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Sometimes the best trade is the one you don’t make.
I’ve been getting questions about Robinhood (HOOD), and after analyzing the chart using Elliott Wave principles, I’ve got to be straight with you — I’m not touching this one right now.
The move up from the prior low contains too many overlaps to qualify as a clean bullish impulse. In Elliott Wave analysis, a strong directional move normally unfolds in five waves, with Wave Four remaining above the territory of Wave One.
When those waves up and down repeatedly overlap, as they do with HOOD, it suggests the market is correcting or consolidating rather than building a reliable trend higher.
I’ve tried several different wave counts, and none resolves cleanly. You could argue that this is a leading diagonal, which allows overlap, but diagonals are notoriously unreliable and often fail to produce sustained continuation.
The Downside Risk Is Significant
Now consider what could happen if the chart resolves lower…
Using the decline from the October high near $150 into March as a guide, then projecting a similar move from the recent high, HOOD could fall toward the $30 zone. With shares in the $90s, that represents roughly $60 of potential downside.
Even if the decline doesn’t reach that full target, the wave structure suggests a break from current levels could send the stock toward $50 or lower. I’d rather consider buying in the $60s than risk riding it down from the $90s.
The trend line connecting the late-May low with current levels has held so far, but trend lines are among the least reliable forms of technical analysis. They work until they don’t. We see those lines and assign meaning to them, but the market doesn’t care about our drawings.
Why I’m Protecting My Capital
The unresolved wave structure is only part of the risk. HOOD has a beta near four — one of the highest I’ve seen for a non-leveraged individual stock. Beta measures how dramatically a stock tends to move relative to the broader market, so a reading around four points to extreme volatility.
That can amplify gains, but it can punish a bad entry just as quickly.
My bottom line is simple: The overlaps undermine the bullish case, the downside targets are substantial and the stock’s volatility leaves little room for error.
So what am I doing? Nothing with HOOD right now.
Sometimes sitting on your hands is the smartest move you can make. The chart will eventually tell us what it wants to do. Until then, I’m staying cautious and protecting my capital.
Jeffry Turnmire
Jeffry Turnmire Trading
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I’m just a regular dude in Knoxville, Tennessee: a husband, father, civil engineer, urban farmer, maker and trader.
I’ve been at this trading thing with real money for 20-plus years, and started paper trading over 35 years ago. I have a knack for making some epic predictions that just may very well come true. Why share them? Because I like helping other people — it’s the Eagle Scout in me.
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