While I’ve enjoyed trading profits of $180,000ish in the first 3 weeks of 2014, I got a little too aggressive and lost $9,000 late last week, see lessons from that loss HERE
The good news is that much of my gains come from the newly-hot sector of marijuana stocks as ever since weed became legal in Colorado, this sector has been on fire…and that creates a ton of volatility both on the long and short side.
Just as my topstudent and I discussed on FOX the other night:
Here’s how I made $50,000 the first week of January 2014:
As you see much of my gains come from short selling the ridiculous runups in marijuana stocks and in this interview I gave to Mainstreet.com in regards to weed stocks, I said “”Penny stock investors all made exponential returns on their money within a few days, and then short sellers like me cleaned up when their unsustainable run-ups crashed 40% to 70% within a few days.”
Here are some other great quotes from that article:
“Experience teaches me there will be more waves based on breaking sector news in the coming weeks and months,” Sykes told MainStreet.
For example, Advanced Cannabis Solutions (CANN) started the year at $3.25 a share and is now trading at $15.85 a share.
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“That’s a 388% increase in two weeks,” Sykes said. “Applying simple technical analysis to buying a marijuana penny stock involves finding those that are breaking out above previous highs to dramatically increase the odds of profits for investors.”
I wrote this article explaining why CANN became so overvalued (I made several thousands of dollars starting my shorting of CANN in the $21s and covering the final bit of my position in the $16s)
Here are 3 more tips I gave for short sellers of marijuana stocks:
Tips for Short Selling Cannabis Stocks
1. Marijuana stocks don’t rise on fundamentals because the industry is too new for revenues and profits. “Valuation is based on hype and potential,” Sykes said. “The bigger the marijuana-related idea, the bigger the stock spike potential no matter if the company can actually pull it off. It’s the Wild West right now.”
2. Lock in profits by purchasing stocks with specific targets and exit prices. “Once you hit those targets and prices or anything close, take the profits and run,” Sykes said. “Much of it isn’t predictable. I myself aim for 20% to 30% gains per position in one or two days given the volatility.”
3. Vanishing trading volume is an indication of media frenzy wearing off. “Ride the hype but be sure to exit when the momentum even begins to look like it might fade,” said Sykes.
When I said “much of it isn’t predictable”, I was referring to breaking news as the patterns and runups that marijuana stocks have enjoyed are VERY predictable and as proven by CANN’s near doubling from the $15s when my article was published, predictability can lead to some VERY big gains if you’re prepared.
For some more background on how to buy penny stocks breaking out, whether they’re marijuana penny stocks or any other sector, please watch this video too: