🗞 Open For a Trade Idea

WHILE YOU POUR THE JOE… ☕️
Time Machine

The year was 2017, I was about one year and a half into learning how to trade.

At 19 years old I was having daily P/Ls in the thousands, trading $TLSA and $META options like nobody’s business.

Then I blew up (obviously) and lost over $50,000 in one summer… 😭 

That’s not all, I kept hitting wall after wall in the years that followed, until honing in on what matters and getting my lucky break at Goldman Sachs.

But that’s a story for another day, the point is I learned 5 key mistakes I made that slowed my progress, especially when I managed to grow from $5,000 into $50,000.

All of which I will walk you through (and how to fix them) in a completely free 5-day email experience 🫰 

It’s called The G(B)low-Up Window.
You can sign up for the waitlist here.

If you’re struggling to grow and keep your winnings, then this experience was literally designed for you.

Talking about growth, let’s get on with today’s email 📧…

NO MATTER WHAT HAPPENS
Market Neutral = Longer Life Span

Trading is one of the most stressful jobs in the world, your brain takes a beating every single day, from both the emotional and the intellectual side.

So, why make it harder on yourself by ONLY relying on day trading?

Do you really think these investment banking traders and hedge fund traders sit all day long watching prices tick up and down?

You don’t have to answer that, but it’s no.

In fact, 85% of the day is spent researching, modeling, and pitching ideas.

So here’s one for you to analyze and keep in your back pocket (it might even make you some money)

P.S.
We will show you how to get from day trader status to coming up with ideas like this one, so make sure you grab that free 5-day email experience.

Okay let’s go ⬇️ 

$FND Long / $COST Short

Call me unpatriotic, but I’m betting against one of America’s favorite wholesalers, even if they refuse to raise the price of the famous $1.50 hot dog.

Not because I think there’s anything wrong with the company, but I do think it has gotten too hot for its own good, especially in a world where tariff uncertainty is king.

At the same time, I need a way to protect myself in case I’m wrong on this one, and that is where a long in Dollar Tree comes in handy.

So let me explain:

If you read our last newsletter on a macro breakdown, then you remember this picture, and it’s essentially telling you that real rates are still very much negative, meaning we have a reason to stay risk-on for the markets.

Now there is still one major question left to be answered.

Tariffs…

All in, there are essentially two scenarios by August 12th (which is when the 90-day truce ends between the US and China):

1. We stay at 10%

2. We go on a full trade war and go to 40% or more again

And of course we want to focus on the retail sector in this case, since that is arguably the most affected area under this tariff regime uncertainty.

Retail Sales

We just received retail sales data yesterday, and you can clearly see the trend of post-tariff fear front-running.

The weakest area was Motor Vehicle Parts, so we are ruling out our $AAP long thesis for now.

On the other hand, Miscellaneous Store Retailers saw the best run this month compared to last month as well.

What that tells me is that, even though credit is tight right now, people have enough to keep buying their essentials at these discount retail places.

Enter Dollar Tree. ✅ 

Door #1, or Door #2?

Okay back to tariffs, here’s what could help us play a long in Dollar Tree and a short in Costco:

1. If tariffs stay at 10%, then the safety play in Costco is kind of less attractive isn’t it? At the same time, it would be a great weight lifted off Dollar Tree’s back.

2. If tariffs go to 40%, then I think this is already priced into both names, so it would be up to the consumer reaction to see what happens here.

Judging by the way 10yr bonds have traded in the past 6 months, I don’t think anyone is pricing in any more tariffs at this point.

It’s just too stable. ⚖️ 

Model The Trade

If you’re part of our Sovereign Trader program, then you know what comes next.

Correlation regimes between $DLTR and $COST look pretty stable to me.

If anything, we are now back to the average normalized ranges, meaning there could be a gap in performance to be closed down (and there’s a massive one).

Using regressive statistics to test the starionarity of the A/B time series…

Okay I know you probably don’t know what that means, so let me simplify: ⤵️ 

• A scientific method of answering the question “Do these stocks get back together when they move too far apart” came back as a resounding yes.

• Then we asked “How far apart is TOO far apart and expected to come bouncing back” and the image above is what we got.

That red boundary is the deviation limits of this $DLTR - 0.388370829098506 * $COST (you can graph this in TOS) time series (adjusted for neutrality), and we are now at the bottom end.

Which means if we buy $DLTR and short $COST we have pretty good chances of making money on this trade. 💵 

Let’s check back in 20-60 days and see how we did, but so far I can tell you we’re doing pretty good 🫰 

Before I leave you, notice the huge difference between buying or selling something just because a chart told you to, and having a solid fundamental reason to trade.

Not to mention the math to back it up as well.

All of that & more is what awaits you after this free 5-day email experience.

So make sure you’re signed up for the waitlist.

G.

GO AND MAKE IT HAPPEN
Endless Loop

Have you studied George Soros’ theory of reflexivity?

It’s like game theory but on steroids and heavily focused on financial markets. Today’s book recommendation 📖 is a bit heavy and slow to read, but trust me it’ll be worth it in the future.

Plus, it’s also a timeless classic.

To your success,

G. 🥃