With the stock market, there's going to be periods of:

The Bull Phase

• Hope → Optimism → Belief → Thrill → Euphoria

People are going to be making money left and right at this period. People are going to be pulling out loans—it doesn't matter what sort of stock anyone's in, they're going to make money. It's a peak bull run. Think of the crypto mania at that one point, think of GameStop. Everyone was making money, didn't matter about the fundamentals. Stocks were trading outside of the fundamentals, and everyone was making money.

The Transition and Bear Phase

Then there will be a period where they'll have a pretty significant dip, but because of that period of euphoria and thrill, everyone just suspects that it's just a cool-off prior to the next rally. And it ends up not happening, and stocks continue to fall.

People get anxious. Like I said, people were pulling out margin to get into positions to hopefully make a quick buck, and stocks continually fall and fall. People get worried about getting margin called.

People have periods of denial where they believe they're in great companies that they'll come back, but then it continues to fall and panic starts to set in. Eventually capitulation happens—they end up selling out of the positions they couldn't withhold. They couldn't withstand the emotions of the stock market and had to sell out.

Then anger creeps in, and then depression creeps in. People are telling themselves they'll never enter the stock market again.

The Cycle Repeats

Surely enough, the cycle repeats itself. It starts to rally, there's a period of disbelief—they believe it's a sucker rally that it's going to fail like many others. And then there's hope, optimism, belief, thrill, euphoria once again. This happens time and time again in the stock market, and I'm going to show you guys how I capitalized on these emotions and how you guys need to be aware of your emotions when you are investing in the stock market.

Once again, like I said, with market psychology, these institutions and market makers play and prey on those emotions:

1. Stock goes up → Everyone's euphoric → Everyone's buying stocks at that point (think of crypto like I said, everyone was buying it)
2. Then they pull the plug → Everything starts to fall → People have all these emotions → They start getting anxious
3. People were leveraging into positions → Scared of getting margin called and getting their money pulled away from them
4. Periods of denial → They believe they're in great companies → They think everything's going to come back eventually
5. It continues to fall → We are going to be playing into that as well

We know that market makers are going to continually drop it into areas where people are panicking, where people have set stop losses, where people end up having to sell out of their stocks or option contracts. They want to get out of the markets—they can't handle it anymore. They start getting angry about the market. It continually falls and falls for what seems like eternity.

And then that's when things start to recover—when sentiment is so poor, everyone has just given up. And then, like again, stocks slowly start rallying up. Everyone believes it's a sucker's rally—it's been negative for so long, we're talking months and months of red. And sure enough, periods of optimism, belief, all over again.

Like I said, this is how I made $70,000 in less than 30 days. I knew market makers were playing off these emotions. A lot of people gave up on the stock by then, and this stock was Block, ticker SQ.

The Setup

• SQ had great fundamentals—the numbers, the retail name numbers leading up to earnings were great
• The stock, however, kept getting sold off because of Jack Dorsey. Everyone was assuming, everyone was saying he was on his way out, was lackadaisical in his management
• I ended up capitalizing on that. I knew the stock wasn't going to remain like that forever
• I knew the direction of the company was forward-thinking—they were not stagnant
• I knew market makers were playing into the emotions, and this is when I pulled the trigger, bought a ton of shares of Block stock, and made a killing

The Analysis

Remember, at that one point there were periods of euphoria—the stock was trading upwards of like $300—and then just continually fell and fell for what seemed like months on end. We started reaching capitulation levels, areas of major demand. I kept accumulating the stock, knowing the stock inevitably was going to have a crazy rally, and inevitably earnings came up and it did, to many people's surprise.

It rallied up, but for the informed investor, it was just in due time. I had to ask myself leading up to earnings: understanding why the stock capitulated, why the stock fell—and it was due to stock-based compensation. The fundamentals were not the best, but overall it was doing well. The market, however, was pricing bankruptcy into the stock.

The Key Insight

A lot of times you're going to see this play out in the stock market time after time again into fundamentally great companies, just because of poor sentiment. The whole S&P 500 sentiment of the stock was not doing too well. I understood the company was great to hold for the long term, and I was buying in at great valuations. It was just a matter of time before it rebounded, and that's when I had the conviction to buy a massive amount of shares into the company.

If you can check the stock when it was at capitulation levels prior to earnings, it had a huge upside—77% upside from there. You didn't even need to capitalize on the majority of the upside. Prior to that, if you entered in a little early, you would have made 30-40%—all gains that outperform the index funds, all gains that outperform the index funds of 6% to 10% a year.

The Patience Factor

Like I said, a lot of people don't know exactly where the bottom is—that's what the difficulty is. By having that level of patience, you're able to hold through the downturn, you're able to come out with massive returns. You may have entered it early, you may have captured only 40% of the 77% move, but the thing is you're always buying in at a great valuation. It was only inevitable—it's just a matter of time until things flip your way and you're able to slowly and effectively compound your wealth.

