Was the Mania from 2021 a One-Off Event? Or is Round 2 Coming?

The bull market insanity from 2020 through 2021 was the wildest and most mind boggling large scale event I’ve ever experienced in my years of trading, however after 8+ months now of heavy correcting and selling off it seems we’ve all sobered up and have come back down to earth. When it’s all said and done I believe this phase of financial/monetary/market history will have more written about it trying to make sense of it all than in any other time in history, however for this article I want to mainly stick to and focus on one main premise/prediction. We’re not done yet with the manic madness and there’s at least one more round of unbridled bullishness to take advantage of.

In the OTC world almost everything ran hard in 2020/21, and since then almost everything has come back down to earth. The question is, was that the end of the show? After some extensive scanning I’ve noticed that there’s a reoccurring pattern emerging in these penny charts, specifically on a very long term time frame. When a discernible pattern becomes obvious on the monthly chart time frame, we’re probably talking about years worth of momentum/accumulation/distribution/price discovery/etc, which also implies that it’s a force of nature which isn’t easily reversed. While a monthly chart setup may take a long time to build up, once it gets to a certain point it becomes very hard to reverse. The way I see it, significant patterns and setups on the monthly chart do not happen without reason and intention behind the scenes.

It’s fairly rare to see a strong monthly chart in the penny stock world, as most penny stocks by nature tend to be poor performers on most metrics – with brief respites of upside sprinkled in to keep the casino interesting and inviting. Long downtrends and brief/violent rallies generally don’t make for nice long term trends/charts. So with that in mind, I’ve never in my trading career seen so many monthly charts in the OTC with higher highs/lows and in macro picture uptrends. Something is up, the show from 20/21 does not appear to be over by my account.

What I mean by this is there’s an uncanny amount of OTC stocks that punched through to new long term (if not all time) highs back in 2020/21, and though most of them have all been put back on ice (sold off/corrected/consolidated), many of them have been able to base above their old breakout spots. So the pattern to identify is this:

  • OTC stock breaks out to a new long term (if not an all time) high either in late 2020 or 2021
  • Rally stalls and tops out after an impressive run, generally sometime in 2021
  • After the price peaks it dips for many months but ultimately seems to find a floor somewhere around/above the original breakout level (old resistance becomes new support)

The basic idea for this pattern is a new significant long term high, then a higher low after that. An example of that is $GDVM:

The chart above is $GDVM’s monthly chart and you can see it began to wake up in early 2021, then really ran and broke out to new meaningful highs in summer 2021, and then chilled out and corrected/consolidated for a number of months – while proving it could hold above the old ceiling. This is the general pattern I’d like to highlight and have everyone watch out for, because if I’m right then many of these setups are destined to retest and ultimately break their 2021 highs. Case in point, here’s what $GDVM has been doing of late:

Of the long list of OTC stocks that made meaningful long term (if not all time) highs in 2021, the more of them that can break those 2021 highs means we’re more and more likely looking at a subsequent round or leg up to the madness which began in 2020. I can’t overstate it enough just how big of a deal that would be, as that first round was the most epic trading environment I’ve ever been blessed to be a part of, and a secondary wave/leg up tends to imply an ever bigger expansion in price and volume. That is to say, I think round 2 could be even more lucrative and insane than the first. That will be especially true if you can ride out a play from the lows of 2022 and it ends up breaking it’s 2021 peak and confirms a continuation breakout to new all time highs. Easier said than done, but it will be possible, especially if we’re watching for just this sort of event to further pan out – with a tailored watch-list of the most promising long term charts.

An even better or further along example of this pattern playing out successfully is a recent runner $GEGI, which has followed the precise pattern I highlighted:

$GEGI broke out to test new long term highs in 2021, came back to consolidate with a higher low in 2022, then after that good long shakeout and decline it ran back to retest the 2021 highs and break through them. One of the key details to virtually all of these monthly chart setups I’m highlighting is that after/above their 2021 peak, there are nothing but blue skies overhead, ie the price is essentially breaking out to price levels not seen before – and that tends to be the environment most favorable for runaway rallies and life changing returns.

As of this article, I’ve found 5 tickers which fit this description of having the long term monthly chart pattern in place and are now breaking their respective 2021 peak; $GEGI, $GDVM $TXTM $VAPR and $BRGC. If I’m right about this, then there should be many more which go on to do the exact same thing, break through their 2021s highs and go onto blue skies. My current list of OTC stocks that have the general setup in place and are candidates for this pattern playing out is pushing 130 and I’m not even done scanning for them yet. Like I said before, it’s not all too often you see uptrends on a macro scale in the OTC market, so I believe that to see so many of them all seemingly in position to break out to such critical price levels isn’t an accident. As more and more of these setups in the OTC market trigger continuation breakouts of their 2021 moves, the market will get more and more confident and bullish, and then the FOMO kicks in as one runner leads to another.

I suspect that what we’re seeing is a massive blow off top phase setting up for the OTC market and I think the best plays will be these monthly charts that continue their long term macro scale breakouts. The whys to all of this will be debated for many years to come (like why would such low quality stocks all break out in unison in such a precarious macro environment?), but without trying to dissect things too much these charts simply look to me like they’re in the midst of a massive capital influx, ie there’s way too much capital out there and it needs to find a home, and these OTC stocks seem to be targets at the moment. Even though most have gone quiet this year, I believe something big began back in 2020/21 and 2022 has been more of an intermission in the overall action, rather than an ultimate reversal of what we saw.

