Watchlist: 06/11

Dear L.,

For coming week there are three sectors I will be watching closely. I expect stocks related to the shipping sector, Bitcoin and Lithium to show considerable volatility.

As already mentioned in my last post, shipping stocks, led by DCIX went crazy on Friday. Does this mean the renaissance of the shipping stocks is there? I may not foresee this. Nevertheless, there will be some nice volatility in this sector in the days to come. Stocks to watch are: DCIX, DRYS, GLBS, TOPS, SHIP & ESEA

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While writing this Bitcoin has broken out of the $7500 mark.

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Given the recent parabolic move, Bitcoin related OTC stocks will most likely rock on Monday and maybe throughout the week. Stocks to watch are: BTSC, BTCS, GBTC, GAHC, TITXF, BITCF, GLNNF, SING, DIGAF, UAHC, ONCI, PRELF & BLKCF

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And finally there are some more OTC stocks profiting from the strong recent performance of the price of Lithium.

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Stocks to watch are: LACDF, LRTTF & NRGMF.

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Let´s see what kind of opportunities next week will bring. I am very curious.

Best,

Nils

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Update

Dear L.,

I have been neglecting writing about the outcome of my last predictions and new watches in general. I hope to be doing so again soon.

Let´s look at my last three watches IMMY, NEOT and SRAX.

 

IMMY did not perform well and the anticipated bounce came more than a week later.

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NEOT on the other hand did bounce a little…

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and finally SRAX had its „predicted“ green day two.

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What has been astounding this week is the comeback of the shippers. One year ago shipping stocks went parabolic with the most infamous stock DRYS going from around $5 to over $120 before crashing. It terms of today´s price level the stock reached a high of $3415747. How does this difference come along? Well, the shares experienced reverse split after reverse split to keep the stock „alive“.

Anyway, on Friday the shipping stocks spiked again fueled by the crazy mover DCIX. Among the spikes were infamous

DRYS…

DRYS.png

GLBS…

DRYS.png

DCIX going from $4 to almost $20(!!!)…

DRYS

TOPS…

DRYS.png

SHIP…

DRYS.png

and ESEA…

DRYS.png

Let´s see if this can start a new shipping craze.

Best,

Nils

Update: 24.10

Dear L.,

so let´s start project „hindsight bias“ and have a look at possible promising setups for the week and especially today.

However first let us just see how nicely two patterns which started on Friday have played out yesterday.

Both LRTTF and…

LRTTF 2.png

TITXF (remember my poor trade a week ago) perfectly confirmed their OTC breakout pattern. They gapped up and spiked in the morning.

TITXF

Today, IMMY may be interesting to watch. This spiked big time last week but has been loosing moderately for the past two days. Given the fact, that it could not hold its gains even on day one of the spike and additionally liquidity has dried up this is not the optimal setup. However, it may offer a small bounce play opportunity when selling of down to the $1.75 level.

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Similarly, NEOT may bounce today or tomorrow. There seems to be rather strong support in the $1 area. After four red days in a row, I would watch this for a morning squeeze.
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Finally, for the past weeks SRAX has been able to squeeze shorts over and over again. I expect SRAX to be able to squeeze again this week, most likely not today yet though.

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Let´s see if the action confirms these setups.

Best,

Nils

CAPR & TITXF

Dear L.,

The last two weeks have been a little busy and I haven´t had a lot of time to trade. Nevertheless, I wanted to publish this post to write about my last two loosing (Alas!) trades.

The first trade was on OTC stock TITXF. I was looking for the OTC breakout play and entered with a small position size just below resistance at 27.5 cents on 09.10. TITXF did not break out that day and I decided to hold overnight. However, the next morning there was quite some selling pressure and I threw in the towels at 25.4 cents.

Just yesterday TITXF finally did break out and moved from 26 cents to 34 cents!

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The second stock I did trade on 10.10 was once more CAPR and once more I lost trading the bounce play. I bought this after five consecutive red days close to support at $2.60 when it seemed to be ready for a bounce. Well, it turns out it was not ready (it would do so the next day) and I stopped out at $2.53.

