It wasn’t until the second alert, later that afternoon, that I decided to
jump in and short CVI for 1000 shares at $4.83. The setup for this alert
appeared to be more of an ideal Tim-trade, i.e. it was the first day the
stock failed to make new gains after running from $2 to over $5 AND it was
starting to fade late into the afternoon. At this point I was feeling
pretty damn good about my decision to play this one, the stock was heading
lower and I was up about $100 in roughly 10 min… life was good… that is
until the stock decided to spike up into the final hour and Tim sent out an
alert stating that he had covered. At that point I made the decision to
stay in the trade and to not cover like the rest of the drones who typically
cover as soon as Tim does, causing a temporary spike in stock price.

My reasons for staying in the trade after Tim covered was because I knew
that Tim’s initial reason for shorting the stock fit the general profile of
his pennystocking methods, and that the price of oil had been getting killed
over the past few months. I also knew that Tim is a terrible timer and has
the patience of a three-year-old strung out on red bull when it comes to
holding a stock (no offense Tim), so I try to trust my own instinct and
tolerance when it comes to getting out of a trade.

The biggest mistake I made on this trade, however, was not doing my own due
diligence before entering into this trade. After the market had closed, I
discovered that CVI was reporting their quarterly earnings that very next
morning. In hindsight, had I known this, I would have waited to trade this
stock until after the earnings had been reported. You can imagine my
dismay the very next morning when CVI reported exceptional EPS over the
previous year and the stock gapped up nearly 20%. But why, you may ask, did
I not cut my losses immediately when the market opened? Well, here are a few
reasons to my madness:

1) I never trade a stock during the first 5-10 min of the
market open, even if I’m already at a loss. This is typically the most
volatile time in trading for any stock and is almost never an indication of
the direction the stock is heading for the day.

2) In spite of a good earnings report, CVI was already up
nearly 175% which was mostly likely due to the anticipation of their
earnings report. But hell, of course their earnings were good, oil was
upwards of $150 during their previous quarter, they better damn well have
made some money.

3) Stock prices don’t reflect prior earnings, they are forward
looking prices, and looking at the current trend in oil and the fact that
this company is losing its major supplier at the end of the year and hasn’t
yet found a replacement, who in their right mind would buy into such a crap
company..?

4) Bitter long-term share holders pumping the crap out of this
stock on yahoo, google, and the lion message boards to would-be ignorant
stock yuppies who would believe that this company is going places based
solely on some internet alias’ pumped up post. Look at the long term chart
on this one, it’s been dropping ever since the price of oil peaked back in
June and any time this stock has spiked up since then it has been followed
by many BIG red candles.