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Trading Recap

Shorts $SOBRed Up

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Written by Timothy Sykes
Updated 10/26/2022 6 min read

It makes investors sick to their stomachs…

The talking heads only see the downside of it…

But for us traders, it’s the key to financial freedom.

Without volatility, we wouldn’t get the chance to score 20%, 50%, or even 200% winners in a single day.

To win in this market, you must embrace it.

Say it out loud with me: “Volatility Equals Opportunity.”

The most recent action in SOBR Safe Inc. (NASDAQ: SOBR) proves it.

In just a moment, I’ll share why this has been one of the best traders this month…

But first, a word of caution…

Many of you know I stopped short-selling several years ago when it got too crowded.

I saw too many folks pressing the short side and realized the potential squeezes could obliterate my account.

That decision kept me away from huge losses and generating consistent profits.

You’ve heard recent horror stories about traders getting squeezed in BBBY, HKD, and ILAG…

Instead of shorting high-flyers, I’ve tweaked my strategy to dip buy into panics.

Year-to-date, its helped me generate just shy of $125,000 in trading profits.

See all my trades out in the open right here.

Now, back to the setup in SOBR.

There were many ways to profit from this one over the last week, and I want to show you how you could have.

I feel many more of them will pop up, and I want to ensure you’re ready to capitalize on them.

Stack the Odds

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I want to put myself in the best position to make a profit on every trade I take, whether it’s just a few shares or a few thousand.

All it takes is a little common sense.

For example, would you rather buy a stock in an uptrend or a downtrend?

The answer should be pretty obvious.

When I buy into an uptrend, I have the bigger-picture stock momentum work with me.

Here’s what that looked like in SOBR.

This daily chart shows the initial push made back in September.

Shares rose from a little less than $1 to over $3.

That immediately put this stock on my watchlist.

Over the next several days, SOBR faded as most runners do.

However, it rebounded and began trading higher in a clear channel, which changed everything.

Something very interesting emerges when I dig down into the intraday price action.

I picked three days at random to show you where potential trades existed.

What I want to focus on are the white boxes.

Nearly every day, SOBR dips at the open in a bit of a panic, reverses, and shoots back up.

This creates the perfect opportunity for morning panic dip buys.

Let’s dig into one of the most recent occasions.

Here is the 1-minute chart from Tuesday.

You can see the same sell-off at the open preceded a huge spike.

I drew two white lines at potential support areas defined by the post-market low from the day before, and the low of a consolidation right before the close.

Once you know to look for this setup, then it’s a matter of timing the trade.

When to Jump in

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Many people think I know exactly what number the stock will stop at before it gets there.

The truth is I have a list of possibilities in my mind.

I supplement that with price action and Level 2 analysis.

For example, you’ll notice at the bottom that the morning panic dip volume isn’t great.

I’d like to see heavy volume and a clean reversal to trade against.

This is a better example where the temporary low came on decent volume.

I can also use Level 2 data to look at where buyers begin to step into the market.

Level 2 data displays the current bids and asks from market makers.

I look to see the number of buyers at the bid and sellers at the ask.

The more buyers at the bid, the more likely a stock is to tick higher.

Plus, if I start to see more volume occur at the asking price, I know that buyers are willing to pay more to own the stock, typically a bullish sign.

None of these individually gets me into a trade. But taken together, they help me decide when to jump in.

The Bottom Line

SOBR was a great trading vehicle this month because every selloff was met with buyers.

That trapped shorts in the trade so that every time we broke through an important resistance level, they got squeezed just a little more.

Remember, one stock can create multiple opportunities.

—Tim


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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”