Side note: There’s a theory called the Dollar Milkshake which is one possible explanation as to where all this capital is coming from and why it’s desperately trying to find a home, but again that’s not my area of expertise or the scope of this article. My main point is these monthly charts are very atypical by historical OTC standards, especially in such large quantities, and in and of themselves are very actionable and tradeable events which are suggesting a trading environment similar to late 2020 and 2021 returning to us.

A while back I posted an article highlighting the common chart theme of many of Frank’s AlphaRidge plays, which is exactly the same pattern I’m now highlighting here. Go check out that article and look at the charts I posted and you’ll see the setup to the pattern; The 2021 rally to new long term highs followed up by an extended pullback phase but then also putting in a new higher low (current pullback lows should be at/above the old breakout point from 2021. None of those listed in that article have gone on to retest their 2021 peak yet, let alone broken through, but I do think we’re going to see many of those same tickers test and break their 2021 highs and signal continuation moves, especially as the theme/pattern becomes more and more obvious to the OTC world as a whole.

What makes me feel extra bullish about this thesis is how little confidence I sense in the OTC world and how bearish the overall sentiment appears to be. After 6-12 months of selling off, most of the retail flippers have long moved on from the hot plays from 2021, and I get the overwhelming feeling most believe that it was a one-off event and nothing more. The lack of bullishness and hype means the environment is perfect for many of these tickers to start to sneak back up to their 2021 highs, then once they’re through to new highs the retail crowd is likely to jump back in. It’s a perfect scenario for a bull market to begin from, as you don’t want to have a crowded trade too early. The more bashing and pessimism I see on these tickers with incredible monthly charts, the more I get the sense that we’re on the verge of something big.

Once I noticed this overall trend, my first step was to compile a watch-list of tickers that fit this mold. 130 and counting, hopefully I can push 200 eventually. From there the plan is to stay on top of these plays as hopefully more and more move into position to first test their 2021 highs, then eventually blast through. Keep in mind that the further a ticker has to go to get from it’s current lows to it’s 2021 peak, the more likely it is to try and shake people out somewhere around that pivotal breakout level. Look at $GEGI’s recent path to new highs and you’ll see it first popped to test the 2021 peak in June, then retraced and had a significant shakeout before re-attacking that breakout level and ultimately getting through on the second try.

With a watch-list this extensive, I’m obviously not trying to catch them all. I’m following this many because I want to be connected to the beat of this market and as the number of successful breakouts of the 2021 highs grows, I want to be ready to get more aggressive with them. I’ll be happy to share my list with anyone in the chat and I’ll be very vocal about this theme and pattern, especially when/if I start to get major confirmation of this overall trend.

There will be many ways to potentially play any of these given setups, but the most upside will be from getting in heavily into one/several plays well before their 2021 peaks are tested, and then guessing right and having one/several go on to not only test their respective peaks but then blast through and signal a fresh long term breakout to new highs. While that approach will have the most upside, there’s also more risk because you’re basing that trade on the assumption that it will indeed retest and break it’s 2021 peak. On the other hand, waiting for more confirmation of said test and breakout will improve your odds of a successful trade, but it will come at a higher cost of entry, smaller position size and possibly more exposure to attempted shake outs.

I believe this macro trend/theme/pattern is going to be more and more relevant in the OTC as things play out. From Frank’s old tickers turned merger plays to $DFCO to many mining stocks, I’m seeing this same pattern emerge left and right. These are huge moves on a scope that most of us will miss unless we’re looking specifically for them, ie let’s not miss the forest for the trees. The scope we’re talking about here implies time and patience as a monthly chart takes an entire month for each candle to pan out, and that’s a time frame most traders are not used to dealing with.

In the coming days/weeks/ and hopefully many months expect to hear me reference these plays and this general theme. Not only do I believe we could be looking at another incredible opportunity similar in nature to the 2021 event (though almost definitely not identical), but if we’re actually ready and prepared for it then we can do a better job at taking advantage of it than we did in round 1.

I’ll continue to scan and add as many tickers to this watch-list as I can as well as track any on the list that look to be turning back up and building volume as they potentially try to retest their 2021 peaks. In no way am I recommending any major moves right now other than to keep your eye out for this general theme to possibly further play out, to stay patient and diligent and to be ready to act upon it. If you have any questions, comments or ideas to add, please feel free to post them in the chat rooms. The idea for articles like this is to provide a bigger picture idea or concept for everyone to chomp on, but then the actual battle and all the gritty details take place in the trenches, ie the chat rooms.

I really appreciate having all of you in the community/chat and I want more than anything for all of us to profit beyond our wildest imaginations during what is likely to be one of the wildest eras in market history. With an OTC full of monthly charts like this, I think we’re in the right place at the right time. Keep the faith.

PS – This current iteration of my monthly chart watch-list I’m working on (130 and counting) is an all inclusive one with what may end up being lots of setups that are unable to take out their respective 2021 highs. This will probably be especially true for the setups that 1) have a long way to go to get back to their 2021 highs (ie the ones that have fallen the most from their 2021 glory) and 2) also have a lot of volume at those previous overhead price levels. Once I’m finished scanning and working on this list, I’ll probably compile a second list of my top 10 or 20 monthly charts and create a new post for that. Be on the lookout for that.