Rentech Inc. (Amex: RTK) is really starting to annoy me

Video recap today.

+    BOT    1,000    AXL    false    Stock    5.712    USD    SMART    09:30:43        5.00
+    SLD    1,000    AXL    false    Stock    5.990    USD    ARCA    09:32:26        5.00
+    BOT    2,000    RTK    false    Stock    2.430    USD    ARCA    09:48:42        10.00
SLD    2,000    RTK    false    Stock    2.4700    USD    AMEX    09:53:17        10.00
+    SLD    10,000    RTK    false    Stock    2.380    USD    ARCA    13:02:03        50.00
+    SLD    10,000    RTK    false    Stock    2.370    USD    ARCA    13:02:06        50.00
+    BOT    20,000    RTK    false    Stock    2.437    USD    SMART    13:10:33        100.00
+    SLD    20,000    RTK    false    Stock    2.380    USD    SMART    13:30:38        100.00
+    BOT    20,000    RTK    false    Stock    2.410    USD    SMART    13:33:28        100.00

Today’s profit: ($1918.00)

Watchlist

SPDE and EDAP up big. EDAP may be a decent continuation long (on strength only), while SPDE should be a decent short on green/red.

Disclosure: Long 249 shares ZRBA. If you didn’t get the RTK reference, Law and Order did an episode on the RDT Killer, which was their version of the real-life BTK Killer. I have a disclosure policy.

How to set stock price alerts in Interactive Brokers Traders Workstation

This tutorial covers the TWS “alarm” function. There is also a more sophisticated “alert” function that allows TWS to automatically make trades based on stock price action. Also, IB has the order types “market if touched (MIT)” and “limit if touched (LIT)” that will submit an order if a stock hits a certain price. I will address these features in future videos.

Disclosure: Long 249 shares ZRBA. I have a disclosure policy.

On watch: Rentech Inc. (Amex: RTK)

On watch for short: Rentech Inc (RTK). It has been choppy in the past, though. Short on green/red. The news that has sent it skyrocketing from 30 cents is mainly fluff.

rtk

On watch for long is AXL, following financing news. The news wasn’t the greatest, but there is a good chance of some short squeezing.

axl

Disclosure: No positions. I have a disclosure policy.

August 18th trade recap: Blah, day 2

It probably wouldn’t have been so blah if my quotes at IB had been working in the premarket. I missed huge gains in RTK and AXL. Instead I made $14.01 by buying RDN and AFN. Both AFN and RDN were pre-leader longs. I played them both well; they just did not continue to go up.

+    BOT    1,500    AFN    false    Stock    .920    USD    NYSE    09:33:55        7.50
+    SLD    1,500    AFN    false    Stock    .930    USD    DRCTEDGE    09:39:32        7.50
+    BOT    200    RDN    false    Stock    8.040    USD    SMART    10:42:49        1.00
+    SLD    200    RDN    false    Stock    8.120    USD    SMART    10:52:49        1.00
+$14.01

I also bought my 249 shares of ZRBA.

BOT    249    ZRBA    false    Stock (SCM)    3.75    USD    ISLAND    11:36:43        1.24

AXL I bought late in the day as it hit a new high. I played it too big considering how poor I am at these. If I had played it smaller I would have probably held overnight for a likely gap-up.

+    BOT    1,000    AXL    false    Stock    5.700    USD    SMART    15:35:32        5.00
+    SLD    1,000    AXL    false    Stock    5.750    USD    NYSE    15:37:33        5.00
+$40.08

MERC another fat-fingered short, far from ideal. I covered literally 10 seconds before it plunged 20 cents. Oh well.

+    SLD    3,000    MERC    false    Stock (NMS)    1.500    USD    SMART    15:50:08        15.00
+    BOT    1,500    MERC    false    Stock (NMS)    1.460    USD    DRCTEDGE    15:53:47        7.50
+    BOT    1,500    MERC    false    Stock (NMS)    1.500    USD    ISLAND    15:55:06        7.50
+$30

Today’s Profit: $84.09

Disclosure: Long 249 ZRBA. I have a disclosure policy.

