This week specific microturd stocks have been getting a lot of exuberant action to the upside. $CBIO (Catalyst Biosciences) stock is our supernova highlight of the day. The stock went up nearly +200% yesterday and today went up another +30% in pre-market trading (a total of around +300% in two days). The news that caused the stock to spike was that one of their hemophilia drugs got the OK to proceed with clinical trials in South Korea.
Our take on the news was that it was fluff, a non-event for the nanocap stock -- pure stock manipulation. As to why it went up 200% yesterday? Answer: There are a lot of people who chase garbage stocks all day and just buy regardless of news, fundamentals, and rationality. And more reasons why can be read here on our previously detailed "what are nanocaps" post. The stock has a float of ~600k shares, and yesterday it traded over 20 million shares! With the recent insane multi-day moves of other nanocap runners $HTGM, $DRYS, and $ETRM in the back of my mind, we were very cautious to short $CBIO with any kind of big size. We actually hoped the retards would lift this stock to $22+ / share right at the open, but that didn't happen. In fear of missing out on the drop, we starting shorting Catalyst Biosciences stock with only 500 shares at $17.01 but kept adding to the position the lower it went. The crazy volume that occurred in the stock yesterday was absent today so that partially indicated to us the stock would sell-off today (= the stock manipulators abandoned ship).
Five hours later we covered the turd for a nice easy $5,370 profit! Will $CBIO go even lower throughout the week? Probably. But we wanted to cash in and move on.
All our trades are alerted real-time in the MookTrader stock chatroom, from all entries, adds, to all exits.
We are always on the lookout for overly beaten down stocks with daily charts resembling rocks falling off a cliff. Sometimes they make prime picks for bottom picking, assuming the only reason they are going down is because a huge fund is just liquidating its stake. An example of this is the stock $RRD (RR Donnelley & Sons). It has been trending down since its February 28th decent earnings release and in-line forward guidance forecast, where it closed at $16.55 that day.
One month later, $RRD stock hit a low of $11.02 today -- that's a -33% decline on no concrete news. We speculate that funds are blowing out of this thinly traded stock and ignoring the cheap valuation the stock is now trading it. Either something is wrong with the company that news hasn't been publicized yet or it's just a screaming buy. We are thinking the latter and decided to buy some for a bounce today.
We entered the $RRD long position at $11.09 today and added into strength when the tape showed that buyers were ticking the stock up (and the massive sellers were not grinding it down). We did not see a huge block print (something around 300,000+ shares would have been nice) near the bottom of the lows today so decided not to swing long the position and just daytrade it. Took profits into strength and ended up with a nice and easy stress-free trade.
Net Profit: +$3,344
All trades are called out live in the MookTrader stock chatroom as they happen. Come trade with us!
We shorted this Bioanalytical Systems ($BASI stock) today. This was the 2nd day run up on no news. Stock ended up trading ~3x its float today which signals massive stock manipulation, which doesn't bode too well for it holding its +100% run gain this week.
Reasons why we initiated the short position in BASI like all the other microturd pumps are because the company is running on fumes in terms of its cash position as well as the insane +100% pop in 2 days. The trade was pretty straight forward....shorted into pops and covered into weakness.
Net Profit: +$3,458
All trades called out live in the MookTrader stock chatroom as they happen.
In 1996, I started my trading career on 110 Wall Street, NYC as a proprietary equity trader. I was exposed to trading investment grade stocks listed on the NYSE or NASDAQ exchanges with prices greater than $5 and having market capitalizations of over $100 million. My mentors at the firm traded only these and thus so did I. For the next 18 years, small and mid cap stocks were my bread and butter. Mega cap stocks like Exxon and IBM were too liquid for me to tape read so I tended to stay away from them.
Then in 2014, I stumbled upon Twitter as a secondary source for financial news. Here I was exposed to the world of nano and micro cap stocks, stocks with market capitalizations of $50 million or less and usually with stock share prices of less than $5, companies which I refer to now as "microturds" or "nanoturds". Twitter was filled with people boasting how they made five figures daytrading companies that financially looked like they would file bankruptcy any minute after the close. If these traders on Twitter could rake in the dough on these type of stocks, why couldn’t I? I decided to dive into trading these shitty companies. Stepping out of your comfort zone makes a great trader even greater. Learning new trading techniques and strategies only makes your potential earnings power grow.
