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Why Did CXAI Go Supernova On Friday?

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Written by Timothy Sykes
Updated 4/14/2023 5 min read

Money is attracted to speed.

Nothing is more true in trading.

A second faster can mean the difference between capturing massive profits or missing out entirely.

Just look at all the action we saw in AI-related stocks last week.

Ticker symbol CXAI went from $1.21 to a high of $69.47…

GFAI went from $8.82 to a high of $39.20…

And SAI went from $1.17 to $7.40…

What a week for Supernovas!

I hope when you see and hear about moves like this:

  • You get excited about the potential the market offers
  • You’re curious into why these stocks moved so much.

The most obvious relationship between these three stocks is that the last two letters of their ticker symbol was AI.

But that’s just scratching the surface.

After all, one of the first stocks to kick off the AI rally was BZFD…but that stock hasn’t done much since its January highs…In fact, it has sold off considerably.

And the “sector leader” AI, barely moved last week.

There are two main reasons why some AI stocks are popping off while others are sitting idle.

Here they are…

Market Structure

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I think it’s a good practice to look at a company’s stock structure before trading it.

For example, check out these details in CXAI:

Source: StocksToTrade

So when I’m looking at a company’s stock structure I’m paying attention to the market cap, float, and average trading volume.

Based on Friday’s action CXAI had a market cap of about $200.5 million. This tells me that the stock is a micro/small-cap company. Ideally, you want to stick to small caps because they have the most volatility and opportunity.

Second, which is the most important is the float. This tells me how many floating shares there are out there.

According to StocksToTrade dataCXAI has a float of under 500K shares.

That’s an extremely low float. Generally, stocks with floats of under 10 million are considered low floats.

Trading is all about supply vs. demand. If there is a low quantity of shares available then it’s a lot easier to push prices.

Third, I want to see the average stock volume. Over the last 60 days CXAI has traded an average of 3 million shares. That’s 6x the float!

However, last Thursday it traded 163 million shares…

Another thing worth looking at is short-interest. This tells us what percentage of the float is short the stock. Stocks with high short-interest (above 10%) have a better chance of going Supernova…

But just because a stock doesn’t have a high short-interest doesn’t mean it’s not worth trading. Short-interest data is not released in real-time. So a lot of stuff can change, especially when these stocks take off…it sucks in new shorts.

Stubborn Shorts

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None of these Supernovas would have occurred had it not been for stubborn shorts.

Look I get it…

I used to be a short-seller.

Most of these companies are trying to capitalize on the AI trend…their businesses are trash…yet their stock prices are spiking because the last two letters in their symbol have AI.

It’s pretty dumb…and that’s why I always tell my students to expect the worst from these companies.

Chances are these stocks will go back down…

The only problem is we don’t know when.

CXAI probably looked like an easy short when it climbed from $1.17 to $6…

But it kept sucking in the shorts…

And because the float was so low…the stock more or less got hijacked.

Source: StocksToTrade

It went to the teens, 20s, 30s, 40s, 50s, and 60s.

I’m sure the shorts got destroyed.

The combination of a low float and stubborn shorts caused CXAI to Supernova. 

This game usually ends when the company announces a stock offering to raise capital.

Or if it goes absolutely crazy like HKD…then the exchange or someone will halt the stock and investigate it. Last year HKD went from $13 to $2555 in a few short weeks…

Making it the craziest Supernova of all-time.

It now trades under $8 a share.

Bottom Line

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Many of these companies are trying to pump off the AI trend…but some have a better chance of going Supernova than others.

I believe it has to do with the company’s stock structure.

I know a lot of traders like to highlight short-interest as the holy-grail indicator for squeezes, but who had CXAI, GFAI, MRAI, and GFAI on their radar 3 weeks ago?

I think it makes more sense to look at how many shares are floating and how much trading volume is going through these symbols.

You can find a lot of good sympathy plays if you take this into account.

If you’d like to learn more about how I trade Supernovas then check this out. 

P.S. It’s raining Supernovas…find out how I play them here

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”