The truth about Tim Sykes from a former critic

Is Timothy Sykes a fraud? The former trading wunderkind and small-time hedge fund manager now sells stock-trading DVDs and trading advice. Should you listen to him? Should you ignore him? Read on for the answer.

When I first came across Tim Sykes over a year ago I was skeptical. One year later, after $77,775.01 in profits using his trading strategies, I have turned from Sykes’ greatest critic to his most ardent fan. This is the story of how he changed my mind.

I first came across Sykes in March of 2008 and I wrote this critical post:

Timothy Sykes, the boy wonder who turned $12,000 into $1.65 million while still a teenager, has abandoned his hedge fund Cilantro to re-create his day-trading achievement in full view of the internet on his new blog. Sykes is best described as young, brash, egotistical, and annoying. Of course, an impartial observer would describe me in much the same way. Timmay and I also share the preference for shorting stocks over buying them. But rather than being two peas in a pod, we are polar opposites: Tim is the quintessential short-term trader and I am the archetypal buy-and-hold value investor.

I am not like some people who say that day trading is a crock and that it never works. It can work for some people some of the time. The problem with Tim Sykes is that he encourages others to follow in his footsteps by buying his happened to Richard Dennis, the noted commodities trader, who famously lost tens of millions of dollars in 1988 after his trend-following strategy stopped working. Sykes of course likes trading microcap stocks with relatively thin markets. This means that his system is especially prone to break when too many people start using it.

  • Trading takes a lot of time; this is particularly true for Timmay’s day trading and momentum trading. Most people have jobs, and very few people have enough in savings and enough trading talent to make a lot of money trading. So for most people, time learning to trade would be better spent nurturing their career or working a second job.
  • Trading any system takes incredible self-restraint and guts. Very few people have the self-control to be able to stick to a system even when it is not making money. This is even harder if a trader buys a system (say, from Tim Sykes), because it is harder to become truly convinced in the system if that trader did not invent it himself or herself.
  • Traders and investors should steer clear of Sykes’ DVD and his trading system. Those few who could be good traders would likely do better developing their own system rather than following Tim’s. Of course, I find Tim amusing, so I encourage you to read his blog for its amusement value.

    Sykes and I had a rather entertaining back and forth in the comments on that blog post. After that exchange, I decided to do some deep research. I went back over every single one of his blog posts. I looked up the stock charts on every stock he mentioned to see whether his predictions about stocks were accurate. I looked at every single one of his previous trades (all verified by Covestor, on which he is the #1 ranked trader; please note that Covestor does not account for cash in a trader’s account when it measures performance; so while according to Covestor Sykes is up 48,000% since November 2007, and he would be up this much if he invested 100% of his account in each trade, his account is up only 475%). I realized that Sykes’ trading system worked. He was right far more often than he was wrong. His trades were consistently profitable. I bought his Pennystocking DVD and his book and I subscribed to his TimAlerts trading alert service.

    I started trading using both by following his trading alerts and by trading on my own using what I learned from the DVD and book. Slowly, almost inexorably, the profits piled up. And it wasn’t just by piggybacking on his trades that I made money; when I traded stocks he did not trade I made even more money. As I write this, my total profit from TimAlerts is $28,093.77 while my total profit from doing similar trades on my own is $49,667.25.

    In September of 2008 I wrote  Why I paid Tim Sykes $2000:

    I previously wrote about Timothy Sykes and his attempts to teach stock trading to the masses. That post is now my most commented-upon post on this blog and one of the most frequently viewed. Since writing that post I have changed my views on Timothy Sykes.

    First, I have concluded that at least at the present time Sykes’ trading system works quite well. This does not mean that it will necessarily continue to work, and anyone using his system should not put blind faith in it. That being said, the basic premise of short-selling hyped-up stocks should continue to be successful far in the future, although the details of how best to do that will certainly change. I believe in Sykes’ system enough to trade a decent amount of money with it, and so far I have made quite a bit of money trading his system. You can see some of my successful trades on Covestor (note: I no longer use any brokerage accounts that Covestor can auto-follow, so my trades are no longer there).