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Well, this is pretty much it for this week. The last weeks´ performance has made me thinking and I realized a few things. I have come to realize that it is hard, if not impossible, to day trade and attend classes at the same time. There has to be prioritization and full commitment when trying to „master“ or at least become good at something like trading. At the same time, reading Taleb´s „Black Swan“ for the second time has made me aware of how much hindsight bias my trading has been based of. Thus, in the time to come I will be trading less. At the same time I am planning to post regularly (daily) watchlists for the next trading day, clearly communicating my expectations and possible trading plan.

Let´s see how this works out.

Best,

Nils

Weekly Recap: 02.10-07.10

Dear L.,

it has been an interesting week. There were many opportunities and I traded a little, gained some, lost some and learned a few lessons.

Monday – 02.10

Monday was a very active day with many stocks going crazy.

ECYT went from $1.4 to $3.7 on positive news. The stock topped on Tuesday at $6.55!

ECYT

Additionally DRYS squeezed once more from the 2.30s to $2.85.

DRYS - 4.png

So what about my FNMA breakout play from Friday? Well, it worked out to some extent. At the market open, FNMA dipped a little bit but finally found support and spiked. I got a little impatient, selling my position at $3.08 for a small gain. I would have taken off only half of my position but due to my small position size this was not feasible. It turns out that FNMA went to $3.23 on Monday and to a high of $3.28 on Tuesday

FNMA

Tuesday – 03.10.2017

On Monday there was another OTC breakout, continuing its move on Tuesday. Even though it was on my watchlist I somehow missed this move. NSRPF on Monday broke out at $5.5, spiking to almost $7 on Tuesday. NSRPF - 5.png

Similarly, TWMJF broke out on Monday at $8.8. It went to $9.4 on Tuesday and reached a high of $10.51 on Friday.

TWMJF.png

On the NASDAQ WPCS squeezed from the 1.60s to $1.86 in a few minutes.

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And then there was another crazy mover. CLSN went from $1.5 to $6 on an announcement of positive research data.

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Similarly, KOOL almost doubled, going from $3.6 to a high of $6.44. This move was caused by a mere announcement of patent recognition. So much about market efficiency.

KOOL.png

Wednesday – 04.10

On Wednesday the OTC breakout week continued. GLNNF broke out at 40 cents. I entered at this price with a small position size due to limited liquidity. After buyers and sellers had fought at the breakout level for a few hours, GLNNF spiked in the afternoon to around 48 cents. There, at 48.5 cents I sold have my position  and planned to hold the other half overnight. However, I got greedy and when GLNNF showed some weakness I sold the other half of my shares at 47 cents. The stock closed a little lower but went to 67 cents on Thursday. It even went to as high as 95 cents on Thursday. So my 20% gain does not seem that good compared to a 100%+ gain. Despite the opportunity for doubling my capital I am ok with taking advantage only of a part of the move. However, I have to criticize myself for not following my plan and holding the second half of my position overnight.

GLNNF - 2.png

Thursday –  05.10

I am not 100% certain about how to judge my trading on Thursday. I decided to trade CAPR. This had been one of the crazy runners during the previous week and I thought it may be due for a bounce. In the morning it sold off, before coming back to the opening level. This level was rejected but CAPR found support just below this level and above the volume weighted average price (VWAP). The action looked good and I bought some shares with a small position size at $3.07. Well, it did not work out. CAPR shortly thereafter lost buyers, sold off and I got stopped out at $2.95. I still think it was ok to enter this trade but I have to admit that it was not a setup that I want to concentrate on at the moment.

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Friday – 06.10

On Friday I finally tried to trade the bounce play. MTBC had been selling off after some crazy price action in the beginning of the week. This company was in the back of my mind from earlier this year when MTBC trapped short sellers for many days in a row. During this time shorts got squeezed when PR after PR was released. So given the price action I thought that both a bounce was due and maybe a press release was to be expected.

