All these breakouts…

Dear L.,

markets keep being determined to a large extend by the sell-off in tech stocks. This morning the market opened sharply higher, then followed Facebook down the drain to bounce together again. Give the fact that Facebook is a major component of the SP&500, it obviously makes sense that the recent tech panic has influenced the indecees too.

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Luckily, small-cap land keeps on offering both longs and shorts which I will elaborate on now – as always with a pinch of hindsight bias.

This morning TOPS gapped up big time due to a 10/1 reverse split. Despite the existence of the efficient market hypothesis, splits often lure momentum buyers into specific sectors and thereby bring volatility.  Similarly, TOPS had a very nice red to green move this morning.  From the this level at $2 it spiked to $2.5 in a matter of two minutes

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ENRJ, which had shown remarkable strength last week just to finally crash, on the other hand presented a very nice bounce play opportunity.

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Now, let us have a look a the new section “WHY AM I NOT IN THIS TRADE?

Do you remember how I got stopped out of FUSZ last week in the mid 60s? Well, look at where it trades now. Just under $2.

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Even though I had had VATE on my watchlist for a possible breakout, I judged there to be too little liquidity. Well, the breakout worked perfectly and liquidity would have been enough for my capital.

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Similarly, due to some stupid reason I did not approve of the RHHNF chart when it was on my watchlist for the breakout at 40 cents last Thursday. Since then it almost has doubled.

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And then there is UCLE, which should have been on my watchlist last week but unfortunately was not. Well, it broke out very nicely too.

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The one breakout which I ended up trading, and luckily taking some profits on, did not fare so well.

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Well, given this bunch of great breakout charts I really cannot blame the market conditions for my current lack of profits. Rather, I will have to analyze how my decision making misled me. After all there is something to learn from this.

Best,

Nils

 

And even more midday mumbling

Dear L.

Let´s get right into it. Today Goper Protocol, Inc. (GOPH), which is above all linked to Blockchain, was on the top of my watchlist. Already yesterday the company announced the acquisition of assets to facilitate its operations. At first I interpreted the PR as very positive and thought about buying GOPH at the open. However, the announcement also said this:

In total, Gopher paid $1.2 million in cash, note and employment signing bonuses, issued 2,000,000 shares of common stock and 3,000,000 warrants to purchase shares of common stock for a period of five years at a fixed exercise price of $1.85 per share.

Given the issuance of shares and warrants with an exercise below the current value of the stock at the time, I thought that this may be rather bearish for GOPH and decided not to place a trade. As it turned out, GOPH rallied throughout the day and closed at $2.3. Given overhead resistance at $2.45 I decided to buy into the likely breakout today.

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In the morning, GOPH opened strong and I bought shares at $2.41 in anticipation of the breakout. After a short hiccup, GOPH broke out and topped at $2.63. After some consolidation, it finally went to $2.68. I thought about taking profits here but decided to sell if the up-trend was broken. When this happened, we saw a rather big washout and I exited my position at $2.56 for a small gain. To be honest, I am not very satisfied with this exit. Going back over the trade, I have realized that I tend to exit into weakness. For OTC stocks however it is import to sell into pops and buy the bounces since fills can be rather difficult. The fact that I wanted to exit just below $2.6 and got filled at $2.56 demonstrates this fact too. Even though GOPH sold off down to the breakout level at $2.45 and at the time of writing quotes at $2.5, I do not approve of this exit. Either I decide to hold this into the close (which would be the ideal behavior given the breakout play) or my plan should have been to sell into strength in the 2.6s and then rebuy the dip.

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Anyway, this trade ends the losing streak and gives me more confidence into the breakout play.

Yesterday, I watched another possible breakout play VATE. Looking at the price development since yesterday, the breakout turned out almost perfectly. However, this stock just does not offer sufficient liquidity and I decided not to join the party.

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Well, that´s it for now.

Best,

Nils

 

 

 

 

Midday mumbling….

Dear L.,

There have been no trades from my side today but I want to share with you what I have been watching and what small-cap land has been doing while trade wars are fought.

Here, just a short update  on what FUSZ has been doing since I was stopped out at 69 cents. Even though I would not even have thought about holding this for more than two days, FUSZ´s price development make my exit seem even worse timed.

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Yesterday, Biotechnology company U.S. Stem Cell, Inc (USRM) announced “99% reduction in severity of Psoriasis utilizing autologous stem cells” making USRM fly to the moon. In the afternoon it broke out nicely at 7.4 cents and even though I was watching it at the time, I decided to not buy the breakout due to a 20%+ move on the day. After the breakout USRM climbed 10% before selling off this morning.

