Vicious meme stock rallies have put several hedge funds out of business by squeezing investors exposed on the short side. That’s one way to get killed in investing. Even with stringent risk limits, as little as a 3.5% drawdown can get you booted from some seats.
Let’s be clear. The most recent rallies in GameStop (GME) and AMC Entertainment (AMC) have nothing to do with fundamentals. And with trading volumes greatly exceeding averages, most investors don’t know how to approach this setup.
Our proprietary signaling process is designed to help investors avoid getting blown up, while simultaneously generating returns. We go beyond simple moving averages and incorporate fractal mathematics in our “Go Anywhere” process to position people for the most success with the least amount of risk.
What is the best way to avoid massive portfolio drawdowns in meme stock rallies? Hedgeye CEO Keith McCullough said this morning on The Macro Show, “I’d stay with what the market’s doing. I’d look at all of it.”
The most important factors in McCullough’s assessment are his Risk-Range Signal, the TRADE line, and the TREND line. “That’s it, I don’t look at anything else,” he said.
“What is normal in Quad 2 is these types of things happening,” McCullough concluded on the rallies. “What we should look for is more of the process.”
Watch the full video for Keith’s Ranges and full breakdown.
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