OVERVIEW
Speculative Money Running Rampant

Yesterday, the market showed the follow-through we were expecting, with stocks reaching all-time highs. Federal Reserve Chair Jerome Powell stated that the economy is in "remarkably good shape," which helped propel the S&P 500 past the 6,000 mark. This surge is backed by strong U.S. economic growth and a solid labor market. With the Trump administration likely to create a favorable environment for stocks through low interest rates, the S&P 500 seems well-positioned for further gains.

This optimism isn't confined to the equities market alone. It has also fueled a rally in Bitcoin, which gained momentum after Trump’s victory over Harris. Bitcoin (BTCUSD) surged from $70,000 to $98,000, and yesterday, it achieved a monumental milestone, breaking through the psychological resistance level of $100,000 for the first time in history. This is significant because Bitcoin is often seen as a barometer for speculative money—when funds flow into Bitcoin and its price surges, it typically indicates that institutional investors are in a "risk-on" mode, eager to gain exposure to a highly volatile asset class.

Nasdaq

The Nasdaq continues to reflect the positive market sentiment we outlined in yesterday's report. The QQQ demonstrated strong follow-through, gapping up and rallying on high relative volume without any intraday weakness. Notably, it didn’t fill the gap between $517 and $520, which is a major sign of strength. The fact that there was no retracement to this level indicates a solid bid underneath the market.

A significant portion of this strength is coming from NVDA, which broke out during yesterday's session. After a weaker start, the stock surged to close with a firm finish, expanding on high relative volume from its weekly base—a position we aggressively loaded up on.

If you take a look at the visible range volume profile (VRVP) on the right, you'll notice blue volume, which represents demand, and yellow volume, which indicates supply. The data shows aggressive buying above $520 on the open, with minimal supply being absorbed above $522. This suggests that buyers were in control, pushing the stock higher with little resistance from sellers. The lack of supply in this range is a clear indication of strong bullish momentum, and it signals that there is room for further upside as long as demand remains intact with price discovery likely to continue in driving the QQQ higher.

S&P Midcap 400

The midcaps are still consolidating, with a second test of their rising 10-EMA showing demand stepping in to defend the key $612 level. Volume on the day was relatively low—lower even than Friday's half session, but this is not necessarily a negative sign. Let us explain.

The session produced a green hammer candle with a long tail, indicating that buyer aggression outweighed seller aggression. The fact that the day closed firmly in the upper range is a positive sign, and the low volume suggests there wasn’t a large influx of supply. Instead, we’re likely seeing a significant number of market participants holding onto their MDY shares, rather than taking profits. This behavior indicates confidence in the current trend, and the lack of selling pressure supports the idea that the midcaps are in a healthy consolidation phase, ready to continue their upward momentum.

What we don’t want to see is overhead supply or the Point of Control (POC) level at $616 being tested without a strong breakout. Ideally, if the price can break above this range, it would signal the beginning of a markup phase for midcap stocks, potentially pushing them to all-time highs.

For now, the key test is how the price responds to the rising 10-EMA. The best-case scenario for bulls is unfolding right now, with demand stepping in to defend this level. If this support holds, it increases the likelihood of a continuation higher, but we’ll need to see continued buying pressure for confirmation.

Russell 2000

The small caps are in a similar position as the midcaps, with the Russell 2000 finding support on its rising 10-EMA, also on low relative volume. The key level to watch for a breakout is the overhead supply and Point of Control (POC) at $241. If the Russell 2000 can break above this level, it could signal the start of a stronger uptrend.

In the coming weeks, expect a potential surge in both MDY and IWM, as the QQQ may begin to cool down during this timeframe. As large-cap momentum slows, money will likely rotate into the more speculative small and midcap sectors, which tend to attract increased interest in risk-on environments.

DAILY FOCUS
Why Now Is The Time To Act

The market only offers swing traders a handful of exceptional opportunities each year—typically 3-4 clean, low-risk setups with high upside potential. Most of the time, swing trading is about waiting, requiring patience and discipline. But when the market shifts into a favorable phase, as it is now, those who act decisively can position themselves for outsized gains.

Markets follow a predictable cycle: stage 1 (accumulation), where prices consolidate and smart money quietly enters; stage 2 (expansion), when trends emerge with explosive breakouts; stage 3 (distribution), where risks increase as early entrants take profits; and stage 4 (markdown), when prices decline, and setups fade. Success as a swing trader depends on recognizing these cycles and identifying moments when the odds are stacked in your favor.

We’ve been particularly aggressive in accumulating exposure in cryptocurrency-related assets (e.g., COIN) and the Tech/AI sector (e.g., DUOL, NVDA). These positions reflect our conviction in their current momentum, and we are actively looking to increase exposure further as setups continue to develop. If you haven’t already, this is the time to refine your watchlist, focus on high-quality breakout opportunities, and be ready to act with confidence.

If you've found yourself unable to recognize the current market expansion phase and the surge of high-quality setups, it’s time to take a deep dive into your approach. Missing these opportunities can drastically impact your swing trading performance, especially because moments like these—when momentum is picking up and trends are emerging—don’t come around often. The first step is to determine whether the issue is related to your process or psychology.

Process Problems

A process problem arises when your strategy or tools aren't fully optimized to identify and capitalize on key opportunities. The market is dynamic, and if your process is outdated, unclear, or inefficient, it can lead to missed trades.

Is Your Watchlist Focused?

Your watchlist should consist of leading stocks within sectors showing strong relative strength. If your watchlist is too broad, filled with low-quality stocks, or not reflecting current market leadership, it becomes easy to overlook stocks that are breaking out of accumulation and entering their stage 2 uptrend.

