Hey trader,
My daughter used Duolingo for years. She learned Chinese.
She learned Korean. She pulled straight A's in Spanish through the platform.
I have nothing bad to say about the product.
Now look at the stock. Look where it was and look where it is now.
This is the poster child for what I see happening to 50% of the stocks in this market. You are going to see things like this happen across the board.
Profitable companies are getting destroyed while algorithms chase slopes in every other direction.
I told members this week that the lesson behind Duolingo applies far beyond one ticker. The Genesis Cog Scanner tracks the signals that separate real institutional buying from algorithmic noise.
Understanding that difference is what keeps you on the right side of these moves.
A Wonderful Company That Nobody Wants
Duolingo is profitable. It is issued to schools across the country.
But Duolingo competes with Google. It competes with Bing.
It looked like a monopoly until you realized it was not one. That is what did it in.
Earnings did not matter here. Valuation did not matter here.
The stock is dirt cheap and I still will not buy it because I do not buy crashing stocks.
I want nothing to do with it until it consolidates. The lesson is that you cannot live inside the market without knowing the stock itself and understanding every facet of it.
Running on Fumes
Rocket Lab builds rockets and boosters out of Long Beach, California. The stock sits at $67.
The company has never made money. They reported a loss of 9 cents this quarter.
I labeled this one "running on fumes" for a reason.
- The stock trades at $67 with no earnings history. That is pure speculation. People are playing a game of chicken, betting the company will eventually earn its way into the valuation. I do not play that game.
- The stock does not contribute to the fabric of the economy. It builds rockets to go to the moon. When you wake up in the morning, you are not thinking about flying on a rocket.
Do not put the fate of your wealth in the market's hands. Always err on the side of common sense.
It will serve you for the rest of your life.
Nvidia Proves the Same Point
They beat earnings estimates by 13 cents. The stock got destroyed anyway.
Forget about the chart for a moment. Look at the money flow.Everybody is heading for the exit.
Somebody bought this stock at $544. Some institutions bought it at $200.
They are sitting underneath their desks right now hoping nobody asks them to explain.
Wall Street makes up mythical lies all the time. A company beats by a penny and they destroy the stock by $30.
The market is the ultimate humbling practice in the world. You have to play for risk management a hundred percent of the time.
The Lesson That Applies to Everything
Do not live your life on technicals. I can promise you that if you rely on technicals alone and never do fundamental research, you are going to get exposed at some point.
Palantir had an RSI of 99 and is now getting killed. Paychex has had an RSI below 30 for almost two months while earning $6.40 a share at 10 to 12 times earnings.
These are opposite ends of the same problem. The algorithms push everything to extremes and the only way to survive is to combine technical awareness with fundamental knowledge.
One without the other will destroy you.
Next week in the Genesis COG curriculum is Fundamentals Week. Week six.
Members will learn how to read balance sheets and income statements. It is a crash course for exactly this kind of market.
The Genesis COG System tracks when these structural shifts appear in real price action. It flagged Nvidia's deteriorating money flow while analysts were still upgrading.
It identified Duolingo's breakdown pattern before the collapse accelerated.
Knowing what a company does is only half the battle. Knowing what the stock is doing is the other half.
When those two pictures contradict each other, the stock wins every time.
Have a good weekend. Monday comes fast. Be ready.
Professor Jeffrey Bierman
Creator of the Genesis COG System