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?
Tags: Breakdowns, Financial Media Circus, Good Trades, Impatience, Patterns To Short, Short Selling, Story Stocks