At the open MTBC sold off and then came back. The bounce play setup seemed to materialize and I entered at $2.55. I was a little early as it turns out and MTBC showed some weakness before grinding higher. Then however, there was a small squeeze and the stock went to $2.8. I sold my shares at $2.75 when the tape indicated a reversal. The sale was quite good. So what is the other huge spike that you can see on the chart? Well, it turns out that MTBC did release another PR later in the day. The stock spiked from $2.5 to $3.5 on some mediocre news on positive customer feedback – too bad I was out already at this point.

MTBC 2.png

It was an interesting week.

Let´s see what the next one brings along.

Best,

Nils

 

 

The Games Gotta Continue

Dear L.,

this week has shown once more that it is not as easy as it seems. There were incredible opportunities, but every trade which I made seems to have taught me the wrong lessons.

But let us have a look at the weeks.

Monday – 25.09

On Monday, I had some nice setups on my watchlist. Unfortunately, uni-lessons took longer than expected. Thus, I missed these opportunities (which of course does not mean that I would have been able to take them).

For the rebound setup SPI nicely squeezed from 11.5 cents to 15 cents.

SPI 5.png

SDRL went from 39 cents to 43 cents…

SDRL 2.png

and even WAC went from 60 cents to almost 70 cents.

WAC.png

Let´s now have a look at the OTC stocks on Monday. Friday´s breakout GLNNF actually did not perform as predicted by me. Contrary to the breakout pattern, it did not gap up, failed the morning spike and subsequently sold off pretty heavily.

GLNNF.png

And then there was the trade which I  actually did exucute. NSRPF, another OTC stock, had broken out earlier during the day. In the afternoon it showed some weakness, selling off back to the breakout level again. I took this opportunity to buy the dip at $4.6. Here I have to mention that NSRPF is not a very liquid stock and at some points minutes would pass without an occurring trade. However, NSRPF directly moved in my direction and followed a positive trend. It went as high as $4.8. The pattern seemed to work and I was ready to give NSRPF a lot of room, putting my stop below $4.6. Then however, at $4.8 something very weird happened on Level2. From one moment to the next, the action turned from supper bullish to super bearish. Buyers completely disappeared at the $4.8 level and NSRPF fell to $4.7. This by itself would not have been a problem, but given the bad liquidity I feared a complete crash. Long story short – I panicked and sold for a minuscule gain at $4.72. What happened afterwards? NSRPF directly ripped and went as high as $5.4 – yeah $5.4!

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Another stock breaking out nicely on Monday was IMLFF. From the breakout level at 37 cents, this went to as high as 45 cents on Tuesday.

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Tuesday 26.09.2017

And here we are on Tuesday and the start of my loosing streak. What I was watching on Tuesday was ARDM, one of the hot stocks of the week. Given the chart setup I thought that it could squeeze shorts a little bit. At the open it had a huge red candle. I bought it then on the uptrend at $3.29. ARDM went to the crucial high of the day at $3.35. This is were one could see the same thing which was present in my other loosing trades too. Huge sell orders came in and pushed ARDM down again. Finally, I got stopped out at $3.20.

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And what happened then? Later in the day ARDM did break out and squeezed to $4.2!

ARDM.png

Wednesday – 27.09.2017

On Wednesday SRAX was the one I played, once more looking for the bounce. I bought SRAX close to the high of the day at $2.21. It all looked quite good and SRAX shortly squeezed to $2.3. Once more at this point a huge wall of sellers (short sellers I suppose) showed up. SRAX sold off, attempted the $2.3 level once more, failed and I got stopped out at $2.16. Given the fact that I was up comfortably at the $2.3 level, this loss was kind off painful.

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Just to mention it, NETE had a very nice red to green move on Wednesday.

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Thursday – 28.09.2017

And then there was Thursday. Buff. Well, what can I say. On Thursday I traded INPX which led me to a loosing streak of three trades in a row. INPX had sold off quite heavily on Wednesday and I was looking for the bounce play. The open was perfect. INPX selling off and then grinding up. I entered at just under 39 cents. It all looked good and INPX grinded higher and higher. At this point the 37.5 cents level had held very nicely as support. Thus, I increased my stop to 37 cents. INPX traded at 39 cents, testing the high of the day. Huge sell order showed up on level two but INPX held steady. Then it happend. For the blink of a second, all buy orders above 37 cents disappeared, INPX crashed, I got stopped out and INPX went back to 39 cents. All this took less than a second. I have already heard about market makers bringing the price to specific price levels in order to trigger stop loss orders. This is what seems to have happened here and I will have to put mental stops in the future rather than hard stops.

