How to Profit Safely in This Mega Melt-Up VIEW IN BROWSER
By Michael Salvatore, Editor, TradeSmith Daily - TSLA, NVDA, and INTC make giant moves
- The Mega Melt-Up continues
- The lessons from 1929 and 1999
- Why and how to be “bullish first, cautious after”
- This robotics pick ran up 78% in three weeks
Watch Elon turn $1 billion into $100 billion… Last Monday, Tesla CEO, world’s richest man, and trillionaire-in-the-making Elon Musk bought $1 billion of Tesla (TSLA) stock. That represented about 0.08% of the company’s market cap (the sum value of all its outstanding shares). In response, investors piled in and pushed Tesla’s market cap up by about $100 billion (the green circle below). One way to think of that is as a 100x premium on Elon’s stock buy. 
We talked recently about how Tesla’s board is dangling a trillion-dollar pay package for Elon, payable on certain milestones such as market-cap growth and vehicle deliveries. The idea seems to be luring him away from his role in politics to train his focus back on Tesla. We could read Elon’s $1 billion stock buy as saying “challenge accepted.” Then we could read the investor response as saying “thank goodness.” Hopefully for Tesla shareholders, it means Elon can return to executing on his grand vision of robotaxis, humanoid robots, and prolific solar power generation. But still, this is one of the largest insider stock buys I’ve seen – and maybe one of the largest ever. And it wasn’t the only big tech buy to hit the headlines. | Recommended Link | | | | Breakthrough technology threatens their trillion-dollar industry. Using three proprietary mathematical pillars, backtests show it would have improved Warren Buffett, Ray Dalio, and David Einhorn’s legendary returns. Now available to regular people. Click here to see it in action. |  | | Last Thursday, Nvidia (NVDA) made its own big move… The chip giant announced it would invest $5 billion into Intel (INTC) and co-design chips with it. This sent INTC up nearly 23% on the day, representing more than $31 billion in added market cap. It’s not quite the 100x Elon Premium. It’s more like 6x – not that INTC shareholders are complaining. But investors are responding to these insider buys with what you might call irrational exuberance. And we need to pay attention because it’s further confirmation of our “Mega Melt-Up” thesis. Make no mistake, the Mega Melt-Up is alive and well… Had you any doubt about whether the stock market was still in a melt up, news like this should put those concerns to bed. Investors do not normally chase $1 billion with $100 billion. It’s classic melt-up behavior. And we’re not just in a regular melt up. Our research shows we’re in something bigger and rarer: a Mega Melt-Up. These have happened only twice before… - The Roaring ‘20s – This was a time of massive technological advances with radio, aviation, and electrification… the first margin loans, letting people borrow to trade stocks… and an explosion of consumer credit lines that powered the economy higher.
- The 1990s Dot-Com Bubble – This was marked by the advent of the commercial internet… the first online brokerage accounts, allowing fast access to trading… and a similar boom in consumer credit and borrowing.
Those times, just like today, saw stock prices rip higher. From April 1921 to the top in 1929, the Dow soared 463%. And from 1995 until the peak of the dot-com mania in 2000, the tech-led Nasdaq 100 went up more than 1,100%. This third Mega Melt-Up began in 2020 with a revolution in trading with easy-to-access brokerage apps such as Robinhood (HOOD)… continued in 2023 with the dawn of AI… and pushes through today with lower borrowing costs set to power another consumer credit boom. You must manage your emotions – and expectations – in times like this… The thing about Mega Melt-Ups is that, at some point, they inevitably melt down. The Roaring ‘20s gave way to the Great Depression. The Dow fell by 90% and didn’t recover for 25 years. 
And the dot-com bubble bust lopped 50% off the Nasdaq 100, taking another 16 years to surpass those previous highs. 