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There are two very noteworthy stocks this morning. Both of them shot to the moon within minutes just to silently go back to where they came from.

SNGX squeezed from $2.3 to $3.7 within 3 minutes.

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A little later EARS copied the move and reached a high of $3.08 after having opened at $1.5.

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And then there is the one stock I am a little angry about. when preparing my watchlist, AMTX was on the top of my watchlist. This was based on various facts. Firstly, the daily chart fit my pattern. Secondly, since AMTX had declined more than 10% yesterday, the short sale restriction was on AMTX, making it more difficult for short sellers to put pressure on the stock. Thirdly, the previous two red days had seen relatively small declines. I argued that selling pressure was relatively low.

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However, when AMTX opened being green on the day, I argued that the typical price move was not to be expected and focused on other stocks. A big difference as it turns out. AMTX perfectly followed the bounce play pattern. It sold off in the morning, found support and then ripped through the high of the day at $2 just to squeeze to almost $2.5. Well, I guess as so often, there is some hindsight in my observation here.

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That´s all for today.

Best,

Nils

Five in a row…

Dear L.

Today should have been my biggest profit days thus far with two awesome breakout plays. Instead it was the fifth losing day in a row.

So what happened today?

Well, coming into the new week, my focus was on some NASDAQ stocks. The four stocks which I was watching closely were KBSF, AMTX, DXR and RKDA for morning squeezes.

KBSF

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AMTX

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DXR

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RKDA

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While some of these did bounce based off of the daily chart, the bounce setup did not materialize and I am happy that I did not touch any of them.

In the last week it seems as if there is at least one stock a day with a 100% move. Similarly, today shares of NF Energy Saving Corporation spiked almost 300% on news of having singed two sales contracts.

Well, look at this chart.

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But for me today it was the day of OTC breakouts. So, I think we have to talk about what happened.

This morning I saw that nFüz, Inc. (FUSZ) a “Hollywood-based digital technology company” announced a partnership with dr2marketing. While this PR does not say anything at all, FUSZ already had been on my watchlist and in micro-cap land PRs without any content can make shares spike.

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As expected, in the first minutes of the morning FUSZ starting climbing and broke out of its prior resistance at 71.5 cents and went as high as 75 cents. I was expecting a pullback back to the breakout level however and therefore did not chase. And as it turns out I got my pullback and was able to buy at 71 cents. This purchase seemed well-timed since FUSZ started to accelerate towards 75 cents once more. when it could not break out however, this was the bearish sign which then started a downtrend. On the tape sellers continuously where taking out buyers and seemed just to be stronger. Then, just before i was about to be stopped out at 68 cents a massive buyer showed up at 69 cents, making FUSZ rally for a few minutes again. However, it was a weak and rather unsuccessful attempt. And when the buyer got taken out step by step, I decided that the pattern was broken and bailed out at 69 cents myself. Well, once more I sold almost at the bottom and at the time of writing FUSZ has reached a high of almost 90 cents.

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Next to FUSZ I missed another great breakout play. RSII (developing senior living communities) had been on my watchlist for the breakout at 2.2 cents. However, I forgot to actually set an alert and did not realize to check for its quote until I stopped out of my FUSZ trade. Well, I missed a move to a high of 2.79 cents at the time of writing.

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Missing not only  these two opportunities but also ZSAN last week even though I was right on the daily time frame is very, very painful. To be honest, I do not know exactly what my mistake was today when stopping out. But I have to take some lesson out of this. After all you never fail but always learn.

Best,

Nils

 

 

The craziest stock I´ve ever seen

Dear L.,

There haven´t been any trades from my side so far today. Nevertheless, it already has been a truly incredible day in the small-cap sector. Here is what I have been watching.

Firstly, we have to talk about PTCO which finally crashed yesterday. The promoters were able to push the stock to a high of $4.35 (from a previous close of $2.8) in the morning. But the gains could not be sustained and PTCO crashed within the last trading hour to a low of $1.82 before bouncing to $2.4. I tried to get a fill at $1.91 but was too slow and ended up sitting on the sidelines. This morning PTCO ones more sold off down to the $1.8s before bouncing back to the 2.6s.

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On the Bounce Play Pattern side, DXR was truly impressive today. Look at this daily chart – almost perfect. From the previous night´s close at $5 it almost reached $8 later in the day. Unfortunately however, DXR gapped up 10% this morning. This gap up made me not to consider this opportunity. However, just as for JAGX the bounce worked superb for DXR despite the gap-up. Maybe I should think about my strategy when there is a gap-up after all.

