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ONCY's lesson: Don't sell a stock if it is banging the offer

I messed up an easy trade on ONCY today. Lesson: if a stock keeps trading only at the offer (ask) and not at the bid, and the bid keeps rising, it is probably going to continue to go up.

+ BOT 1,300 ONCY false Stock (SCM) 3.220 USD SMART 09:32:08 6.50
+ SLD 1,300 ONCY false Stock (SCM) 3.300 USD ISLAND 09:33:20 6.50

Here is a screenshot of the time and sales from right before I sold (I sold at 9:33:20). It actually was not just printing at the offer, unlike how I remembered, but it was at least balanced between bid and offer and the bid did not drop after hitting 3.26.

Daily profit: $91.00

Weekly profit: $3583.25

Disclosure: No positions. I have a disclosure policy.

Trade recap for October 1st: Boring!

Boring day. No watchlist tonight … I’m going to attempt to have a life for one day. I’ll post a watches in the comments to this post.

Daily profit: ($3.00)

Disclosure: See my disclosure policy.

Update on trading Tim Sykes' system

My fairly consistent profits from trading using Tim Sykes’ system have continued. Despite some sketchy trading, my profits have been helped by the plethora of pump and dumps recently and me scalping TimAlerts for quick profits (in fact, my recent trade of RODM nearly paid for the TimAlerts lifetime subscription that I bought a year ago). I thank Tim for all he has taught me and I heartily recommend his Pennystocking Part Deux DVD to anyone who wants to learn how I and he trade stocks.

(click chart to enlarge)

Note that the profit on this chart does not include the profit from my watchlist longs, which are definitely in the style of Tim Sykes. As I write this I have accumulated $1770 in profits in that strategy over the last 40 days. See my recent detailed report on how successful those trades have been.

If you like more detailed statistics, here is a histogram of my profit margin on Sykes-type trades:

(click chart to enlarge)

Unfortunately I am not the most experienced with creating histograms in Excel. No trades fall below the -16% return bin, but eight trades generated more than 22% profit (they are just thrown into the 22% bin; the largest profit margin was 51%).

Disclosure: See my disclosure policy.

Trade recap for September 30th: Pumpty dumpty sat on a wall

The next pumped up OTC stock that is due for a fall: Nutra Pharma Corp (OTC: NPHC). I shorted this today and covered for an easy $776.65. I had a few other small trades today. Tim Sykes has a good post on Nutra Pharma.

IB trades:
+   BOT   900   VSR   false   Stock   5.400   USD   ISLAND   09:30:10       4.50
SLD   900   VSR   false   Stock   5.45   USD   ISLAND   09:31:50       4.50
+   BOT   400   HOKU   false   Stock (NMS)   4.105   USD   SMART   09:41:11       2.00
+   SLD   400   HOKU   false   Stock (NMS)   4.110   USD   SMART   09:41:51       2.00
+   SLD   10,000   NPHC   false   Stock (OTCBB)   .830   USD   SMART   09:46:35       41.50
SLD   500   NPHC   false   Stock (OTCBB)   0.8300   USD   SMART   09:46:35       2.08
BOT   1,500   NPHC   false   Stock (OTCBB)   0.7370   USD   SMART   09:51:14       5.53
+   BOT   5,000   NPHC   false   Stock (OTCBB)   .750   USD   SMART   09:52:07       18.75
BOT   4,000   NPHC   false   Stock (OTCBB)   0.7500   USD   SMART   09:52:07       15.00

Daily profit: $781.20

Disclosure: No positions. I have a disclosure policy.

Making money by buying stocks on my watchlist

I have netted $1,776.12 buying stocks on my watchlist since I started this blog. I have learned to buy stocks on simple breakouts by following what Tim Sykes teaches in his Pennystocking Part Deux DVD (and his other DVDs), although I do have my own style when playing these. While this is not large relative to my account or other profits, it is impressive because I am generally very poor at buying stock. I am satisfied with my gains so far and if I can keep generating such nice profit margins I may look to increase my position size. I have tweeted some of these trades (like my great trade of GSAE yesterday).

(click chart for full-size chart)

Following are some details on these trades:

Average profit: 4.63%
Weighted average profit: 3.02%
Winning trades (%): 86.7%
Normal position size: $5,000.00