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Well, this was my pretty rough week. On Friday I was planning to take a break but did end up watching the markets. Once more, some bounce plays were on my watchlist. The pattern in the end was confirmed but the intraday price action was difficult and I did not end up trading the setups.

NETE went from the lo 70 cent area to $1…

NETE 2.png

SRAX squeezed from $1.8 to $2.5…

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And Itus had a very nice short squeeze in the afternoon too. After breaking VWAP at $3.28 it squeezed to $3.85.

ITUS 4.png

Finally, towards the end of the day I did enter another trade. Even Though I did not feel compelled to trade I decided to take advantage of this nice setup. FNMA has been trending towards the crucial $3 mark for some days. Close to market close I entered with a small position size at $2.98. FNMA did reach $3 various times before the bell rang but sellers defended this level pretty heavily and we have to see if it can break on Monday.

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I have to take the right lessons out of this week. But I have to admit that it is not easy since I did trade „good setups“ (at least I had thought so) but I still ended up loosing quite some money. Maybe I have to ask myself if I did overtrade throughout the week.

Let´s see for the next week.

Best,

Nils

 

 

Opportunities coming back!

Dear L.,

This week I have been listening to the audio book „Trading in the Zone“, one of the classic books on trading psychology. At some point the narrator asked the following question: „If you had a wish and were to be given one trading ability, which would it be?“. At this point I was actually following the markets and therefore I did not really listen. Subconsciously my answer was: „Following my plans and taking action!“.

So, here we are again my best L. I have come back to reality. With hindsight and confirmation bias it all seemed so easy during the past three months when I was not able to actually trade myself. But now? Well, actually it still seems „easy“ and „predictable“ but pushing myself over the edge is a lot more difficult than I had expected.

But let me tell you this week´s story.

This week started like every other week in recent months with me going to work for Monday and Tuesday were the final days of my internship. Thus, once more I can only tell you with hindsight bias about the market action for these days.

But on Monday there were some very appealing bounce plays.

There was ALDX, bouncing from the $8.5s to $9.5 in a matter of four minutes. Pay attention to the daily chart here. It just looks perfect.

ALDX

And there was KNDI, which went from the $4.70s to $5.4 in under 20 minutes too. You see – there were some nice opportunities.

KNDI.png

After another day of work on Tuesday came, you may have already guessed it, Wednesday. The best trader in the world was back in front of his laptop (did I mention that I even have an additional screen now? – sweet huh?).

The first stock on our list was actually on my watchlist too. ITUS had gone totally nuts in the beginning of the week and went from $ 0.7 to almost $2 on news of an issued patent. You know that I like these high flyers later in their cycle. More specifically I think the risk reward is the best after some days of selling off. However, more recently I additionally became more fond of the setup of buying these stocks for a red to green move since they can squeeze shorts extremely easily. The problem with this setup compared to the bounce play setup is that in this case there is still much selling pressure left once people take profits.

Nevertheless, I was watching for a weak open and then a squeeze – the known old story. And what we got was actually exactly this move. ITUS sold off down to the mid 1.70s before finding support and grinding higher. Then, when it broke the opening level in the mid 1.80s, it quickly squeezed to $2.35. What was I doing? I was sitting at the sideline. Well, I guess that for this first trade I can use the excuse that this was just too fast for me after having been away for a few months…. Nah, this excuse does not sound not too convincing to me either.

ITUS.png

Well, just for the sake of mentioning them, let us have a look at two more red to green movers which were not on my list. PULM squeezed nicely from around the mid 1.90s to the mid 2.30s. To be fair, even though it found support it did not put in higher lows and almost all of the squeeze happened in a single candle. Thus, playing this squeeze was very difficult indeed.