The captivating aspect of trading nano caps is the price volatility. These days it seems like there is at least one nanoturd that slowly rises over 100%+ in price each day. Compared to normal stocks listed on the NYSE that kind of move is unheard of. Here’s a list of what I found common to nano cap stocks, a lot of it ain’t rocket science but interesting stuff:
1) The worse the fundamentals, the higher the nanoturd flies when it is pumped. Companies who have going concern warnings on their latest 10-Q filings tend to have more violent price swings to the upside. I began to wonder why and came up with some reasons. First, companies with fundamentals equivalent to the stuff that comes out of my behind are heavily shorted and experience a massive short squeeze when the stock runs upwards paired with new investors/traders/pumpers blindly scrambling to go long on the next hot play. Second, these companies need to raise capital via massive dilutive equity offerings to stay in compliant with Nasdaq listing requirements or just to stay liquid, and "magically" rip up a day before they announce an offering. Note, I wrote magically in quotes. Blatant stock manipulation must be going on when these nanoturds fly to the moon on 10000x normal volume most likely by paid stock newsletter promoters or pumpers in live stock chatrooms or affliates of the shady chop shop investment bankers involved in the secondary offerings. I am really surprised the SEC hasn't cracked down on this because the stock manipulation is so apparent. Another thing about the fundamentals of these companies is that since their businesses are not complex it's very easy to understand the financials of the company when digging through their lastest 10-Q filing. If anyone is interested in reading SEC filings, these companies would be where you would want to start. They are straight forward and easy reading with not too much complex financial reporting in them, as compared to a mega cap company like Google with many subsidiaries and too many numbers to keep track of.
2) A majority of big upward moves on nano cap stocks start on the day when a press release is issued about ANYTHING related to the company. Sometimes after reading these press releases I scratch my head and ask why would this stock go up +300% in one day because of this news? Some of the pr's are legitimately positive material news for the companies however most of them are just gibberish and put out to trick the dumb. For example, a $5 million dollar market cap stock announces that it has signed a joint venture with another about to go bankrupt company and plans to develop new products together. No financial terms of the deal are revealed. Stock opens at 9:30am at $1 and closes at $3.50, with 10x the float exchanging hands that day. WTF right? (For the newbie, we'll do a volume comparison of a well-known bigcap stock Apple Inc. ($AAPL). AAPL trades an average of 29M shares each day, with a float of 5.2B shares. Each day only around 0.55% of the float exchanges hands. If AAPL traded 10x its float in one day, that would be 52B shares! I'm sorry but that will never happen.) Let's also take a look at weed stock $ETST, a stock I am currently short. In the past month they have put out 6 press release pumps with half of them being total meaningless. Beware of stocks that are highly promoted by the company itself with financials as good as the white stuff on your car windshield and by penny stock promoters who get paid by the company itself to sucker the unsophisticated Joe Blow to get long. They usually signal financial distress and a majority of them have share the same story ending --- the stock does a highly dilutive secondary with warrant offering = longs get reamed.
3) In general, the daytraders and investors who are actively GETTING LONG these nanoturds are a lot younger in age than those that trade listed NYSE and NASDAQ stocks. What does this have to do with anything? It says A LOT to me. It means the average trader who buys these stocks are less educated, less financially savvy, less wealthy, and less experienced with the markets and how they work. Most of these traders have trading accounts less than $10,000 and are attracted to the inexpensive share price of these stocks. They would rather buy 5000 shares of a $1 stock than only 100 shares of a $50 stock. I wouldn’t be surprised if most of them can’t even understand what’s inside a company’s SEC quarterly filing and or even know how to access these corporate filings. A lot of “sheep” are getting long these stocks when they fly. Sheep = clueless people who have brokerage accounts that follow the blind advice of another that they think can make them money. Bottom line, there are a lot of clueless people involved getting long this garbage. Check out the quality of posts you see on StockTwits in these names and you will understand what I'm talking about. Another concept I can’t comprehend is that these people think reverse splits are positive for a failing nano cap company. Having a new crisp $1 bill is worth significantly more than 100 oxidized pennies. That’s “sheep” thinking and absolutely retarded. Low float must mean the stock will go up right? Ask the guys who top ticked $DRYS above $110 (I'll explain more about that later in the post).
4) Less capital is required when trading nano cap stocks as compared to NYSE listed stocks in regards to bearing the same amount of risk. During the first week I started shorting these pump jobs, I made the mistake of using the same buying power I would normally use when trading NYSE listed stocks. Let’s say for example my initial opening size for a NYSE stock trade is $50,000. I would also initiate $50,000 positions in these nanoturds. From my experience I can conclude that having a $10,000 position in one of these OTC or pink sheet nanoturds is risk equivalent to having a $50,000 to $100,000 stock position of a listed NYSE stock. On a side note to novice investors, microturd stocks usually have a 100% margin requirement at your broker as compared to 25% for normal stocks. You will need to take this into account if your bank roll is limited. You get more bang for your buck when trading these nano cap stocks so I can understand why investors with very limited funds would want to flock to them.
