TIM $14,050 (flat on the day, down $18 on the week)
No positions, 100% cash over the weekend
Well, this was an unusually boring week for the markets. The markets were flat (yes, I know they were down, but contrary to all the media BullShip, a negative 1.5% week is meaningless aka flat). Today, we got a nice little rally as I think people were happy that there wasn’t any panic (damn!). Today also marks the first time in a very long while (years I’m guessing) that I got rejected when I tried to borrow shares of a stock I wanted to short.
The stock was JRJC, an old favorite of mine (I have bee bullish for quite some time although I never put my money where my mouth was). Oh yes, I used to be very optimistic about China Finance Online (Nasdaq: JRJC)—they are growing like gangbusters and contrary to popular belief, their valuation was / is quite reasonable. But I found myself rather disappointed while listening to their latest earnings conference call—I expected blowout numbers, but I definitely didn’t get them. And, if a cynical bastard like me is disappointed, the company’s many haters must be partying like crazy (and adding to their short positions). But, I didn’t try to short the stock until today because you never know how a stock will react to earnings (see VDSI’s catastrophe and GSOL’s bounce after horrific earnings).
While I expected post-earnings JRJC (pre and post-earnings are two very different animals aka expectations are all that matter) to get crushed, the question was would there be a solid lower low in the cards after the crushing had occurred. Today, when the stock broke $23 (a level it had held twice on Wednesday), I knew (yes, that’s right KNEW) lower prices were coming. Remember, my strategy is very very very very simple (short lower lows / breakdowns and buy higher highs / breakouts). KISS—keep it simple stupid. The one fly in the ointment was Thinkorswim not having any shares available to short of JRJC (it happens). JRJC acted perfectly, downtrending nearly $1.50/share within an hour, which would’ve yielded a nice near risk-free profit of $225 (if I had gotten my 150 shares, which would’ve required an investment of $3,500 or so or 25% of TIM assets). I doubt I would’ve held over the weekend because I like quick profits like this, but I still expect lower prices (but with many bounces) since the stock doesn’t have any technical support until $15.
I know, I know, there are many other brokers out there whose specialty is finding hard-to-borrow securities (trust me, I know, I’ve worked with them all!) and I’m sure JRJC is borrowable somewhere, but I chose Thinkorswim for TIM not only for their superior customer service and screening tools, but because I truly believe everybody should be able to play these patterns, no specialty broker required. In this case, I was wrong. It certainly won’t be the last time. Oh well, onto the next play por favor…(I wish CPSL had held onto its gain betters, I want to short into strength damnit!)
PS I’m anticipating many emails asking how I can flip on a stock so easily—well, like Traitor Monthly magazine, I have no problem flipping when details emerge that contradict my initial thesis (although unlike Traitor Monthly, I listened to the company entire conference call first (the comparison being they jumped to conclusions about me before reading my book !)) (How mature am I?) After all, we’re called traders for a reason—this isn’t about making a long term commitment to any investment or anyone.
TIM lesson: Trading is all about the survival of the fittest; you form an opinion, stick to it as long as it proves profitable / correct and then reverse or move on to the next play (or prey).
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