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And here comes the stock I was referring to in the title. RKDA! This example shows what a small float and a conveniently placed PR can do. This morning, agricultural technology company RKDA announced that “today announced that it has achieved two key technology milestones in its High Fiber Resistant Starch (RS) Wheat program”… The PR made RKDA gap up to $18 – from a previous close at around $11.5. But this should not be the end of the story. RKDA decided to squeeze shorts all day. Apparently, the shares were easy to borrow at many brokerage firms. This led to a crowded short trade resulting in the shorts being trapped. Well, RKDA squeezed these shorts up to a high of $48 and at the moment it is still up 242% on the day.

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Wow! What a move!

Best,

Nils

 

 

Oh ZSAN…..

Dear L.

Yesterday I revisited the Bounce Play Pattern and introduced some likely candidates for the coming days (OGEN, ZSAN, PIXY). While two of these picks performed pretty badly today,  ZSAN decided to squeeze shorts big time into the afternoon. Luckily ZSAN was the one stock I had decided to focus on. However, despite the great squeeze I managed to loose on this trade today. What had happened? Let me tell you.

This morning ZSAN gapped down slightly from the mid 15s to the high 14s. Then, in the first minutes of the trading session it sold off some more. It bounced from its lows however, held support and put in higher lows. Not wanting to miss out on a predicted play, I entered my position as planned at $14.27. I do think that this entry was justified. However, one might argue that ZSAN was down almost 10% on the day at this point. Therefore, a rather large percentage move was necessary just to break even and thus start the squeeze with a red to green move. Nevertheless, I judged the pattern favorable, bought a small size and set a mental stop at around $13.3. A few minutes later ZSAN cracked previous support $14.1 and washed out to $13.7. And here enters my big mistake of the day. As I just have said I had concluded that any price move above $13.3 would keep the pattern valid. However, when ZSAN tanked I decided that this weakness should not have happened if a squeeze was about to occur. I chose to take my losses sooner than later and sold at $13.87.

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I was pretty happy with my exit at this point. This “happiness” about not having lost more capital demonstrates that I already expected to loose on the trade and did not have any conviction in it. It may be a good idea to think about this. Anyway, I did not follow my plan and the result was me being without any shares.

And then? What happened. Well, ZSAN held the low of the day for the next hours. And then it did this:

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It perfectly squeezed to a high of $18.4 and currently is trading at $17.14. Would I have been able to nail this move perfectly if still in my position? Certainly not. But would I have been able to ride some part of this move? I am pretty confident (at least once) that the answer to this question is yes.

Alas, I had sold all my shares, teaching me a good lesson.

Best,

Nils

Revisiting the bounce play

Dear L.,

The past week seems to have revived the small-cap sector. When small cap stocks soar, they eventually crash and some of them, almost forgotten by the trading community at this point, decide to squeeze comfortable short sellers and bounce.

And here enters the bounce play pattern the game. The premise is as follows. After a meteoric surge, these small cap plays crash back down again. After one-two  red days, short sellers become more and more comfortable until one morning the stock holds its lows, breaks out of the high of the day and thereby forces shorts to cover.

We saw this pattern perfectly last week when TENX squeezed. After a first red day, TENX sold off a little more on Monday. However, losses could be kept small and subsequently we saw higher lows until the morning high of $ 7.6 was broken, causing shares to spike to $9.4.

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Today, we saw a nice bounce too. JAGX spiked big (BIG) time on Thursday just to crash on Friday. This morning JAGX gapped up slightly. This probably made some short sellers uncomfortable. The result was the bounce no playing out perfectly. On the day of the bounce I like to see shares selling off slightly in the morning before putting in the higher lows as in the TENX example. This morning however JAGX started to squeeze pretty much right out of the gate, thereby not offering a clear risk. Nevertheless we saw a nice squeeze up to a high of 26 cents down from 22 cents. All this happened in a matter of 6 minutes.

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So, where does this take us? At the moment some stocks that were pretty impressive last week see rather strong drawdowns. Will they offer the bounce play? Let´s see.

OGEN´s chart does not look perfect but it is worth a look. Liquidity has almost disappeared and the pullback has been almost too much but I want to watch this tomorrow anyway. The big move from 1.8 to 4.2 last week makes me hope that this has a good bounce in itself.

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Our next candidate PIXY, looks pretty interesting too.

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Finally, we have last week´s rockstar ZSAN. This crushed short sellers to an impressive extent in in the last 7 days. Now it is coming back down and may offer the bounce after two red days.

