I went into today thinking I wouldn’t trade cuz they were no ideal setups. But when $23,000-in-revenue-joke-of-a-company-TheStreet.com-pump-and-dump (EDEN) became a big 2-day runner, my market inefficiency sense kicked in and I immediately reserved 1,000 shares to short, just in case it might show signs of reversal. By 11am, it was up 40% on the day in the $2.60 range, and while there were some big buy blocks just below at $2.55 and $2.50, the sellers were persistent. This is what I call “a wall of sellers” and when stocks are up big already on little to no news with fading volume, this wall signals the end of any runup, at least usually.
Sure, sometimes the wall collapses and the stock surges, but since TheStreet.com’s article was factually inaccurate and it’d already proven three times over the past 2 days it couldn’t break $2.75, I figured it’d be better to be early than late as I’d just try to double up if it went higher.
When some sellers came in to try to take out the big 10k buy block at $2.55, I could stand aside no longer, shorting into that block and posting my findings HERE. Sometimes when a big buy block gets taken out, it signals an immediate panic, but even with my rather harsh article, that didn’t happen here. For an hour or so, it went slightly higher to $2.65, but I held, convinced my argument was sound. 3 hours later, the stock was only down to $2.30ish and buyers held strong—after all, my blog doesn’t have anywhere near the traction of TheStreet.com, so the truth doesn’t really matter…yet.
Going into a Friday afternoon short a surging illiquid low marketcap stock, you’re just begging for a short squeeze and since I knew I wasn’t gonna be able to watch this thing on Monday, I covered at $2.35, a $180 profits after commissions. Disappointing, but a very good trade nonetheless. Off by 10 cents on an ideal entry, off by another 10-15 cents on my exit, still earning 20 cents/share—the latest example of how great this strategy is that you don’t have to be anywhere near perfect to profit handsomely.
Little different from my successful trades on similar failing microcrap companies with tons of bitter shareholders: PSTI (Jonathan Lebed pump) and SYNM (day traders message board pump), this TheStreet.com pump coulda woulda shoulda gone down more considering it was factually inaccurate, but those other plays were good shorts for several days and weeks later, so I have no doubt I’ll be back in EDEN again…
Not talking about earnings, revenues, expectations nor the economy might seem strange to many of you, but those variables don’t matter in PennyStocking. I look to profit from basic market mechanisms—promoters/media pumping, suckers believing the hype, sellers/profit-takers eventually appearing, people’s stop losses getting taken out—because that’s what’s always worked for me. I truly believe these variables are more predictable than those mainstream variables and until I stop getting results with my method, I’ll continue to believe. 6 months into this quest, I’m up 47%…with the markets still down 5-10%, I’d say my results speak for themselves.
PS Note TheStreet.com corrected their article at 3:30pm causing a drop to $2.10, but still not many people read the corrections page, lots of naïve buyers in this thing still, and a little squeeze into the close to $2.30 justified my decision to get out.
Posted in 101good, Breakdowns, DVD, Good Trades, Patterns To Short, Short Selling, Story Stocks