Report Card #16

Dear L.,

I most likely wrapped up today´s trade and wanted to tell you about them. I traded twice and the result was two wins – pretty nice.

So… let´s just right get into it.

GEVO (Gevo Inc., Basic Materials) was one of the three stocks I was watching. We have encountered this stock already previously. Basically, this is a dilution machine, having traded at more than $60k split adjusted years ago. Last week, it experienced an incredible rise, followed by an equally strong crash. After Friday´s bounce I thought that GEVO was about to continue selling off today.

gevo2.png

Coming into the trading day my plan was to see how GEVO reacted at previous support around $8.8. Right out of the gate GEVO climbed towards this anticipated level. When it could not break $8.85 I shorted at 8.73, chasing a little bit. GEVO did pull back after the failure to break through resistance. It fell through VWAP and I covered half my position at $8.35. Instead of further selling off, GEVO bounced and tested the $8.8 level again. Even though it failed, VWAP supported this time and therefore I took my other half off at 8.55. This was early as it turns out. GEVO traded as low as $8.15 in the following minutes.

gevo2.png

Later in the day however, GEVO started to squeeze doing this.

gevo2.png

All in all, I am quite satisfied with this trade. Relating to my previous comments about the need to improve my Risk/Reward, I am especially happy about this entry close to resistance. The loss given my stop was relatively small compared to my target price (which I did not achieve though).

The second stock that I traded was CADC (China Advanced Construction Materials Group, Inc., Industrial Goods). CADC had been pumped on Friday and was pumped again today. After having pressed the “locate” button on my trading platform about 500 times, I finally was able to locate shares during CADC´s pump.

CADC hit the circuit breaker halt before topping out below $10. When CADC felt very weak, I shorted at $8.75, expecting VWAP to fail. And VWAP did fail. CADC washed to $7.8. I tried to cover half my shares at $7.8-$7.9 yet CADC was very illiquid and I failed in doing so. CADC even crawled back over VWAP. At this point in time, liquidity basically disappeared and even another pump seemed not impossible. When CADC fell again below VWAP without selling off considerably, I covered 2/5 of my position at $8.05 to protect myself. Finally, the bids for CADC where pulled and the stock washed to $7.6. I covered the rest of my shares at $7.7, which was way too early as it turns out.

gevo2.png

I am quite satisfied with this trade too. The only thing to criticize in my opinion is my full cover at $7.7. I should have left on at least 1/3 here.

Given these trades I think that I deserve a C+ for today´s discipline and execution.

Best,

Nils

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