As I’ve posted HERE and HERE, EDEN was a great pump due to a 100% spike caused by a fluffy inaccurate article written by a major media outlet—my former employer—for a bit—TheStreet.com (they later corrected it, but the damage was already done). The first time I shorted at $2.55, impatiently/conservatively covering at $2.35 for a decent $180 profit. But given its tiny tiny tiny $6 million marketcap and annoying illiquidity, I don’t regret covering quickly…that much…cuz as I’ve shown on fellow microcap pump and dumpers PSTI, REED and SHZ, these suckers remain good shorts for many days.
So, when I re-shorted EDEN mid-day yesterday on a slight low volume bounce up from $2 to $2.20, I had every confidence in the world we’d see $2 again and then the question would be if there were stop losses there—as often happens at big fat round numbers. Despite some ever surprisingly determined buyers and a solidly bearish close at $2.04—caused by a 49,000 share sell order—I was even more confident of a big drop today.
But it was not to be—yes it cracked $2—only after a lot of stubborn buyers at $2.01—but only a few stop losses went off taking it down to $1.97—nowhere near enough to get it to my goal of $1.80. For 20 minutes, I still gave it a chance, but the volume was just too pathetic, so I covered at $2.01, a decent $257 gain, basically 10% overnight, pretty much in line with my other trades.
Yes, this was a tight trade—I hate shorting tiny marketcap stocks—and no I don’t recommend taking a position bigger than 5,000-10,000 shares, but you gotta see that for all my $500ish in profits, my impatience made this trade a lot harder than it had to be. Although it certainly was a good cover as the stock bounced a bit the rest of the day on dismal volume, as usual.
Setup: inaccurate pump, erroneous buying, perfect spike to short sell into
Obstacles: illiquid/hard-to-borrow stock
Risk: possibly get squeezed by further erroneous buying (unlikely)
Reward: 15-50% retracement (probable)
Diagnosis: nice setup + usual obstacles + good risk-reward=worthy trade
Action: short and wait for reason/bitter shareholders to kick in. Short at $2.55 was right, but then you just gotta hold down to $2, presto $1,000 profit instead of $500.
I never seem to learn to play these right so you guys learn for me, ok?
Posted in 101good, Breakdowns, Financial Media Circus, Good Trades, Impatience, Patterns To Short, Short Selling, Story Stocks