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Why Do Some Stocks Explode And Others Don’t?

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Written by Timothy Sykes
Updated 6/21/2023 5 min read

Runners after runners…

Stocks are soaring, with gains of 33%, 67%, and even 168% in a single session!

If you’re not using this tool, you’re likely missing out on much of the action.

But I’m not writing to you today to rub it in your face.

We all know that having access to fast and reliable news is vital. It’s the key to staying ahead of the game.

But if you want to take your trading to the next level, you must start thinking IMPACT.

Yesterday, a specific positive news headline was major for one sector.

However, not every stock in the sector reacted the same way.

One barely moved, while the other gained 64% at one point.

I’ll show you what you need to pay attention to and how to use it to make smarter trading decisions.

Catalyst Trading Remains Hot

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There are strong themes in the market that last months…like the one we’re seeing in AI right now.

But there are also short-lived themes…like what we sometimes see in crypto, EVs, and biotech.

You know what else?

Just because there’s a positive catalyst in a sector…doesn’t mean that all those stocks in the sector will react the same way.

For example, yesterday, the Breaking News Chat delivered this headline in real-time:

China unveils $72 billion tax break for EVs, and other green cars to spur demand

Now, if you’re reading that headline…

You probably think it’s SUPER bullish for Chinese EV stocks like NIO, right?

Surprisingly, the news had no impact on NIO shares.

However, that wasn’t the case for the ticker symbol UCAR:

Shares went up by over 50% at one point…

Going into Wednesday’s session, UCAR had a market cap of $299 million. The company isn’t profitable and is barely generating revenues.

But well, the fundamentals of the company might be weak.

Traders are interested in other aspects of the stock.

For example, the float, as in the number of shares available for trading is relatively low.

According to StocksToTrade, only 7.15 million shares are floating.

Low-float stocks with bullish catalysts have the potential to squeeze and go full-blown Supernova.

What Likely Happened

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Shares of NIO were down slightly on the news, LI Auto shares were up, but nothing compared to the gains we witnessed in UCAR.

Why?

Stubborn shorts.

The same clowns that caused AHI to spike yesterday and have a triple-digit gain for no reason.

I can picture it now…

The short sellers are all hanging out in shady discord chats, looking for their next stock to attack…they see the news out of China…and the move UCAR is making…

Clearly it’s short, right?

After all, UCAR barely makes any money and is far from profitable.

While that’s true…UCAR is probably a crappy company…I say…who cares.

At the end of the day, we were in this for short-term trading opportunities. Fundamentals don’t matter if you are in a trade for a few seconds or minutes.

That’s why you are destined to get wrecked when you use logic and try to short-sell.

But at only 7 million shares or so…it’s not hard to squeeze the shorts.

And that’s exactly what they did to them on Wednesday.

A not-so-big headline turned into a squeeze in UCAR

What It Means For You

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Start paying attention to float.

I know many traders will tell you to focus on short interest. But from my experience, you can get reliable short-interest data. And if it’s unreliable, you can’t make decisions off that information.

On the other hand, you can see when a squeeze is occurring just by looking at a price chart.

Stocks with floats under 20 million are more likely to squeeze if they can catch the right catalyst.

If you’d like to learn how I trade catalysts, you’ll want to check this out. 

I’m serious, watch this now. 


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Author card Timothy Sykes picture

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”