• Focus on sectors that are currently in momentum, such as Tech, AI, or crypto, depending on what the market is favoring.

• Clean up your watchlist—remove stocks that have shown no recent relative strength or failed to show follow-through.

• Narrow your watchlist down to a manageable number (10-20) of stocks that exhibit high momentum.

Are You Scanning Effectively?

Effective scanning tools are essential for identifying stocks breaking out of accumulation phases. If you're relying on outdated tools or a manual approach, you're likely missing high-probability setups. Outdated methods can result in missed trades when they’re needed most.

• Invest time in setting up reliable scanners on platforms like TradingView or Finviz that can identify stocks breaking through resistance or showing unusual volume.

• Filter for stocks with strong technicals, including breakout patterns, volume surges, and price above moving averages.

• Regularly update your scanning criteria based on current market conditions (e.g., favoring stocks with recent price strength and low risk of pullback).

Are Your Criteria Too Rigid?

A common issue for many traders is waiting for the "perfect" setup. The market rarely offers perfection, and waiting too long for ideal conditions can cause you to miss out on actionable trades. Instead, focus on high-probability setups that offer acceptable risk/reward ratios, even if they aren't flawless.

• Develop clear rules for what constitutes a "good enough" setup. For instance, a stock breaking through resistance with strong volume and holding above key support levels might not be perfect, but it's a solid entry.

• Embrace flexibility in your entries. If the conditions align with your strategy, take the trade with confidence—even if it's not the textbook setup.

If you find your process isn’t providing clarity or consistent results, it’s time to revisit your trading plan, refine your scanning techniques, and define more flexible criteria for identifying breakout setups.

Psychology Problems

While a process issue is often about the tools you use, a psychological problem stems from mindset and mental habits. The ability to recognize setups is only half of the equation; the other half is having the confidence and discipline to act decisively when those setups present themselves.

Are You Hesitant to Pull the Trigger?

Fear of failure or past losses can paralyze you at the moment you need to act. It's natural to feel hesitation, but hesitation will kill your ability to take advantage of momentum-driven moves. Overthinking or second-guessing yourself right before entering a trade is a common psychological barrier.

• Shift your focus from fear of loss to the potential reward of taking a calculated risk. Trading isn’t about being right all the time—it’s about consistently executing with a defined risk/reward.

• Create a trade checklist to help you confirm entries and boost confidence in your decisions before you pull the trigger.

• If you hesitate, walk away for 10-15 minutes, refocus, and come back with a fresh mindset.

Are You Stuck in Analysis Paralysis?

Another psychological roadblock is overanalyzing every trade. Momentum trading is about quick, decisive actions when the conditions align. Overthinking every little detail can prevent you from entering when you should, causing you to miss profitable trades.

• Set time limits for analysis. Spend no more than 10 minutes analyzing each stock and defining your entry/exit strategy. Once the plan is set, take the trade and move on.

• Use checklist-style criteria for setup evaluation (e.g., volume confirmation, breakout from base, support/resistance levels) to streamline your decision-making process.

Are You Too Focused on the Past?

If you’ve been burned in previous trades or recent market conditions, it's easy to develop a bias that clouds your judgment. Holding onto past losses can prevent you from recognizing new opportunities in the current market environment.

• Practice mindfulness techniques to reset your mindset—whether it's taking deep breaths, walking away from the screen for a while, or even journaling to process emotions.

• Journal your trades to understand your mental state before and after entering trades. Reflecting on your past decisions (good or bad) will help you identify patterns in your trading psychology and build confidence moving forward.

The Ideal Entry

Stocks move in stair-step patterns, cycling through periods of consolidation and breakout. As a momentum trader, your primary goal is to enter positions as a stock transitions from a stage 1 base into a stage 2 uptrend and hold until distribution begins. Recognizing these bases and shifts in market character is essential. Look for breakouts marked by the breaking of descending resistance and confirmed by a surge in volume. These signals indicate growing demand and strong crowd participation.

This principle applies across timeframes, whether you’re analyzing daily, weekly, or intraday charts. At its core, it’s a conversation between buyers and sellers—a direct reflection of crowd psychology. Mastering the ability to identify these transitions, particularly the initial breakout from a stage 1 base into a stage 2 uptrend, is what sets successful momentum traders apart.

The unfortunate reality is that missing these primary breakouts significantly increases the likelihood of a failed entry if you later attempt to trade secondary patterns, such as volatility contraction patterns (VCPs). While it’s not impossible to find subsequent opportunities, the initial breakout represents the lowest-risk, highest-reward entry. Later entries carry a higher failure rate because the element of surprise diminishes, and the stock’s move may already be maturing.

WATCHLIST
Don’t Blink: Watch These Like A Hawk

MSTR: MicroStrategy Incorporated

• MSTR is on our main focus list for today, as with BTCUSD pushing higher and our position in COIN from yesterday seeing major follow-through, the leading cryptocurrency stock is likely next.

• There was a technical breakout in yesterday's session, but we did not execute, as MSTR failed to take out Friday's range and instead traded along its descending level of resistance at the breakout level of $406.

• Today, we are targeting a breakout, with a focus on the 5-minute opening range high, as usual, with a full-sized risk limit (0.5% of net asset value). One could make the case for using a 1-minute opening range break instead, given the strong confirmation from both BTC and COIN. However, we're happy to give up some size for additional confirmation, as cryptocurrency names are often volatile and lack liquidity in their intraday charts.

ARM: Arm Holdings plc

• ARM continues to be on our focus list, as yesterday's session failed to show the follow-through we were hoping for above $145. However, the setup remains valid and has actually become even more intriguing now, given that NVDA has led the AI and semiconductor names higher.