With the first week of freedom now gone I feel happy with what I’ve learnt and how I’ve progressed from a terrible trader that knew very little about penny stocks, to a much more confident trader that can now pick out stocks with an actual plan to trade them.
I am waiting for my brokerage account to go live at the moment, and it should be up and ready this week come thanks giving time.
I have recently purchased a new book called “The Day Trader’s Guide to Technical Analysis“
By Chris Lewis, and what an excellent book it is. I’m not entirely sure if they still publish it, as it was published back in 2000 and I haven’t spotted any new or updated editions as of recent. I’m even more surprised about the crappy reviews it has on amazon which just goes to show you that what some traders find works for themselves, most likely doesn’t work for others, and most likely this is when what ever is read is not understood which results in confusion!! Understand?!…
This book may as well have been written by Timothy Sykes in some areas though as a lot of the skills, strategies and the mentality required is very much identical to that of Tim’s. So a great book and I highly recommend it to further anyone’s education with day trading penny stocks.
Any hows lets take a look at how the first week of freedom went:
This Is What Happened In The First Week Of Freedom
The first thing that I was happy with is of course owning your own clock, meaning that I didn’t need to worry about anybody else or any other schedule to adhere to other than my own, which is such a great feeling.
Best of all with no distractions or parcels to deliver I could fully focus on the market and my potential trades before they happen.
The main two stocks that I studied were that of $KBIO and $AVXL as you can see in my last post.
I won’t go into too much detail with them as I’ve seen what they can do, but my general thesis on $AVXL is short at the moment unless some juicy news comes along like last week, which created a bit of a short squeeze.
As for the crazy and completely unpredicted spike with $KBIO that no one could see coming other than insiders in the know, this stock is now in the $18-$20 range area and although I will keep an eye on it for educational purposes I would not be looking to trade it at present.
There were a few other stocks that I watched and divulged into, but these were the main two that reacted, and had I been trading I would have traded $AVXL and banked!
I’m keeping an eye on $BIOS at the moment as there is some activity going on there and there is also a high percentage of shorts in play and they will be covering at some point or get squeezed with positive news.
Keeping a watchful eye on high short rations on penny stocks is one of my favourite strategies as all you need to do is sit and wait for the predictable spike to commence with the usual catalyst of positive news.
Of course sometimes the short position traders will start covering before any catalyst occurs which makes it more difficult to enter a trade and often it will be best to not enter a trade if this is the case.
Lessons learnt last week
One of the most important lessons learnt this week was to not only be prepared with your planned thesis on your stock picks, but to also know your stock inside out!
Knowing as much as you possibly can will give you a great advantage over a stock that you know little about.
You need to know how it reacts, what it’s past support and resistance levels have been as of recent, it’s credentials and of course why you have it on your list!
Now the $AVXL chart that I scribbled on below is my idea of what could happen next this week starting on the 23rd November 2015.
The red lines being that of technical resistance and the green ones support, my thesis is overall bearish at the moment and here’s why:
I believe that this stock spiked on the 18th due to the news release that morning at 7am which created a bit of a panic among the shorts by making them cover their positions which in turn made the stock price increase.
The very next trading day it started out with high volume again, dipped down to around $5.80 and bounced off of support back up to $6.50, but gradually faded for the rest of the day.
Notice how demand (Volume) has dramatically reduced around mid-day onwards on the 19th and even more so on the 20th, where it looks like the bears are gaining control.
It will be interesting to see if there is a consistent battle with a short happening and then a squeeze again this week, similar to that of $KBIO, but as the volume is fading I believe that the price will keep going down.
Of course if the volume picks up again we will likely see the short squeeze short pattern again, but you just have to wait and see what it does come market open.
Ideally I would like to see it bounce a little if I were to short it, but I could also go long if it holds support at the $5.45 area and has price action. Without volume you can not really make a trade on this, as it is harder to exit your position if you are going long, so if the volume is very choppy or low then all you can do is sit and wait or simply move on to another stock for the time being. Of course my bias is Short overall at the moment, so I would like it to spike a little possibly to the $6.20 area which is where I would attempt to short it if I were playing that move. For now I am just going to stick to the long side though and get consistent results with that first.
- Know your stock inside out
- Know the past resistance and support levels
- Only trade when there is volume in play (Price Action)
- Be prepared to exit a trade when the stock does not do what you thought
- Don’t EVER take your eye off an Open Trade!
What I’ve got my eye on this week so far: $AVXL $BIOS $MCUR $BONT $ZINC
With $AVXL and $BIOS being the main two stocks i’m watching, there will be others that most likely come along the way. I have not done enough research or homework on my list this weekend as i’ve been busy house hunting, and I will also be away in a meeting come market open today.
It’s ok to miss trades as there will always be opportunities and I am here to make consistent quality trades and not just role the dice in the hope to make money. As I have not planned enough to commence trading today (Monday) and I am waiting for my brokerage account to go live also, I am taking the time to sort other things out in my life which is cool.
So lets see what happens with the market this week, as it is said that thanks giving week is known to be historically active! Until next time, prepare yourself ahead of the action and be ready to trade with your stock picks and plan of action to trade, should your chosen picks react as you expected. 🙂