5) Technical analysis plays a larger role in daytrading nano cap stocks than fundamental analysis. I’m not a fan of technical analysis and never will be but when most of the clueless traders getting long these things are following technical indicators like VWAP and 9ema, you have to take note too. Understand what the sheep flock to and take advantage of it. Fundamental analysis and tape reading play a large role in my decisions when daytrading NYSE listed stocks as well as when I get short these nano caps. But sometimes these nano cap stocks on days where they trade ten times the float are so active and liquid that it makes tape reading hard to decipher. I am then forced to rely on technical indicators.
6) The massive triple / quadruple digit gains on microturd pumps always fizzle over time so it pays to be short them. The only problem is that you do not know when the pump will end. Take for example the most ridiculous microcap pump job of the past few years: Dryships ($DRYS stock ticker). It went up +1500% in three days on no real concrete news but pure speculation, pump job, and sheep buying. The Nasdaq halted trading on November 16th in the stock before the 9:30am opening bell four days after the pump started for "additional information requested". Past examples of this type of additional information requested halt result in the same outcome: the Nasdaq just created a ton of long bagholders, in plain English ... the stock is going to tank hard when it re-opens for trading). Three days after DRYS hit its $115 high it was back down to $5 a share, and currently is trading at 30c a share (prices are before the January 23, 2017 recent 1:8 reverse split). What’s funny to me is reading on Twitter that people were buying $DRYS above $100 and saying it’s going to $200 and still undervalued, or when it starts collapsing in price they tweet "I don't understand why it's falling". Sheep at its best! Don’t cover and stay short if your capital can bear the squeezing. In fact, short more on the way up!
7) No way in hell will I ever get long a cash-strapped microturd. If the financials tell me that the company is desperate to raise cash and/or imminent to file chapter 11, I will not go long … ever. The same goes with fluff or meaningless press release pumps. You never know when these highly manipulated stocks will get halted by the SEC or stock exchanges and if they do you are left holding the bag like a retard who deserves it. $DRYS anyone? $KBIO? You will not get any sympathy from me. Nowadays the new hot sector the sheep are pumping are cannabis stocks. Long and wrong for sure. The traders who love to buy up these stocks are probably thinking that I’m the dumbass for not getting long them. There are so many different ways to make money trading stocks and more power to them for doing something I can’t. I can now understand why none of my mentors on Wall Street never traded pinks or nano cap stocks. It's because they are highly manipulated and most of them are financial garbage -- things a series 7, 55, and 63 licensed equity trader would never buy for their mothers or their clients. They understand the concept of working capital, why a company goes bankrupt, and how important a going concern warning means in an SEC filing. I wish just one of them shorted them so that I could have learned that strategy much earlier in my career.
Hearing the NYSE closing bell on CNBC, I can now relax and call it a day. Looking at my realized P&L on my computer screen it gives me great pleasure to see that I’ve made a few extra thousand dollars shorting nano cap stocks, adding to my already numerous gains from small and mid-cap NYSE and NASDAQ day trades. Broadening the range of the type of stocks I can trade equates to more profits for me at the end of the day for myself and my live stock chat members. Don't be afraid to expose yourself to new trading strategies. Slowly master them one by one. I consider myself a very proficient all-around trader these days --- daytrading pinks to household recognized companies listed on the NYSE both long and short as well as swing trading them (holding them overnight for an extended period). What's next for me? Arbitrage trading? That's something I haven't done before.....
- Hubert Tsai, aka @MookTrader
When a listed stock has a parabolic rise for any reason, we take note of the much desired price movement and watch for signs of eventual topping out, making it a prime example for a short scalp. This is what happened in KEMET Corporation ($KEM stock) last Thursday and Friday. KEMET announced Thursday that it will acquire NEC TOKIN from NEC. Since NEC TOKIN will be debt-free, Wall Street gave this acquisition a big two thumbs up as the combined company will have a much stronger balance sheet and greater EBITDA sending the stock up +40% in two days.
Looking for signs of increased volume on the 1 minute charts as well as watching the tape to determine that sellers were now stepping in (either long sellers taking profits or short sellers initiating positions), we patiently waited until we felt those two signs were being observed in $KEM. When the stock was up around +37% on the NEC TOKIN news, we started our short position at $11.65. As the stock rose but the tape painted bigger sellers/shorters were coming in, we were confident to add to our short position into strength. One of the keys to being a contrarian trader is not to get shaken out when things go against you especially when the tape indicates and reinforces your trade thesis. In this case with $KEM, as long as new sellers were stepping in and whacking bids we knew the buyers would eventually get exhausted and the stock would turn down because portfolio managers will always take profits on a +40% rise in a NYSE stock.
