Market had another yoyo day which took the price underwater and then took it back up to see the sky.
Somehow today, the market got me thinking that a melt down was about to happen. I began to unload position to raise cash and reduce risk. I even bought $SPXS to hedge against my other position. But it was all for naught ’cause market did not melt down and price went back up. Oh well, I took my losses on $SPXS and moved on. The only thing that hurt me today was not the loss that I took from $SPXS but the loss of the utility of my cash after I got out the same day. Having bought a decent size, all the cash was locked up on the three days settlement and I could not use it to buy back the shares I sold earlier.
Yes, I have cash account only ’cause it is a protection against my own rare moment of insanity when I’m overly exuberance. Think about it, the three days settlement lock-out can be used as a circuit breaker to force you to take a step back and reevaluate.
First, I got out of $AMRN when it took out the lower opening range. Again, I sat back and watched. This time, the sellers were able to push the price below $1.60 but only for a short time. When price bounced back and stayed “rigorously” above $1.60, I began to buy back for the bounce. By day close, price closed near my entry point. Again, I’m holding to see if there will be a bounce next week. My “obsession” with $AMRN has to do with the fact that I’m taking Vascepa now and I can “feel” the benefit I receive from taking it. So, it is my belief that, eventually, the health benefit of Vascepa will soon become known which will then drive the weekly script numbers higher. So, I’ll continue to “find” the bottom of $AMRN without adding to my loss here. That is the reason why you see me getting out as soon as I see the trend is not going my way.
$CLIR, and $NCTY, both low float stocks were also my target for dumping since these are the ones that can go down fast in a melt-down. I don’t understand why no one wants to sign deal with $CLIR despite its multiple news on lowering pollution emission on “duplex technology” burners. It has been over a year since they’ve been shouting their superb emission control. I guess the only way anyone will sign up to use their technology is when they are being forced to do so by the new regulation. When will that happen? Until then, $CLIR will just bounce around until someone buy them out or dilute themselves to raise cash.
$NCTY was an instinct play and I didn’t feel the need to keep it; although the chart looks good for a bounce next week.
$GALE took out yesterday low and I lost my confidence in this one. I was expecting it to go up from yesterday but instead it went the other way around. I sold 2/3 of my position initially and then the rest later when I was anticipating a melt-down. Later, I bought back some for the bounce.
I also reduced position on $CERS twice to reduce risk. By day close, I am holding only 1/3 position.
Due to my cash being tied up from buying and selling $SPXS, I needed cash to add to $KNDI position because I could feel the upward momentum happening. Looking for position that I had for more than three days, $TINY footed the bill. Seeing that price wasn’t going anywhere and that $KNDI offered the best upside next week than $TINY, I decided to sell $TINY to raise cash to buy $KNDI.
Take a look at $KNDI 5min chart below:
Did you see how price jumped over the 79 SMA and then proceeded to take out the 89 XMA as well? That was when I started to look to for cash to add more. Look at the daily chart below:
Did you see the hammer candlestick chart? I like to see today high takes out by Monday next week to confirm an upside momentum.
Due to losses from $GALE, $KGJI, $LRAD, my portfolio gave back gain from yesterday.
LRAD, KNDI, AMRN, KGJI, CERS, GALE and 50% cash.
Someone asked a question about why I don’t use or mention volume, below is my answer:
Thanks for the excellent question. If you’ve been reading my daily journal, you may notice that I trade in and out of my position based on the momentum of the stock during the trading hours. Sometimes after I sold, the downside momentum slowed down and began to reverse; if I liked the stock and I still had cash (for not being locked out by the three days settlement. I opted out of margin account ’cause I didn’t want the temptation to go overboard), I would buy the stock back if the daily chart still had an uptrend bias.
Volume, the way I see it, is a lagging indicator.
All stock start off the day with volume (light or heavy). I could sell in the morning with light volume and then the waterfall price action began with heavy volume. So, if I was to wait for heavy volume on falling price before I started to sell, I would lose (or give back gain) a lot more. On the other side of the coin, you can have heavy volume taking the price down (a highly motivated seller from a hedge fund, etc) and then only needs light volume to drive the stock back up. So, who do you believe? the heavy volume in the selling or the light volume in driving the price back up?
I don’t believe either one that is why I trade the way I do. Get out, nothing happen, I buy back. Sure, sometimes, I paid a premium to buy back but that was better than getting caught in a quick downdraft. And sometimes, I get out, price keeps going down on heavy volume, price stabilizes, I buy back at cheaper price.
I know trading text book often mentioned the value of using volume to monitor the strength of the trend; from my experience, the ONLY time I find volume to be an effective tool is when it is used in conjunction with several candlestick top or bottom reversal pattern.
For example, if there is a super high volume on a hammer candlestick after three to four down days, the odd of calling a bottom is much higher when price confirms the bottom by taking out the high of the hammer candlestick the next day. Nevertheless, I’m satisfied even if the volume is average when facing the potential top or bottom candlestick reversal pattern. Having a super volume to go along only make me salivate more, but it won’t affect my decision making regarding buying or selling based on the chart pattern; that is why you don’t see me mention volume unless it stands out so much that I’ve to mention it.
The way I see it, using volume is no different than using basic strategy when you play blackjack at the casino who uses seven decks of card in the shoe. With that many decks of card, the benefit of the basic strategy is diluted to the point of having minimum impact to your play.
Thus, I prefer to use the logic behind the game of musical chair to make my buying and selling decision over volume.
If you are referring to low float stock with low volume such as $NCTY. I play these with the understanding that I can be “stuck” if volume isn’t there for me to get out without getting hurt badly. For these type of low float stocks, it is a double-edge sword that can cut you deep quickly or give you fast and furious gain if you “remember” to take your profit and run. That is why sometimes you will see me saying something like “took my profit (or loss) because there was a large bids for me to take” in my twitter tweet. But most of the time, I try to stay away from these low float stocks unless the fundamental story tickles my interest.
Hope it helps.