PULM 2.png

Additionally, SPI, which should have been on my list given the chart, went from just under 10 cents to just under 15 cents – not too bad!

SPI 4

On Thursday, there was not too much to complain about. One crazy move to mention was on the side of AKTX. Look at this crazy composium of shorts getting squeezed and longs chasing. From the low 6s to almost $12.

AKTX.png

And then there was the newest pump PEKN, having its final crash and offering two very nice dip buying opportunities. Since I usually scan for OTC stocks with a price of under $3 this was not on my watchlist. I probably should adjust my criteria I guess.

PEKN.png

So let us revisit the fateful day. There were a bunch of stocks on my watch list for Friday – so many nice setups.

First, we have HMNY. Based on the chart, this was not a real bounce play yet since it had sold off only marginally on Thursday. Nevertheless I thought that this may offer a nice red to green move. Pretty much right out of the gate HMNY started to spike. Thus, my favorite setup did not materialize and I was out. I´m ok with that. What happened later in the day however is impressive. HMNY broke out of its down trend at around 16:15, it subsequently spiked from around $5.8 to almost $8 before selling off again.

HMNY.png

The next one on my list, and albeit one that makes me upset, is ITUS. This one had a very similar daily chart to the one of HMNY. But unlike HMNY, ITUS offered the red to green move – so I though. At the open ITUS sold off from $2.13 down to $2, which is a good range for the bounce in my opinion. At $2 it found support and put in higher lows. At this point I already missed some of my entries due to the fear of entering my position but finally I bought some shares at $2.07 which actually is a nice entry. Just after my purchase, ITUS started its squeeze – up to $2.18. At this point I thought about selling for a moment but decided that a squeeze should lead us much higher. However, ITUS failed to squeezed and sold off down to $2.06 again. I became a little nervous at this point. But why the ***? I had a stop at around $2 and was certain to be executed given the liquidity. There is no way of trading without having losses from time to time. So why be so nervous? Maybe I need more exposure again. Anyway, ITUS made another attack, crawling back to the crucial $2.13 mark. But once more, short sellers pushed ITUS right back and I threw in the towl at $2.12. ITUS went lower to $2.08 (a higher low), made a third attack and sold off to $2.1(yet another higher low), finally broke out and spiked to as high as $2.5.

ITUS 2.png

So what is the lesson of this trade? First, my entry was nicely chosen. The fact that I was able to generate a small profit despite my unacceptable exit shows this. Second, once more I exited my position with a minuscule profit just avoid a (very small – given my stop) loss. Let us have a look at the chart again. When the squeeze got rejected for the second time – was there any significant level on the chart broken? No! ITUS barely sold off four cents and quickly recovered. The price action at this point did not invalidate my entry at all. I have to say it once more. It is 1000 times better to exit with a (small) loss at a point when your trade idea has been invalidated than to exit with a minuscule profit just to make a profit. It does not matter if my win rate is only let´s say 30% as long as my winning trades are much larger than my losing trades. Traders do go broke taking profits after all and missed opportunity cost is a cost too – as we see in this case and further down too.

Lesson learned, I have to include different time frames and stops invalidating my trade idea for my trade plans.

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I really had hoped not having to write about the next trade and actually did not pick up my „pencil“ until the market close just in order to avoid the painful reality. While I could have earned more on a more appropriate ITUS trade, the next trade, the next missed opportunity, makes me want to attribute myself an IQ of 80. GLNNF is just the perfect breakout out of its resistance at 30 cents.

Already on Thursday, I was watching this stock. However, when it was clear that it would not break out during this session, I promised myself to watch it again on Friday. And boy did it break out on Friday. Since I like to buy these OTC breakouts at the end of the day, speculating for the morning gap up, I had not clearly articulated my plan for a morning break out. This led me to being sitting at the sidelines thinking at many points „let it just come back to X and I´ll enter“. Well, obviously it did not only not come back but went as high as 38 cents from its breakout level at 30 cents – more than 20% of appreciation. If this follows the pattern on Monday, and I bet it will, it will gap up and offer even better returns. Let us see – I clearly deserve this lesson and hope I have learnt it.

