OVERVIEW
A Very Selective Breadth Expansion

In yesterday’s session, we emphasized the importance of seeing a continuation of Friday’s major expansion and the relief rally that began playing out across tech and semiconductor stocks. While we saw some follow-through, it wasn’t as broad-based as hoped. Let’s break down what unfolded.

The market opened with strength across the board—sectors and capitalizations alike—on robust relative volume. This momentum sparked breakouts in a wide range of stocks, from relative strength leaders (our primary focus) to more speculative, volatile names. However, by midday, the initial euphoria faded, and only a select few industry groups managed to sustain their push. Unsurprisingly, the leading group was semiconductors, spearheaded by NVIDIA, which demonstrated exceptional resilience and strength.

Everything You Need To Know About NVIDIA’s Announcement:

NVIDIA’s powerful move isn’t occurring in a vacuum. It’s rooted in major developments from their CES 2025 keynote, where they unveiled innovations poised to reshape AI, robotics, and autonomous systems.

Nvidia’s CES 2025 keynote showcased innovations that could significantly impact companies like Tesla, Nvidia, and others in AI, robotics, and autonomous systems. The introduction of the Cosmos platform and Isaac GROOT Blueprint simplifies the development of humanoid robots and self-driving technology by reducing costs and speeding up training processes. This has direct implications for Tesla, which could accelerate the deployment of its Optimus robot and other automation projects, gaining an edge in manufacturing and beyond.

In the automotive space, Nvidia’s collaboration with Toyota, Continental, and Aurora underscores its growing influence in autonomous vehicles. Toyota will integrate Nvidia’s DRIVE AGX Orin chips into its advanced driver assistance systems, while Aurora plans to deploy autonomous freight trucks by 2027, powered by Nvidia’s technology. These developments suggest growing competition for Tesla in the autonomous vehicle market, especially as other companies adopt Nvidia’s cutting-edge platforms. Nvidia’s new GB10 chip and Project DIGITS desktop system bring high-powered AI capabilities to smaller enterprises and consumers, making advanced AI tools more accessible.

For tech giants and innovators like Tesla, this could streamline the development of AI models, enhancing efficiency and innovation. The gaming market also remains a priority for Nvidia, with the release of the GeForce RTX 50 series GPUs. These cards, featuring improved performance and AI-enhanced DLSS technology, ensure Nvidia continues to dominate the gaming and creative sectors while expanding its reach into metaverse and AI-driven applications.

So, What Does This All Mean?

Nvidia’s groundbreaking innovations unveiled at CES 2025 are more than just technological advancements—they’re a catalyst for growth across industries and the broader market. For Nvidia itself, these developments position the company to dominate not only AI but also the robotics and autonomous vehicle markets. This diversification strengthens Nvidia’s revenue potential beyond its already dominant Data Center business. As more companies like Tesla, Aurora, and Toyota adopt Nvidia’s cutting-edge platforms, demand for its hardware and software will likely surge, driving Nvidia’s stock higher.

Nvidia’s influence extends far beyond its own performance. With the largest weighting in major indices like the Nasdaq-100 (QQQ), Nvidia’s upward trajectory has a ripple effect across the broader tech market. A strong Nvidia often signals strength for the entire sector, pulling mega cap tech stocks higher alongside it. As Nvidia pushes AI and robotics forward, companies relying on its technologies—like Tesla for robotics, Google and Amazon for AI chips, and even gaming giants—stand to benefit, potentially boosting their own stock performance.

Additionally, Nvidia’s role in advancing AI applications and consumer-facing technologies will likely encourage further investment and innovation across the tech industry. This momentum could keep the Nasdaq-100 and other tech-heavy indices trending higher, particularly as AI continues to be a transformative force in multiple sectors.

Nasdaq

The Nasdaq, particularly the QQQ, stands to benefit significantly from the buying pressure driving Nvidia higher. Nvidia, now worth more than entire nations like the UK, France, and Germany, has an outsized influence on the Nasdaq-100 as its largest weighted component. Yesterday’s session was a testament to this influence, with the QQQ gapping up at the open on high relative volume—a promising sign for bullish momentum.

For those in Swingly Pro, the daily report card highlighted a key insight: while gap-up opens are exciting, they often lead to intraday fades as gaps in the market tend to get filled. Yesterday’s 0.48% gap between Monday’s low and Friday’s high remains unfilled, making a short-term pullback likely today. However, this isn’t unhealthy or bearish—it’s a natural part of market behavior.

The QQQ remains strong, trading comfortably above its 10- and 20-day EMAs and sitting in a dense demand zone visible on the Volume Profile (VRVP). As long as this demand zone holds, a gap-fill retracement would likely serve to confirm support and strengthen the breakout.