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Best,

Nils

 

Being a weak hand in LVVV

Dear L.,

today I got to trade again. On news on the purchase of some greenhouses for its Cannabis production, LVVV spiked again in the morning and broke out. Given the two mayor breakouts within the last days, it was already likely that the move would be smaller in magnitude. Nevertheless my plan was to buy LVVV on a dip and sell it towards the close. Since LVVV does not usually gap up the next day after breaking out, I decided not to hold this overnight.

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But things turned out differently. In the first minutes of market activity, LVVV quickly spiked to 6.4 cents. I got fear of missing out and took the entrancement to 6.29 cents as a dip buying opportunity. This is to say that I chased the stock instead of waiting for a good entry. It turns out that LVVV did retrace down to 6.05 cents which would be the support level for the next two hours. The channel was defined between 6.4 and 6.05 cents with me being in on the more expensive side. Later in the morning, LVVV did break out of the channel and went as high as almost 6.7 cents. But momentum quickly faded and we entered the channel again. I decided to put my stop below support at around 6.05 cents. Finally, my stops got activated. The small gap below 6.05 cents on the chart probably indicates that many other “weak hands” had the same genius idea. I got stopped out at 6.01 cents and as of this writing LVVV is back at the top of the channel. It seems as if once more I have been the weak hand that has to be shaken out before a stock can rise.

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Best,

Nils

Midday thoughts 2.0

Dear L.,

Gary´s (Cohn) departure from the white house left markets down this morning and me sitting on the sidelines, waiting for my patterns to set up which they do not do. Anyway, I think I may write about a few interesting stories of the past days. So here we go.

Do you remember me begging for LVVV not to break out on Tuesday? Well, LVVV did break out at 5.5 cents and then continued its momentum up to a high of almost 6 cents. The next morning however, the breakout pattern got rejected with LVVV selling off and ending the day on a big red note.

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Today PTCO´s price action finally made it obsolete for the next weeks. It did crash a little bit, taking out the week hands. However, the crash was not even close to big enough for me to consider dip buying it (what a nice excuse right?). In my opinion the sheer amount of small breakdowns within the last days has seriously damaged this setup and I will not consider trading it anymore in the not so distant future.

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The small-cap sector has seen some more plays in recent days and one of them is ZSAN. This one offered a very nice washout long opportunity today. The presmise is as follows. When ZSAN spiked up to the mid 11s yesterday, short sellers started piling in and until the close the short looked perfect. ZSAN continued selling off and closed way off its highs. This means that short sellers most likely were very confident at this point. When ZSAN started to trade higher in premarket however, this meant that many of the shorts were underwater at the open. Stops were hit and shorts covered. As a result ZSAN spiked to new highs of almost $12.

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That´s it for now.

Best,

Nils

Midday thoughts…

Dear L.,

As I´m sitting here watching the S&P 500 going  from down on the day to up almost 1% on the day without having put on a trade, I want to update you a little on the current situation.

Recently I have written quite a bit about some pumped stocks about to crash and therefore offering the dip buying opportunity. Since its first washout towards the end of last week, PTCO has continued to slowly grind upwards. If this continues for a few more days it eventually will be very attractive again for dip buying. At the moment however, I suppose that most week hands were already taken out last week. Therefore, I want to keep on watching this for a little more time before taking action.

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OLMM on the other hand has already seen two major crashes. Nevertheless it has not fallen apart thus far and if it continues being pumped for some more days, this will offer another great dip buy too.

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A new stock on the dip-buying radar is GRXXF. This only has advanced from cents to $1.1 so far but the chart looks very much like a pumped stock and reminds me of RCAR in early February.

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The development of MTUU however clearly demonstrates that one has to play these trades carefully. Eventually, they all end like this…

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As I´m writing this I´m praying that LVVV does not break out today. At 12:07 eastern time it trades just a few cents below resistance of 5.5 cents. Being up 21.2% on the day already, this would be too extended for me to buy the breakout. Instead I hope to buy this tomorrow. (at the time of writing it just hit 5.4 cents, so it does not look too good).

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LDSR looks pretty nice from the break-out point of view too. I expect it to break out within the next days.

 

One quite nice breakout that I missed on Friday (yes, again!) was LIGA. Look at the chart yourself.

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…and the other missed breakout RXMD keeps on going totally crazy.

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Actually, given its parabolic move this could offer a nice dip buying opportunity within the coming days too.

And finally I want to shift my focus a little bit. You may have noticed that recently I have focused my attention exclusively on OTC stocks. This is partly due to the fact that the market correction hast made the small-cap NASDAQ market quite boring. Today I missed a great bounce play however. TENX spiked big time on Thursday, crashed on Friday and today… well it bounced perfectly according to the bounce play pattern. Hindsight bias? Probably! But let´s see.

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Best,

Nils