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Best,

Nils

On Overvaluation and Extreme Losses

So, just how overvalued are current equity markets and more importantly when the markets finally crash, what will be the magnitude of this crash?

Universa Investment´s Chief Investment Officer Mark Spitznagel set out to answer this question already in 2011 in the white paper „The Dao of Corporate Finance, Q Ratios, and Stock Market Crashes“. Even though the „likely“ crash has not occurred for 6 years, his analysis is very compelling and may be worth keeping in mind while watching our current surroundings.

It is all about valuation

The start of Spitznagel´s analysis goes back to business valuation and revisits one of the most famous equations in Finance. The Gordon Dividend Discount model states that the value of a company equals it´s future expected dividends discounted at a appropriate cost of capital. Thus, we have.

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where D(1) are next period´s dividends, WACC is the appropriate weighted average cost of capital and g is the growth rate of dividends.

Since it is more appropriate to use free cash flows than dividends, we replace dividends with

Free Cash Flows = „Net Operating Profit less Adjusted Taxes“ * ( 1-Rate of investment (IR))

Additionally, the grow rate can be approximated by the product of return on invested capital (ROIC) and invested capital (IR).

g = ROIC * IR

We arrive thus at

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And since the net operating profits less adjusted taxes are themselves a product of invested capital and return on invested capital, i.e. NOPLAT = ROIC * IC we arrive at.

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The last equation shows us the relevant force in valuation. It is all about the ROIC – WACC spread. According to basic reasoning and based on economic concepts one would expect this spread to disappear. If ROIC exceeds the WACC „greedy“ capitalists will rush into the market, thereby pushing the ROIC lower. The opposite holds if WACC would be to exceed return on capital. Therefore, we generally can expect these two measures to converge. Indeed, empirically in the U.S. both ROIC and WACC have been at a value of around 8%.

So, where are we at? At this point we can say that if Value/IC is high this tells us nothing but that ROIC currently is higher than WACC. Since the growth rate appears both in the numerator and the denominator, we may neglect it.

The Q ratio and expected returns

Our measure of Value/IC which is entirely driven by the ROIC – WACC spread is essentially the same as the Q ratio, which is expressed as total equity over the total net worth of the company (assets and debt are netted). Below the development of the Q ratio between 1900 and 2011 is displayed.

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Source:  Spitznagel, „The Dao of Corporate Finance, Q Ratios, and Stock Market Crashes“, Universa Investments

We may observe that the average Q ratio value is 0.7 for the given time frame. This indicates that at a reading of 0.7 WACC = ROIC. Even though one would expect a Q ratio of 1 to bring equilibrium, we may explain this feature by the fact that net worth of firms consistently has been overstated, i.e. invested capital has been overstated and depreciation understated.

So how can we use Q ratios to forecast returns? Well, first of all it may be interesting, even though it should be intuitive, to note that the lower the Q ratio (the more undervalued the equity markets) the higher the expected returns. This is displayed in the figure below.

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Source:  Spitznagel, „The Dao of Corporate Finance, Q Ratios, and Stock Market Crashes“, Universa Investments

We have it! The Q ratio seems to work very well when forecasting expected returns. What is even more astounding however is the impact of the Q ratio on the left tail of the return distribution. Spitznagel states

„Insofar as the Q ratio is also able to expose the magnitude of that implied spread [ROIC – WACC] as well as perhaps of implied growth rates, where material, it should not be surprising that it in turn indicates susceptibility to shifts from any extreme consensus. And such shifts of extreme consensus are naturally among the predominant mechanics of stock market crashes.“

Therefore, let´s have a look at the effect on the left tail.

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Source:  Spitznagel, „The Dao of Corporate Finance, Q Ratios, and Stock Market Crashes“, Universa Investments

The picture seems pretty scary. 50% and 20% of returns are expected to occur below the returns indicated in each bin based on the Q ratio. The left tails are a lot fatter the higher the Q ratio. Therefore as Spitzagel notes:

„While overvaluation is murder on mean returns, as one should expect, it is even worse on risk.

