Report Card #12

Dear L.,

another day without a trade. Since Monday the market has been nuts while I have been sitting on my hands. Today, I had a plan for NURO (NeuroMetrix, Healthcare Sector). However, my criteria were not met and hence I did not trade.

But let´s have a look at the opportunity. This morning NURO gapped up on news of receiving a $3.8M payment. Given the fact that NURO only had around $6M on their balance sheet, this news do not look quite as bad as other PRs we have seen recently. Nevertheless, I was quite bearish on NURO. Firstly, the magnitude of the gap was not justified in my opinion (from a close of around $1.25 NURO reached a pre-market high of $1.99). Secondly, NURO has been a supreme dilution play for years. This means that the stock sells of until they reverse split the stock. In there, the company raises money from time to time. This process continues and continues, only hurting existing shareholders. Below you can see a monthly chart ranging back years. Here you see that split adjusted, NURO traded at almost $6000 years ago versus around $1 nowadays.

Unbenannt2.png

Given my thesis my plan was to wait for a morning wash and then short into the VWAP bounce with a risk of pre-market highs at $2.2. However, NURO directly sold off, thereby not giving me the chance to enter the trade according to my plan. As expected NURO was very weak all day, not spiking above VWAP even once.

nuro.png

I am happy that I followed my plan today which does not mean that my plan was well chosen. Given the pre-market risk and the weakness that NURO had shown before the market open already, I probably should have shorted right at the open. However, this is hindsight now. Since I followed my rules and did not chase, I´ll give myself a C for today.

Best,

Nils

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