Ticker	Type	Shares	Open Date	Price	Position	Close Date	Price	Profit ($)	Profit (%)
AXL	long	1000	8/19/2009	$5.72	$5,717.00	8/19/2009	$5.99	$268.00	4.69%
RTK	long	2000	8/19/2009	$2.44	$4,870.00	8/19/2009	$2.47	$60.00	1.23%
XIDE	long	700	8/24/2009	$7.74	$5,414.50	8/24/2009	$7.85	$77.00	1.42%
VG	long	1000	8/26/2009	$2.29	$2,288.00	8/26/2009	$2.58	$287.00	12.54%
HLCS	long	2500	8/31/2009	$1.85	$4,617.50	8/31/2009	$2.08	$570.00	12.34%
HLCS	long	1000	8/31/2009	$2.21	$2,205.00	8/31/2009	$2.30	$90.00	4.08%
SVA	long	200	9/1/2009	$11.60	$2,319.00	9/1/2009	$12.02	$84.00	3.62%
GTN	long	200	9/8/2009	$1.24	$247.00	9/8/2009	$1.28	$8.00	3.24%
EXXI	long	4000	9/8/2009	$1.49	$5,940.00	9/8/2009	$1.40	($360.00)	(6.06%)
VVUS	long	400	9/10/2009	$12.65	$5,058.00	9/10/2009	$12.68	$15.20	0.30%
IVAN	long	2500	9/11/2009	$1.93	$4,812.50	9/11/2009	$1.86	($175.00)	(3.64%)
RAME	long	4000	9/15/2009	$1.14	$4,540.00	9/15/2009	$1.26	$501.80	11.05%
YRCW	long	800	9/24/2009	$5.99	$4,793.60	9/24/2009	$6.08	$74.12	1.55%
GSAE.pk	long	1000	9/29/2009	$1.08	$1,075.00	9/29/2009	$1.32	$240.00	22.33%
VSR	long	900	9/30/2009	$5.41	$4,864.50	9/30/2009	$5.45	$36.00	0.74%

Here is my reasoning for each of the above trades:

AXL looking for continuation on strong breakout on (so-so) financing news — was up 117% previous day; opened red like market and I bought on red/green cross; got stopped out (was using too-tight mental stop); hit hod of 7.11

RTK looking to short, opened red with market, but bought on red/green cross; sold with too-tight stop; was up on puffy news previous day 86%; hod was 2.93

XIDE solid one-day breakout, bought on second up-day on red/green 3 min after open, sold as it fell off of 7.96 hod

VG up from 0.50 in two days, showed big 50% gap up on day three and I bought right after open and sold quickly (was filled only 1k out of 2.3k shares due to routing issues)

HLCS opened red (mkt gapped down 1%) then went green, had great breakout chart, made breakout previous day, bought (late) as it went green and broke previous day’s high of 1.78–went over $3 for a good chunk of time

HLCS opened red (mkt gapped down 1%) then went green, had great breakout chart, made breakout previous day, bought here as it re-broke hod

SVA was up from 7 to 9.7 previous day on 10x normal volume on some good news, strong throughout day; bought as it broke morning’s highs 2 minutes after open (slow due to computer issues, should have bought at 11.30), sold as it showed weakness; would’ve played larger but was distracted by computer issues

GTN watched for big breakout above 1.14, but gapped above that to 1.24, tried waiting until it showed strength, should’ve just gotten in around 1.22; when I tried to get in I only got a tiny fill so I got out; it hit 1.48 less than 20 minutes later

EXXI was big runner on earnings previous Friday, opened red, went long on green/red, got out after it failed at 5 cents below previous close; good trade

VVUS was up big previous day on drug news, bought on breakout above 12.50, previous day’s high, was slow (even though I had alarm and order set), not good entry, so I got out quickly; also, it had been choppy the previous day

IVAN significant break of 1.85, broke it in pre where I bought it 3 minutes before open (a little late too considering the break) broke my rule of not trading pre-market thinking it is meaningful for market … should’ve waited for open where I would’ve ween its price action suck and wouldn’t have bought

RAME saw alerted by IL in GOTS chat (now Investors Underground chat) he was watching for hod test; looked at multiday chart and saw hod of 1.12 was a significant technical breakout. Bought when it broke hod and started printing 1.13s, sold 20 minutes later on a bit of weakness

YRCW broke out above huge $6 mark in pre-market, opened at 5.90, bought right as it looked to break 6, it took a minute longer, but then it did and hid a hod of 6.20, I sold as it fell off that; later went below 5.70

GSAE.pk huge run chart from .30 to .90 in two days, bought early in morning as it broke morning’s high of 1.05 and sold as it looked like it was fading a little; 5 minutes later it hit a high of $1.79 and quickly dropped off of there

VSR gapped up on news above technical resistance at 5.20, bought right out of open (waiting for a tiny bit of upward momentum), hit hod of 2.70 then quickly dropped, I sold quickly as it tanked

Disclosure: No positions. I have a disclosure policy.

Watchlist for September 30

GSAE – Hot pink sheet stock with a huge move on ever-increasing volume. I like this as a long on strength or short on weakness. My prediction last night of a 30%+ gain today was correct and I nailed it for 22% (I also tweeted my trade). Tomorrow it should fade. There will be no shares to short, though.

ASTC – Up on earnings and its desire to “explore strategic alternatives” (it is putting itself up for sale). It held strong just above $3 most of the day. A break below $3 (hmm, a whole number …) would make it a nice short. Otherwise it may be a decent long on strength for follow-through from today’s momentum.

RODM – Nice 52 week highs today. Way too slow and choppy for my taste.

MSHL – Top short watch that may actually be borrowable. It spiked big this morning but closed below its open and right above $1. Will be an easy short on the break of $1.