When longs take profits, short sellers start positions, and long buying diminishes, you get a nice stock fade down. That is exactly what we saw in $KEM when it slowly worked its way down from $11.60s to $11.30 in a hour's time. Once it seemed like the easy down move was reaching a wall, we decided to cover and run with the money on a Friday afternoon. If we had more time before the market closed, we would have tried to ride the short down further.
The $KEM short trade was successful and netted us profits of +$3,050!
All stock trades are notified out live in the MookTrader stock chat room step by step ... entries and exits.
The drybulk microcap mania continues today! Almost virtually bankrupt Globus Maritime ($GLBS stock) ascended +129% today on no relevant news today. Before the market opened, $GLBS filed a 6-K regarding a possible shelf offering so a run-up in stock price today was just plain idiotic. We took this opportunity to initiate an extremely cautious tiny short position in the name (as you never know how high these microturds will fly) and would continue to short more on any possible $DRYS-like multi-day rip. Unfortunately we did not get a DryShips-like move and the stock was abruptly halted by the Nasdaq for an information request today.
During the halt, $GLBS released a pr detailing their new $5M equity private placement -- issuance of 5M shares of common stock + warrant to purchase 25M shares at $1.60. Yes ... $1.60, when the last trade on the stock right before the halt was $7.32, and fyi the company had only 2.6M shares outstanding coming into today! Major share dilution! Longs got slaughtered again and we covered this turd into weakness.
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Net Profit: $9,608
Retailers have been going berserk since Trump won the election. And with black Friday coming up, investors usually chase retailers up more than they should. Today $CAL (Caleres stock) reported in-line earnings and yearly guidance but the stock was taken up +17% on the day. We thought this was a classic example of black Friday retailers chasing as well as end of the year sheep portfolio managers trying to catch the S&P index performance by buying anything that was making new highs on the daily charts.
We initiated a short position in $CAL at $33.27 and added to the position into weakness as we saw sellers come in. Once it went below vwap we started to take profits and close out the position.
All trades are called out live in the MookTrader stock chat room as they happen real-time. Not a big trade but an easy one right before the Thanksgiving holidays!
Net Profit: +$2,341
Here's another prime example of why nanocap stocks are easy shorts for traders who have balls to step in front of the train. Today HTG Molecular Diagnostics ($HTGM stock) announced a vague development program with some big German companies. No concrete financial terms were mentioned at all in the press release. This for us was a clue to get short on any possible price rips $HTGM may have that day. In addition, if you look at its daily chart, all the days it had big pops (+30% price increases) the stock was easily squashed back down meaning big gains never hold for $HTGM. Financially, the company doesn't make a dime either (-$22.1M EBITDA) adding to our conviction the company is a piece of garbage.
We shorted the stock into strength because we knew it was going to come back down after the sheep longs find out that they are holding the bag on this turd. Covered into weakness as expected and made a nice handsome profit. All trades and ideas are called out and executed live in the MookTrader stock chat room. Come trade with us!
Net Profit on this trade: +$8.048
Thinly traded low-float stocks usually have exacerbated moves to the upside or downside when material news hits the stock. Genco Shipping & Trading ($GNK stock) went up around +75% today at its intraday peak on news that it sold $125 million worth of preferred stock to investors. This deal may have alleviated some of Genco's liquidity issues for the short-term however it didn't solve any of the company's money losing operations or reduce any of the company's massive debt (which measured around 18x its current market capitalization).
We felt that an insane run-up of +60% for $GNK stock on this news was unwarranted and initiated a short position. We confidently added to the short as the stock climbed up. Blind long chasers who do not know how to comprehend Genco's horrible balance sheet were at work trying to move the stock to the upside. These sheep always lose at the end as the artificial rise in the stock eventually crumbles and goes back down to where it should belong. Covered the short position into weakness and made some easy bucks. All stock trades are detailed out live in the MookTrader chat room to all our members as the trade happens real-time. Follow us in the trade or simply watch the daytrade unfold to learn how we consistently take money out of the stock market daily.
Net Profit: +$3,415
Negative European car rental outlooks yesterday from Avis ($CAR stock) sent rival Hertz Global ($HTZ stock) stock tumbling -15% in 2 days. After an unsuccessful bottom pick yesterday, we decided to give it another try today as we felt Hertz is a value buy based off comparing their eps growth rate and forward p/e ratio. Their eps growth rate is around double their forward p/e ratio making it a fundamental buy.
When the tape told us that buyers were stepping up to support the stock, we jumped back in. This time we caught the bottom pick just right and rode it quickly for a nice profit. We would have liked to hold the long position for more price appreciation but decided to just take profits as the stock stalled on the upside move temporarily.
Net profit: +$3,549.