With having the first three days of freedom fly by so fast already, I’ve finally gotten the chance to focus on the stock market and be more prepared to trade with precision.
Unfortunately I am still waiting for my account to go live to commence trading, but so far I am very happy with the trades I’ve called mentally and how I will approach trading penny stocks once my account is good to go.
Just like a doctor or nurse practices and studies before treating a real live patient, I must do the same by testing what works and how to approach trading penny stocks before I treat and look after my patient! The patient being my money of course…Another good analogy from my mentor.
I could be frustrated that I’ve made several great calls without actually making any trades, but I feel great about the fact that I am on the right path with the right strategy thanks to my mentor Timothy Sykes.
I would never have understood or spotted these trades before I started learning from Tim.
So many traders get annoyed if they miss an opportunity to make money, and I personally don’t look at it like that!
If I miss a trading opportunity it will be because I was not prepared for it or did not know about it and that’s fine.
You can’t trade what you don’t see or understand.
So while carefully watching the market in general and of course keeping an eye on my list of penny stocks, this is what I spotted and learnt this week so far…
The 3 Main Stocks That picked up on my radar this Weak
Beginning On Monday it was actually Michael Goode that got me to notice the stock ticker symbol $KBIO in more detail. $KBIO is a biotech stock and it was the fact that it is, or should I say was going into liquidation that it caught my eye!
Funnily enough I was looking at this stock on the 5th/6th November, checking to see the reaction on its earnings release. Don’t believe me, then check out my post on it here(Scroll to the bottom of it).
With a public float of just over 4 million shares and around 8% of that being in a short position, this was a given catalyst that was going to create a short squeeze. Here’s the news article on it.
I’ve nick named this stock the “Pinball Stock” because that’s pretty much what it is this week! Literally you would get the short squeeze, then a short, a short squeeze, a short and then a short squeeze again which seemed predictable.
The thing is, with the news out that it’s going into liquidation got everyone thinking that it’s going to crack and plummet somewhere very soon, but then a crazy thing happens on the 18th November soon after the market close!
A hedge fund manager comes in and buys 1.2 million shares and the stock price ROCKETS from $2.07 after the market close to $19+ which is over 800%+ price increase!!!!!
Now this sort of thing can and does happen as we’ve just witnessed, but to know it’s coming is near impossible unless you have direct information with this kind of news, and it’s very hard to ride this spike after market close.
I was not considering entering a trade on this stock, simply because most people were biased on shorting it due to the liquidation news and rightfully so. Never the less it was fun to watch it move the way it did and learn more about what can happen to a stock with certain criteria in affect.
Here’s $KBIO getting Squeezed and Shorted continually since Monday 16th
Then this news is released soon after the market close (click here) and this little floater launches into orbit 800%+!!!
$KBIO At Market Close
$KBIO Soon After Market Close!!!!!
$KBIO Before, During and After Market Close!!!
As awesome as it is to see a stock do this type of crazy super nova move, there is no way I would have been in this trade simply because of the news out that it was going into liquidation and everyone was preparing to short it! As always anything can happen in the stock market and you really can’t predict these kind of moves happening.
Having said that, I know of one trader that banked $14,000 with a position of just 1000 shares Long!! Looking at their entry position it was not a good trade at all as he/she should have cut their losses ages ago or even taken their profits early, but he/she crazily sat tight and held on with the hope that it spikes some more and got lucky!
Then again, maybe their plan was to hold, but with the liquidation news out it is most unlikely that this trader had a valued exit plan other than hope!
I don’t mean to slate this trader off as it is awesome that he/she banked big, but there is really nothing to learn from this trade other than how NOT to trade and just hope to get lucky, which is not a precise winning plan at all!
It is a very lucky trade for this person in my eyes, but maybe I am wrong and he/she had a different view to it.
Either way fair play to this trader for banking big and an awesome result for them. Screen shot he/she shared just below. Awesome result with just 1000 shares!
