time for some new trade recaps. Although I feel quite optimistic at the moment, wanting to say “I kind of get the gist of this”, as you´ll be able to read in just a minute there are serious, serious things to tackle in my trading too.
But as always, let´s get right into what I traded yesterday and today.
On Tuesday, on the top of my watchlist was VTGN (VistaGen Therapeutics, Inc., Biotechnology Sector). VTGN had gapped up considerably on Friday. However, it was not able to hold its gains and sold off throughout the day. Going into Tuesday´s trading day my thesis was that most likely more selling was to occur and I formulated my plan accordingly: wait for VTGN to sell off and then short the rebound into VWAP.
And I did. The market opened and VTGN started selling off. When it rebounded, I shorted it at $1.37. As I have basically written in every of my previous blog posts, this was a little early and I should have been more patient. The entry is so important because given stop and possible profit target it determines the risk reward of a trade.
VTGN failed VWAP and traded as low as $1.28 in the following minutes. Since my profit target was lower however, I did not take profits into this wash and decided to sit through a “temporary” bounce. This bounce was of larger and longer magnitude than expected however. Even though VTGN could not break through VWAP, it held the $1.30s for the ensuring period. When VTGN defended support again I decided to cover at $1.32. My argument was that given my trade thesis the stock should have traded lower and that the probabilities had changed because of VTGN´s trading behavior.
If I am hones however, I exited because I was afraid that VTGN would climb over VWAP and hit my stock. This would have resulted in a loosing trade. My ego did not want a loosing trade and therefore made me cover. The possibility of being stopped out should not influence my covers however. Only if my stop had been hit, this would have demonstrated that my thesis was incorrect. Consequently, below VWAP I should have remained in VTGN.
Shortly after my cover, VTGN failed VWAP once more before reaching its low of the day at $1.26. A further lesson from this trade is that in fact I want to include a time stop for my trades too. This means that generally I want to be out of these short trades after 11:00 AM EST. In the past we have seen just too many trash stocks bounce back afterwards.
The second stock that I traded on Tuesday was CODX (Co-Diagnostics, Inc., Healthcare Sector). Without any news, someone pumped this stock, basically doubling it. I kept CODX on radar and planned to short into VWAP. Finally, CODX had a huge wash below VWAP. I located my shares and waited for the bounce to short into. But the bounce did not really materialized. CODX was just to weak. I got more and more impatient and frustrated and finally chased CODX, shorting at $2.8. With this entry I set my stop above VWAP. By now I think that this is terrible risk reward trading. There would have been a few possibilities to trade this. Firstly, I could have shorted the VWAP fail with a stop above VWAP. Secondly, shorting weakness at $2.8, my stop should have been a tight stop above recent highs.
However, given my entry and my stop, I was very uneasy during the trade and covered CODX quite early at $2.71. The stock reached a low of $2.48 before it started squeezing shorts.
Tuesday´s CODX story brings us to today´s trades. CODX was very strong premarket, reaching a high of $4.8. Despite this strength I was short biased CODX. Other stocks such as CARV recently had traded similar, just to sell off the second day. Premarket I was pleasantly surprised to obtain borrows for this and planned to short the backside of CODX. The market was about to open and my trading station froze. Nothing was working anymore and I was sitting at the sidelines while CODX was selling off big time. When I finally was able to gain control again, CODX was about to bounce. Due to the past trading lessons and my commitment to being more patient I set in a short order at $4.16 below VWAP. But this level was not reached. CODX bounced to $4.13 just to immediately sell off down to $3.6. In this case my patience most likely was not appropriate and it cost me dearly. What a trade that I missed. It truly hurts to miss out on this because of technical issues and misplaced patience.
The fact that I still had my located shares lured me into a trade later in the day. At this time CODX bounced back to resistance in the $3.5 area. I shorted $3.5. However, after a while I realized that I did not really have a plan in this trade. I covered at $3.52. This was a terrible case of overtrading which I should keep in check.
Finally, I traded SUMR (Summer Infant, Inc., Consumer Goods Sector) today. Someone pumped this and I was convinced to short it, was the opportunity to arise. Once SUMR was under VWAP, it was not able to reclaim it anymore. I shorted patiently into $1.33 and covered at $1.21. This time my entry was quite nice. However, my exit was not so. Even though I expected the washout, I was too impatient to take profits and therefore missed out. Nevertheless, all in all this was a nice trade.