Next, we'll be delving into price action and volume.

What is Price Action?

Price action is defined as the movement of a stock price over time. Both price action and volume are considered leading indicators—they ultimately provide the biggest clues in the stock market.

All the other technical indicators like the golden cross, the death cross, any other indicator like the RSI, those are considered lagging indicators, which price action must occur first to provide the input of whatever indicator it might be. So price action and volume is the real action in the market.

Does that mean all the other indicators—the RSI, the death cross, the golden cross—are useless? No, they're very useful when you combine them with price action and volume.

1. Mean Reversion Using Moving Averages

There are two key price action strategies that I want you guys to really understand. The first one being mean reversion using the simple 50 and 200 moving averages.

Price action will almost always revert back to the average, and I'm going to delve into a chart so you guys can see in real time, time after time, price action will always revert back to the moving average.

How to Utilize Mean Reversion

If price action makes a huge move away from the moving average, it will inevitably run back to that moving average, which will be a good indicator to long a stock into the moving average.

Does that mean to simply just enter if a stock veers away vastly far from the moving average? No—you want to combine this with confluences.

2. Big Green Candle Strategy

Next is a big green candle—simple as that. No wicks. It just ultimately shows buying pressure was so great, price shot up so high, selling pressure was too weak to fend off the buyers. I'm going to show you guys that in Trading View as well.

Volume plays an important role in price action analysis as it can help investors and traders identify buying and selling pressure. It can confirm false and true movements in the stock market.

Volume Confirmation Examples:

• If a stock goes up with smaller than average volume: The movement may be setting up for a bull trap—it may not be a true move upward
• If a stock goes up with higher than average volume: There's good confirmation that massive buyers are present—I'm talking about your institutional investors, big players in the stock market

This is Tesla stock on the daily time frame, and every time you guys see here that the stock veered away very far away from the moving average, it will inevitably fall back to the moving average and will use it as resistance or end up using it to bounce off of.

Tesla Mean Reversion Examples:

• Here we can see very far away from the moving average → played the moving average → bounced up away from it
• We're very far away from the moving average → back down to the moving average
• Very far away → back to the moving average
• Very far away → down to the moving average

You can see time and time after again, anytime it veers away from the moving average to a great amount, it will always revert back.

To show you that I'm not pinpointing or hand-selecting certain stocks that this is happening to, I'll just delve into another stock for you guys as well. I want you guys to do this for yourselves when you guys are testing this whole theory out, but you're going to see time and time after again it'll inevitably play out:

Apple Mean Reversion Examples:

• Very far away from the moving average for Apple → back to the moving average
• Very far away → end up back
• Very far away → coming back
• Very far away → coming back

Time and time after again, no matter what stock you're playing, price action will always revert back to the mean, the average.

Does that mean, like I said, to just enter a stock blindly when it veers very far away from the moving average? No—I want you guys to have every advantage in your toolbook. So I want you guys to utilize this with supply and demand and RSI divergences, other confluences that will support your thesis that it's going the direction you're seeking.

Next is the big green candle. Every time you guys see a big bullish candle, you can suspect that there's going to be a lot of buying pressure. Buying pressure far exceeded the selling volume, which leads way to momentum higher into the stock.

Tesla Big Green Candle Examples:

As you can see here, there's a huge green candle here. Pretty much you can see that we consolidated around here, even fell down—we even fell down past the prior green candle—but inevitably it travels higher.

You guys see a big green candle here → travel higher. Big green candle here → travel higher. These are the things that I want you guys to pay attention to.

Volume Confirmation

When you guys are seeing a big green candle, I want you guys to find other confluences—whether that means huge buying volume. Look at the volume here compared to all the previous volume prior—very strong buying volume. Inevitably, we traveled higher.

• Understand the emotional cycle: Hope → Euphoria → Panic → Capitulation → Recovery
• Think like market makers: They exploit retail emotions at key turning points
• Use price action and volume as leading indicators: They provide the clearest market signals
• Mean reversion is powerful: Stocks always return to their moving averages
• Volume confirms moves: High volume validates price movements, low volume suggests false moves
• Combine multiple confluences: Never rely on just one indicator

So that is it for day five. I want to know your biggest takeaway from this day. I want you guys to post it inside of the Facebook group and hashtag day 5 for me in the group. I'll see you guys in the next lesson.

In our next lesson, we'll put it all together—combining fundamental analysis, technical analysis, supply and demand levels, Fibonacci retracements, and market psychology to create a comprehensive investment strategy. We'll show you how to build a complete system that gives you every advantage possible.

Remember: The market is driven by emotions, and those emotions create predictable patterns. By understanding these patterns and using price action and volume to confirm your analysis, you position yourself to profit when others are driven by fear and greed.