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The 5 Mistakes Shorts Made With ICCT 📈🚀

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Written by Timothy Sykes
Updated 8/31/2023 8 min read

The ticker symbol ICCT didn’t just move on Wednesday…

It SOARED.

Wrapping up the day at a hearty $12.28, doubling Tuesday’s closing price.

But the real fireworks ignited in the after-hours.

When I tweeted it, it had already surged past $29…and it didn’t stop there.

In fact, moments later it reached a staggering $42 per share.

Source: StocksToTrade

Now, picture this: You’ve shorted ICCT at $12…thinking it’s a baseless rally.

But a few hours later, you watch it fly near $40.

It’s moments like these that steered me away from short selling, and it’s the same reason why I tell my students to stay away from short selling.

But flip the script: How exhilarating would it be to buy a stock like ICCT as it’s going Supernova?

Today, I will dive into the mechanics of these Supernova stocks.

In addition, I’ll show you what drives them, how to possibly spot the next big mover, and the pitfalls short sellers often find themselves in.

 

Mistake #1: Using Logic As The Main Driver

First off, ICCT was weird.

It did some funky conversion…

I’m not a special situations trader, so I don’t understand exactly what they did.

Nonetheless, the stock tanked on Monday, hitting a low of $0.97.

Later that day, it clarified common stock trading, warrants, and preferred.

Every 29.84 shares of ICCT outstanding prior to the closing received one share of the combined company, an equivalent share price of  $5.71  based on the  August 25, 2023, close price of  $0.19  per share for ICCT common stock.

It appeared someone messed up, and this thing should have been trading near $5.71.

The following day, it hit a high of $7.50…closing at $5.64.

Which is, more or less, near that August 25th price.

However, momentum traders got involved on Wednesday…and that’s when this thing just went crazy.

Then you have shorts who suddenly are special situation traders…saying this stock should be trading below $6.

Short sellers are so ignorant. They knew nothing about this company a few days ago, but now they explain how this weird conversion deal worked.

So they short…and short…and short.

The stock went up 117% by the end of Wednesday’s close.

And by Wednesday after-hours it was trading above $40!!!

Did the stock deserve to be trading that high?

Probably not…after all…nothing about the business fundamentally changed.

However, that’s not how trading works.

Price action rules over logic when you’re day trading.

 

Mistake #2 Failing To Manage Risk

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Will ICCT be lower a few weeks from now?

Most likely.

But there’s an old saying on Wall Street: The Market Can Stay Irrational Longer Than You Can Stay Solvent. 

In other words, you have to manage your risk.

Can you honestly say you have a risk management plan if you are shorting a stock at $5 and holding it while it goes to $10…$20…$30…or even $40.

Short sellers are always trying to pick up pennies in front of a steamroller.

And they got steamrolled in ICCT.

Psychologically, it’s hard to get out of a position when you know, in the long run, you will be right.

So instead of cutting losses quickly like I always preach…

They hold and pray…hoping that the stock doesn’t tick higher.

In their mind, they are thinking, I don’t want to cut my losses here, if I do, I will miss out on this great opportunity.

But that’s the problem with trading, a strategy you can’t risk manage.

Mistake #3: Being Stubborn

Over 71 million shares traded in ICCT on Wednesday.

If shorts didn’t recognize they were getting squeezed…then maybe it’s a good thing that some of them blew up…because trading isn’t for them.

You have to be willing to say you are wrong if you want long-term success at trading.

While the short thesis on ICCT makes sense…you need to acknowledge the price action.

When the stock is behaving a certain way, you need to be willing to adjust your strategy.

For example, I was dip-buying NAOV on Wednesday.

But I stopped doing that when the company announced a $5 million private placement. The fundamentals changed, and I no longer had an interest in the play.

When things change, you must adapt.

Being too rigid with any strategy is a recipe for disaster.

Mistake #4: Falling Victim to Herd Mentality

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Misery loves company. That’s why short sellers are a tight group.

Each uptick drew momentum buyers in…causing shorts to cover.

Shorts, in this scenario, underestimated how the fear of missing out (FOMO) could worsen the squeeze.

You see, stocks like ICCT don’t always run…

But we recently had a monster squeeze in VFS…

The stock went from $11.61 to $93.

So momentum traders are looking for short squeezes.

And because they’ve been working, they’ll likely continue until they stop.

The trend is your friend, until it isn’t, right?

I teach my students to think independently.

If most traders lose money, why would you want to follow the herd?

Mistake #5: Ignoring Key Technical Levels

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The one thing about ICCT is that it was up-trending nearly the whole day on Wednesday.

And since the stock was trading in uncharted territory…each breakout triggered a squeeze.

More momentum traders jumped in…and more shorts kept getting sucked in.

Short sellers often place stop orders around resistance levels, which occured multiple times throughout the day and after-hours sessions.

Not only that, the stock was extremely volatile, with super wide bid/ask spreads, which made it a nightmare for short sellers.

And unlike the day session, stocks don’t halt for volatility in the after-hours…which makes it extremely dangerous for a short seller.

Be Happy We Have Short Sellers

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It might sound like I’m bashing short sellers in this post. But don’t get it twisted. Without them, we wouldn’t have so many great opportunities in the market.

Their broken logic and total disregard for risk management create some of the best plays out there.

My students and I thank them.

Speaking of students, how’s your trading going?

Did you crush this long ICCT?

If not, there’s a lot to learn from it.

Anyways, I want to help.

Every day, my team and I host live training workshops. We talk about stocks like ICCT and other stuff that’s moving markets.

We bring them to you at zero cost.

CLICK HERE TO REGISTER FOR OUR NEXT LIVE TRAINING.


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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

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* 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 (205) 851-0506 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”