technology,” you have the foundation of a real investment.

Khosla and Kullamägi built their track records on these two versions of the same question.

One version in venture capital.

One version on a trading screen.

The underlying logic - - small potential loss, massive potential gain - - is timeless.

The market rewards investors who understand this.

Always has. Always will.

The only question is whether you have the discipline to be one of them.

THE EQUITY EMPIRE ADVANTAGE

We identified Vertiv before the datacenter supercycle. Nebius before the AI NeoCloud wave. Credo Technology before the hyperscaler connectivity buildout.

Our readers don’t chase what’s already obvious.

Tbey stay ahead of the crowd.

If you’re looking for the next opportunity the market hasn’t priced yet - - the one with a small downside and a massive potential upside - - that’s what we’ve been doing for decades.

Get access to our early stage, Wall Street quality research by joining the fast growing Equity Empire subscriber community here:

Subscribe to Equity Empire → myequityempire.com/elite-yearly-subscription/

John McHugh co-founded Equity Empire with Colin Tedards to help small investors achieve financial freedom. He’s a former Wall Street analyst and hedge fund manager with more than 30 years of experience investing in small cap stocks. This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.

To join the fast growing Equity Empire subscriber community, visit:

myequityempire.com/elite-yearly-subscription/

This is not financial advice. Past performance does not guarantee future results. Always conduct your own due diligence before investing.