After posting some potential plays and declaring I’d play none of them because of all media/speaking (the stuff that actually helps pay the bills while TIM is soooo tiny…for now) I’ve got to do, two plays acted nicely, so I couldn’t help but jump in.
First up, I shorted 1,000 shares of Spacehab (SPAB) at $2.10. I had looked to enter around $1.80, but wisely did not as it spiked above $2, squeezing several early short sellers.
TIM Lesson: Never short into a stock just because you think it’ll go lower, wait for the price action to give you the best possible entry.
It’s risky to short into afternoon bounces—especially when you know you’ll be away from your computer the next morning—but since this company is such a total POS, I felt right in my entry and would be willing to average up tomorrow or the next day. The stock held up stronger than I expected, so I became slightly worried and the list of chores I had to do piled up in my head—there was no way I was gonna hold this sucker overnight and risk a 30-60 cent spike that I wouldn’t even be around to short or cover into.
When the price dropped 10 cents, I said screw it, decent gain, I’m out, covering all my shares at $1.99, profiting by $100ish. Sure, it dropped another 20 cents over the next hour, but I got a lot of work done in that hour and this goes to show you that shorting into smallcaps spikes, while scary, is a solid strategy, especially when the volume begins to fade. After all, there’s lots of bitter shareholders who drank the Kool Aid at higher prices and look to get out on any bounce. I was off on my entry by 5 cents and my exit by 20 cents, so this trade—in the hands of a better trader than me—would yield 35 cents/share, or 15%. Not bad for an hour’s work.
What I did right: shorted into an over-extended smallcap spike that was on the 2nd day of its runup, ignored the sugarcoated hype about a possible NASA contract
What I did wrong: shorted and covered too early, traded while I knew I’d be limited in being able to watch/trade the stock the next day
Lessons: Never trade when you have time restrictions—it influences your outlook considerably. Once in a trade that is your bread and butter, relax, experience teaches you the odds are on your side. Always look to short on the 2nd, 3rd or 4th day of a smallcap spiker with a strongly bearish chart—should wait for sideways action first though
How I celebrated: worked on my Trader’s Expo speech
Near the market close, I also saw Converted Organics (COIN) breaking past the $10.50-$10.70 level it’d previously tried to breakout of no less than 5 times over the past few days. I’d missed the runup from $10.40 to $10.90 (working on my speech, not looking to trade), but I figured if it held the multi-day breakout, it’d be good for an early morning gap higher past $11 and maybe more. Eerily similar to my failed CTIB trade, but I bought right before the market close, buying 300 shares at $10.77. I figured there was little risk of losing more than 10-20 cents/share (considering I’m not leaving until 8:30am tomorrow morning and that 30 minutes of pre-market trading is more than enough time for it to gap and spike or do nothing).
The stock closed right near my purchase price and within a few minutes after-hours, it was up 10 cents. Things looked good, but then all of a sudden, the price dropped to $10.30, then $10!?!?! No news on the wires, WTF? Within minutes, the message boards began posting the SEC filing that said shareholders were offering 750,000 shares for sale. No matter if this would be slightly or big-time negative, it would certainly prevent the stock from breaking out, aka the only reason I bought in. Screw that, I needed to get out ASAP. Tried to sell my 300 shares at $10, but missed that buyer by a split second and had to settle for $9.92.
Nasty $265 loss, but I’d do it again because negative overnight news isn’t as predictable as a chart breakout. Yup, you read that correctly, since my trade was based on solid price action, the odds were on my side and 6-8 times out of 10, I would’ve won. Losses are tough to accept—well, not for me anymore, I feel nothing, for better or worse—but I got out nearly immediately because my thesis was busted. Exit looks good as the stock is now $9.50—who knows if it’ll bounce or not, highly, highly doubtful it’ll get back to $10.75, so it’s a busted breakout and lower single digits look likely (although not high enough probability to short here either)
What I did right: Bought into a multi-day breakout, took a small position considering smallcap breakouts (YTEC, SOLF, CTIB) haven’t been doing well lately, cut my losses quickly
What I did wrong: I’m filming tomorrow morning, I shouldn’t be in any trades (moron!), didn’t wait for a new all-time high to buy (which the after-hours news would’ve crushed anyway), procrastinated, wanting $10.10 or $10.20 instead of $10—costing me an extra $25 in losses
Lessons: Don’t trade when you have time restrictions!!!!! After my last 5 trades—all non-Supernovas—TIM is right back to where I was after IDMI (my last Supernova-esque trade)—what does this tell everyone? Exactly, this is why it’s critical I have more patience and wait for those beautiful babies to show present themselves, rare as they might be.
How I celebrated: wrote this post
Posted in 101good, Breakouts, Good Trades, Impatience, Patterns To Buy, Patterns To Short, TIM Lessons