$KBIO Is another great example of how low supply (Small public float) can sky rocket with huge demand/volume and a tonne of shorts in position as well.
The Second Volatile Stock I Spotted was $AVXL
Now $AVXL was on Tim’s watch list and I took a look at it and noticed that there was a very consistent pattern every morning for the past 5 trading days. I even wrote a quick post about it on profitly before market open.
Here’s the chart:
My Thesis On $AVXL
I am on the same page as Tim and agree that this is a sketchy biotech stock and maybe even manipulated!
To trade a stock like this is risky UNLESS you have a catalyst, such as an earnings winner, big contract or positive news with facts.
It is interesting to see that looking at the chart above of $AVXL, how consistently it dipped and then spiked with relative volume at the market open for the past five trading days.
I prefer to trade stocks with news behind them that gives me a good reason to get into a trade.
The article I wrote on my profitly page I wrote at 6:30am, and at 7:00am a positive news release occurs and low and behold $AVXL reacts.
Had I been trading with my account up and ready (still waiting!) I would have waited for the break out and got in at $4.30ish and my exit would have been $4.65ish.
Here’s the technical chart with a 3 minute candles chart (18/11/2015)
With this stock on a bit of a down trend you want to wait to see if it breaks out going lower. As it failed to break out going down and held support, there was a good opportunity to get in with the anticipation of a break out going higher or simply by waiting for the breakout with the new morning high as long as there was volume to back it up, which there was.
So I have learnt that you can go long either by waiting for the break out or dip buying with a bounce off of support, but only when there’s factual positive news backing it.
The 3rd Stock I spotted was…
The third stock I spotted was that jolly old $YOD stock again! It’s earnings release came out which was no good at all, so no trade, but along with the earnings release was the news of a billionaire investor that of Bruno Wu which was and is positive news.
However low and behold nothing much materialised on this stock once again and so there would have been no trade to enter, as with very little or no REACTION to the stock there is nothing worth entering a trade for.
Remember that I trade reactions to earnings, contracts, billionaire plays etc and NOT what the numbers or some article says! This is one of the main key ingredients that Timothy Sykes has taught me and it seriously works time and time and time again!
What I’ve Learnt This Weak So Far:
- Do homework the night before or early morning to pick up on any good news on watch list
- Do technical Analysis on charts before market open with chosen picks (Support/Resistance etc)
- Don’t worry about trades you miss, can’t see or don’t understand
- The more I learn and understand, the more I get it and the more my confidence grows
- Don’t take your eye off an open trade EVER or you risk losing it all!
- A Small Float with Shorts in Position and a very Big Buyer can create the Super Nova effect
- Be Prepared for news like this after the market close
Confidence is very much like a muscle; the more you work it the stronger and better it becomes.
Most of all even though I’m still not trading real money yet, I am very happy with my calls and thesis on these 3 picks in particular here. Several times I have concluded or thought the same thing as Tim, before he has commented on it or mentioned it in the chat room, and that’s not to say this in a look at me, big ego kinda way, but more so I know that I’m heading in the right direction with my trading and I have a strategic plan that works thanks to Tim..
It makes me feel confident to train myself by learning from Tim’s teachings and see that my thesis is correct. Of course I won’t always be right and don’t expect to be, but trading consistently well is the name of the game to success.
I aim to trade consistent quality trades with a planned thesis, as opposed to trading in the hope to make money!
On a final note for this post today, I learnt a great analogy from Tim:
“Just like a set of traffic lights, if you ignore the red light to stop you will likely crash!”
Too many traders enter a trade and when they get it wrong and go’s into the red, they carry on in the hope that they don’t get caught out and get to their destination quicker!
In other words if your trading plan is not going the way it should and it goes the other way against your thesis,
… YOU MUST CUT LOSSES NO MATTER WHAT YOU THINK… !!!
For the final final note today, anyone that’s unsure of what an earnings winner is, there’s a great video of Tim explaining it just below… Enjoy 🙂