[…]

At current valuations (Q = 1.04) – and if this 110- year relationship continues – there is an expected (median) drawdown of 20%, and a 20% chance of a larger than 40% correction in the S&P500 within the next few years. Should valuations remain elevated (that is, if no large correction materializes), these probabilities continually reset; this makes an eventual steep drawdown from current levels highly likely.“

The sharp correction thus far did not occur and at the time of writing the Q ratio hovers around the 1.038 level. Does this mean that we are headed for a crash? Well, it is not easy to answer this question. Distinguishing between causation and correlation is at times a difficult task. However, the theory behind the basic valuation formula seems very compelling and even if we cannot forecast the future one may conclude that larger drawdowns have become increasingly more likely in recent years.

Best,

Nils

Weekly Recap: 11.09-15.09

Dear L.,

This was a more quite week but there were still some interesting opportunities. So let´s have a look!

Last week I wrote about DCTH and DRYS and possible bounce opportunities. Well, it did not work out very well to be honest.

DCTH just continued selling off.

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DRYS however, offered a very small bounce opportunity. On Monday morning it opened weak, found support however and then „squeezed from the mid 2.3s to a high of 2.50 – admittedly a small move.

DRYS - 3.png

What we did get however where three dip buying opportunities on HOMR – as we had anticipated before.

HOMR.png

On Tuesday, NLNK bounced nicely.

NLKN.png

Given that it has experienced 5 consecutive red days, I will be watching this for a bounce next week too. However, with a market cap of $286 million and a share price of around $12.6 it definitely is not the optimal setup.

What I will be watching closely is NSRPF for a break out of its $4.5 resistance.

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That´s it already for this week. Let´s see what next week will offer.

By the way. From Wednesday onward, I will be able to trade again. Thus I will be able to test my hindsight bias tactics first hand.

Best,

Nils

Weekly Recap: 04.09 – 08.09

Dear L.,

One of the benefits of writing these weekly recaps, including my watchlist for the upcoming week, is that it limits (to some extent) my tendency to rely on hindsight bias. Based on my favorite patterns I put stocks on my watchlist and „clearly“ articulate what I expect to happen. Sometimes it works out and sometimes it doesn´t. Since I do not write this post daily, new stocks show up every day that come onto my watchlist which I do not write about before the week starts. But at least when reviewing my previous week´s forecasts I have to face reality to some extent.

This week was one of the weeks were my patterns did not work out the way I had anticipated and thus we have to talk about it. Don´t worry though. There will be a lot of hindsight bias regarding stocks that popped up on my radar during the week.

For NBEV I had anticipated a bounce play. Well, it did not happen. Liquidity dried up and even though the stock is higher priced, thereby still being liquid in $ terms, this play once more strengthened my view that the bounce play works better for stocks in the $1-2 range.

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The next stock on my watchlist, PYDS, was such a lower priced share. Anyway the bounce did not happen.

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For FSNN, the pattern played out to some extent. After three red days we had the typical morning sell off followed by an upwards trend. When the morning high broke FSNN spiked a little bit.

FSNN.png

The same goes for LINU. However, the pattern appeared after five consecutive red days and thus very late. Already on previous days the pattern seemed to materialize. Consequently, I would have entered at these points and lost on these trades. Anyway, on Friday the pattern was perfect. Weak opening, LINU grinding up and when the high at $1.33 broke it spiked up to around $1.5.

LINU - 6.png

Now let us have a look at the hindsight bias play.

PULM bounced this week after two days of selling off. The pattern took longer to work out but we see that once more the opening level of the stock was the crucial one. Once this was broken short sellers covered and PULM spiked.
PULM.png

Let us have a look at the plays for next week.

Already on last week´s watchlist, HOMR keeps on grinding up. I am waiting for the crash and the dip buying opportunity.

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OTC stock ACBFF is getting close to its resistance level at $2.2 and I am watching it for the breakout.

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For both DCTH and DRYS the pattern is not super convicting but considering their charts, there may be the opportunity for a bounce play. They are worth watching.

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Unbenannt

Let´s see how the week turns out.

Best,

Nils