Price action like this can get ahead of itself. This convinces investors that there’ll be no end to the party. It’s about that time when the market finds its way turning the other direction, and those same investors get smoked. You have to keep an eye on the signs of froth out there and follow your risk management. At the same time, you can’t lean too bearish, either. Mega Melt-Ups are rare wealth-building moments in history if you play them right. Amazon.com (AMZN), for instance, shot up 4,535% from its 1997 IPO to the dot-com bubble peak. Microsoft (MSFT) soared 1,500% from the start of 1995 to its peak. And Oracle (ORCL) gained as much as 1,863%. In short, you want to be in the stocks benefitting from the Mega Melt-Up, with a plan to exit once the tide turns. And sitting on the sidelines, especially in an era with high inflation, is not a great option. You’ll miss out on potential life-changing gains and see the buying power of your dollars dwindle at a current rate of 3% a year. You want to be what I’ll call “bullish first, cautious after”… If you hear about a great opportunity, you shouldn’t hesitate to get a slice of the action. Stock prices can rise at lightning speed in a Mega Melt Up. If you wait around too long, you’ll miss the best opportunity to profit. Just ask anyone who was eyeing ORCL shares last week. After the company shared a revenue forecast growth of 700% over the next five years, its stock shot up 40% in a single trading day. But right after you get “bullish first” and buy in, you should get “cautious after.” By that I mean setting up your risk management based on TradeSmith’s tools. Our foremost guidance in this area is the trailing stop-loss guidance we provide with TradeStops. A stop loss kicks you out of a stock once it falls to a predetermined level. This means you never take a ruinous loss. A trailing stop is even better because it follows the stock price higher. So if you set a trailing stop loss of 20% and the stock rises, your stop-out price rises along with it. With a trailing stop and even a mildly winning position, you’ll never sell at a price lower than your original stop. With these orders, you can quickly get into position with immediate and rising downside protection. And TradeSmith innovates on trailing stops further with our Volatility Quotient (VQ%). By factoring in a stock’s historical volatility, you can optimize your trailing stop-loss level based on how volatile a stock is. It’ll keep you riding the most volatile melt-up names, while still protecting you on the downside. That’s exactly the kind of strategy you need in a market like this, and exactly what TradeStops offers. So how can you safely play the Mega Melt-Up? Our software suite Trade360 shows the way. It comes with TradeStops, which can help you manage your risk on all your positions. In fact, you can gauge the health of any of your stocks the same way… and make sure they’re all in the Green Zone. (Or see if any have strayed into the Yellow Zone or Red Zone instead.) It also comes with our Mega Melt-Up indicator, which you can use to see which of the market indexes are currently in melt-up mode. Not only that, but it also comes with a slew of trading strategies designed to help you make money in bull markets, bear markets, and everything in between. Learn all about it, and more about our Mega Melt-Up thesis, right here. In the meantime, here’s a major AI theme to ride the wave… If the first few years of the melt-up were marked by AI in digital form – think ChatGPT, Google’ Gemini, and Anthropic’s Claude – robotics are shaping up to be the big AI investing theme to come. Robots have been around for decades now, albeit in much simpler form. But with advances in AI, the next frontier is taking robotic complexity to the next level. Over at our MegaTrends advisory, colleagues Andy and Landon Swan recently recommended small-cap robotics company Richtech Robotics (RR). The company is small (less than $1 billion) and has a “Sky-High” Volatility Quotient of 95%. But its mission is the kind of future-tech optimism that’s made for melt-ups like we’re in right now. The company builds robots specially designed for service industry tasks. Baristas, bartenders, nurses, warehouse workers – Richtech’s robotics line aims to build robots that supplement and, in some cases, outright replace these roles. 
Richtech’s ADAM serves drinks at Globe Life Field (Source: Richtech Robotics) We aren’t here to confront the ethics of such a mission… just to watch the market fireworks. And RR has delivered, with the stock up nearly 78% since Andy and Landon recommended it on Sept. 3 – less than three weeks ago. They explicitly recommend the shares up to $3, so this stock isn’t a buy right now. But it’s testament to just how quickly these high-tech stories are getting snapped up in the Melt-Up. Keep your eyes out for more opportunities just like this, especially from the Swan brothers, as the melt-up carries on. For two such examples, just check out my interview with Andy Swan we published on Saturday, all about the future of U.S. energy competitiveness… And Andy’s Sunday dispatch, where he showed why Tesla is still rife with opportunity even after the recent surge. To building wealth beyond measure, 
Michael Salvatore
Editor, TradeSmith Daily (Michael Salvatore held GOOGL and NVDA at the time of this writing.) | 
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