Disclosure: No positions. I have a disclosure policy.

Trade recap for September 29th

Video trade recap. Lesson for the day: “If you are not super-dooper-dooper fast, do not trade stocks based on news.”

BOT   1,000   AMLM   false   Stock (OTCBB)   1.2600   USD   SMART   09:32:46       5.00
SLD   1,000   AMLM   false   Stock (OTCBB)   1.2900   USD   SMART   09:34:02       5.00
BOT   1,000   GSAE   false   Stock   1.07   USD   SMART   09:38:00       5.00
SLD   1,000   GSAE   false   Stock   1.32   USD   SMART   09:41:59       5.00
+   BOT   200   MNKD   false   Stock (NMS)   10.900   USD   SMART   11:32:47       1.00
+   SLD   200   MNKD   false   Stock (NMS)   10.700   USD   SMART   11:33:51       1.00

Daily profit: $218.05

Disclosure: No positions. I have a disclosure policy.

Trading based on whole number pivot points

One of the keys to making money trading stocks is to learn certain ways in which people behave in illogical or emotional ways and then trade to take advantage of those people. It is even better to understand why people act in certain ways so that the trader can be certain that they won’t change. One example of this is the pump and dump: I know that people are always greedy and lazy, so some people will always be willing to buy into the hype of a pumped company. I can profit from this by buying well-pumped stocks and by shorting them when the pump is over.

One of the things I have found with stocks is that people put a lot of importance on round dollar marks, such as $1.00, $2.00, $5.00. So if a stock breaks a round number it will tend to run. People like to think with whole numbers partly because it is easier to do mental arithmetic using those numbers. This leads people to place many buy and sell orders right around round numbers. For a stock at $2.90, there may be twice as many sell orders between $2.99 and $3.01 as between $3.01 and $3.10. So if a stock can break through a round number (in either direction) it will tend to run a bit. While this does not work all the time, it does work more than 50% of the time, at least with momentum stocks priced under $10.

While it is easy to find inefficiencies in the market, it is possible for many of them (like the January effect) to be arbitraged away. Therefore, it is always nice to see evidence that a particular inefficiency has been known for some time and yet remains; this indicates it is less likely to go away. Here is what the great trader Jesse Livermore wrote about round numbers:

Many years ago I began to profit from the simplest of type of Pivot Points trades. Frequently I had observed that when a stock sold at 50, 100, 200 and even 300. a fast and straight movement almost invariably occurred after such points were passed.

Thanks to Pradeep over at Stockbee for mentioning the above quote from Livermore’s book How to Trade in Stocks.

Another psychological pivot point that I use to trade is green/red or red/green, when a stock breaks above or below its previous day’s close. While the difference of a couple cents is minuscule in real terms, there is a big psychological difference between a stock being up for the day and a stock being down for the day. This is related to the tendency of traders to prefer to take small profits but not take small losses. Even if the amount of money involved is tiny it is psychologically painful to take a loss but pleasurable to take a gain.

Watchlist for September 29th

VeriChip Corporation (NASDAQ:CHIP) – This stock remains on watch. Tim Sykes thinks this company sucks and that is good enough for me. $3.00 is important support and it will be a good short if it breaks that.

GSAE – Hot pink sheet stock with a huge move on ever-increasing volume. I like this as a long on strength or short on weakness. My bet is tomorrow it will have another 30%+ gain.

SQNM – This stock died in after-hours trading on horrible news. Those that are competent at playing bounces may try for a bounce play tomorrow. I am horrible at playing bounces so I will not play it.

LUNA – Still on short watch. It faded all day yesterday after a big morning spike. Green/red = short.

Disclosure: No positions. I have a disclosure policy.

Trade recap: The $1920 mug of hot chocolate

Today I shorted EMGE from $2.69 to $2.20 on 1000 shares and had another, tiny, trade. The big trade was me following a TimAlert trade alert from Timothy Sykes. I like to scalp those, and I was quite happy to buy 17,300 shares of today’s alert, RODM, at $5.724 and sell them 62 seconds later for $5.835 (net of commissions), making $1920. I have trained myself to respond quickly to alerts. So even though I was making hot chocolate when I got the alert, I was able to trade quickly after I flew from my kitchen to my computer like a bat out of hell. While I normally like to hold onto some shares of TimAlerts, I could not refuse the nice profit I had already accrued.

Daily profit: $2496.00

After I recorded the video I made the following trade that is reflected in my daily P&L:
+ SLD 1,800 RODM false Stock (NMS) 6.250 USD ARCA 15:56:47 9.00
+ BOT 1,800 RODM false Stock (NMS) 6.210 USD ISLAND 15:57:25 9.00

In after-hours trading I shorted SQNM for a lousy $20 profit:
+ SLD 500 SQNM false Stock (NMS) 3.000 USD ARCA 16:35:56 2.50
+ BOT 500 SQNM false Stock (NMS) 2.950 USD ARCA 16:37:46 2.50

Disclosure: No positions. I have a disclosure policy.