If, however, the moving averages are lost and the $522 demand level is undercut, the probability of a false breakout increases. Until then, the broader context remains bullish, driven by Nvidia’s strength and its capacity to uplift the entire Nasdaq-100.

S&P Midcap 400

The midcaps also saw a gap-up open, pushing into a critical overhead supply zone, which coincides with the declining 50- and 20-day EMAs on the daily chart. Additionally, there’s dense supply around the $583 level, which we previously mentioned wouldn’t be an easy area to break through. So far, the price action has been holding steady, with support found on the daily 10-EMA. This level has been significant, as it hasn't been broken since early December when we first lost it. This development is still positive.

While we might see some choppy price action here, the key thing to watch is that the market doesn’t close below the daily 10-EMA, as that could raise concerns about potential weakness. However, it’s clear that the current strength in the market is not in the midcaps—large-cap and, especially, big tech names are where the money is flowing right now. This shift in market leadership highlights that the focus remains on the major players, with midcaps struggling to maintain momentum in comparison.

Russell 2000

The small caps also experienced a gap-up open, but it came on low relative volume, which is not ideal for breakout attempts, especially in critical moments like yesterday. Despite that, the bigger picture remains largely the same. The IWM (Russell 2000) continues to trade sideways, bouncing within a range. While the rejection at the 50- and 20-day EMAs yesterday wasn't ideal, we are seeing demand emerge at the now rising 10-EMA, which is a positive sign.

This marks a shift from the last month when the 10-EMA was consistently lost, so it's encouraging to see it acting as support once again. However, the low volume and price rejection at the key moving averages suggest that small caps still face some headwinds, and it will be important to see if demand continues to hold.

DAILY FOCUS
Keep It Simple: Trade What You See

As momentum swing traders, the key is to keep things simple and let risk management protect you. When you see breakouts working, especially from market leaders, you need to be there—even if it means starting with a smaller, tester position. Between Friday and Monday, we initiated several positions in these leaders, each with calculated downside risk, and so far, the developments have been very positive. This success is a direct result of our strict entry criteria and selectiveness.

It's important to remember that even when you’re wrong—and you will be wrong most of the time—it's part of the game. As a momentum trader, you’ll likely be wrong about 60% of the time. Accepting this is vital. The reality is, you should always expect to be wrong and adjust accordingly. This is why you never want a single position to make or break you. It's crucial to shift your mindset from a desire to be right to a focus on trading based on probabilities. Striving to be right in every trade can lead to emotional decision-making and overtrading. Focusing on probabilities helps you make more rational decisions, cut losses quickly when necessary, and let your winners run. The key is not being right every time, but being consistent in your approach, managing risk, and positioning yourself for long-term profitability.

We risk anywhere from 0.25% to 0.5% of our account per trade. This ensures that even if we take a loss, it won’t significantly impact our overall portfolio. By managing risk this way, we stay in the game longer, learn from mistakes, and continue to grow as traders.

That being said, since we already have exposure to the market, albeit with small position sizes, we won't be seeking new naked exposure until we continue to see confirmation that the trades we've already taken are moving in the right direction. Yesterday's fade will either be confirmed or we’ll see the expected expansion higher. We don’t want to overexpose ourselves, and this is exactly the purpose of taking small tester positions. It’s important to remember that you can always add more if the trade continues to develop in your favor.

If you want to know which stocks we’ve taken positions in and how we’re managing them, click here. Remember, trading is about staying disciplined, being selective, and always managing risk. Keep it simple, stay patient, and trust the process. Success in momentum swing trading is about consistency over time, not perfection in every trade.

WATCHLIST
The Stocks We’re Watching

RBRK: Rubrik, Inc.

• RBRK experienced another false breakout yesterday, but despite that, it remains the leading relative strength (RS) name and continues to hold its ascending support on the rising 20-EMA. It finished the day above its 10-EMA, which is a positive development.

• Ideally, we're looking for a few more days of consolidation to allow the price action to tighten before expecting a strong expansion higher. This setup could provide a clearer signal for a potential breakout.

INOD: Innodata Inc.

• INOD is showing a similar pattern to RBRK, with a false breakout yesterday. However, it finished above its daily 10-EMA, finding support, and we’re now hoping for a few more days of tightening before a potential move higher.

• False breakouts like yesterday’s can be tough to avoid, but we have a simple trick: always consider the 5-minute opening range high and combine it with relative volume on the breakout 60-minute candle. This approach will help you avoid most of these false moves and increase the probability of catching genuine breakouts.