Report Card # 17, # 18, #19, #20

Dear L.,

even though I should have written this report card daily, something happened last Tuesday that made me rather reluctant to trade for the rest of the week or even review my trades. A few days later, here I am, and I think it is very important to review what happened.

Last week it seemed as if every low float stock went parabolic. News? Not needed! Strong fundamentals? Who needs that? If there was a sub 10 million float, it was very likely that the stock was to be manipulated. However, being aware of these manipulations, traders obviously have to manage risk accordingly and I failed to do so on Tuesday.

One of last week´s hot stocks was CLDC (China Lending Corporation, Financial Sector). Not having seen any volume and volatility in previous weeks, this is what the stock did last week.

Unbdsdenannt.png

Tuesday, on day 1, there were no news justifying this price action. I thought CLDC was a typical one-day pump and dump and set out to short it as in previous opportunities.

Yes, I come back to this topic again and again but while my overall trade thesis was ok, the most important thing, my entries and exits were terrible.

CLDC spiked from $2 to $4.6 where it seemed to top out. Then, there was one big red candle right into VWAP. What did I do? I saw this as the “beginning of the end” and shorted CLDC at $3.9. Let´s summarize here, there was a red candle, into support (VWAP) on no significantly higher volume and I shorted right at support. Obviously, CLDC bounced directly and I was under water. How should the entry have looked like? Well, I could have waited for a clear fall through VWAP to short a little later. At least, I would have seen a clear confirmation then. With my entry, I was directly underwater. CLDC tested support at VWAP once more, before it bounced and shortly broke the high of the day. I got stopped out at $4.42. CLDC however, failed to reach no highs. These two green exhaustion candles actually indicated a rather bearish development and presented a great short entry opportunity. Two big red candles followed, and I chased my entry yet again, shorting at $4. What I have said before can be repeated here. I could have shorted the high of the day fail, the definite crack of VWAP or a possible bounce. Instead I chased. With my terrible entry, I chose a stop at $4.4 yet again, even though it had been shown to be not effective just a few minutes before. To show me how stupid this was, I got stopped out just before the next stuff move at $4.4. From this level, CLDC should reach a low of $3.4 within the next 30 minutes.

Unbdsdenannt.png

CLDC however found support and squeezed shorts later in the day again.

Unbdsdenannt.png

On these two trades I basically lost what I had gained in the two sessions before. Thus, even though the losses were not terrible, the sheer stupidity of these entries made me seriously doubt myself for the rest of the week. Terribly entries and terrible stops: this was a clear F grade trading day.

Best,

Nils

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