    I have become so convinced of the benefits of Sykes system that I bought his DVD, subscribed to a year of his TimAlerts service (whereby he sends his followers alerts every time he makes a trade, and I even recently bought the first Lifetime TimAlerts subscription (for which I paid him $2,000). I even signed up to be an affiliate to sell his products.

    Normally a trading system will either produce a good probability of a profit (i.e., a high percentage of trades will be profitable) or a good ratio of average profit to average loss. Sykes’ system generates both a high percentage of profitable trades and profitable trades that make far more money than unprofitable trades lose. In this sense it is the Holy Grail of trading. The system’s major limitation is that it generates very few trading opportunities where more than a few thousand dollars can be easily deployed, although there are occasional trading opportunities where hundreds of thousands of dollars can be easily used. Also, there are relatively few trading opportunities. This limits the amount of money that can be made with this system to maybe a couple hundred thousand dollars a year at best. However, this limitation of the system also minimizes the chances that hedge funds will exploit the same inefficiencies that the trading system exploits and thus render the system ineffective.

    The other problem with a trading system that produces few trading signals is that it is hard to keep from over-trading. The hardest thing to do is sit and wait, as evidenced by Sykes’ own history of impulsive, forced trades. While he was still able to reap huge profits, others may be less disciplined. I have already seen evidence of followers of Sykes’ TimAlerts service trading way too much (and Sykes himself has criticized his followers for this numerous times). I think it likely that some of them will trade away all their profits by forcing trades when the risk/reward ratio is poor.

    My Original Criticisms Still Stand

    In my original article on Timothy Sykes, I laid out three criticisms of his plan to teach trading to the masses. These criticisms still stand, although these criticisms point out the limits of an otherwise powerful system, rather than revealing the ineffectiveness of the system as I argued in my original article. Anyone considering following Sykes should consider the following:

    1. While Sykes’ system will degrade gracefully (meaning that if it stops working it will gradually generate smaller profits, not change quickly from generating profits to generating large losses), I have already noticed cases where he and his followers’ actions have changed the chart patterns his analysis relies upon. He has enough TimAlerts subscribers that they can easily move the market in certain illiquid stocks. This makes using his system more dangerous than if he did not have so many followers.

    2. Trading takes time. For many of Tim’s followers, with tiny $5,000 accounts, the amount of time they spend trading the system (especially if they do not follow his advice and ignore non-ideal trades) can be disproportionate to their gains. While I am a full-time trader (I utilize a few strategies, not just Sykes’ strategy), many of his followers have other, full-time jobs. Those people would be wise to concentrate only on the most ideal trades, lest they ruin their careers in a vain attempt to get rich trading.

    3. Most people do not have the emotional restraint to be successful traders, no matter how simple and effective the trading system they use. This is my most important criticism. As even Timothy Sykes points out, over 95% of stock traders lose money. Those who cannot handle the emotional demands of trading will likely lose money even if they try to trade a system as simple and profitable as Timothy Sykes’ trading system.

    Conclusion

    If you want to try trading stocks, try following Tim Sykes’ system (I suggest just reading his website and analyzing his trades for a few months, although you can go ahead and directly buy his DVD or TimAlerts trade alerts service if you are rash); it is the best stock-trading system I have seen, as evidenced by Sykes’ top rating on Covestor and his multi-year performance record. However, most stock traders will lose money because they let their emotions rule them; using a profitable system will not prevent them from losing money. Recognize your limits and do not try to trade if you do not have the requisite emotional control.

    Conclusions about Tim Sykes

    Tim Sykes’ trading system works. He is selling the real thing, not a scam (unlike most other trading gurus). Trading based on his TimAlerts service has given me more than ample profits. Trading based on what I learned from his DVDs (I recommend Pennystocking 2, it is by far his best DVD) has been even more profitable. He is one of the few stock traders selling their trading systems who has an impressive and verifiable record. Furthermore, he is honest about the limitations of his trading system: it is not scalable. It would be hard to put more than $100,000 into many of Sykes’ trades and the best percentage returns often come in illiquid stocks where a $10,000 position would be the prudent maximum. But this Achilles’ heel of Sykes’ trading system is also a key feature, because it ensures that hedge funds and other sophisticated investors will not come to dominate this niche.

    sykesprofit_med

    Disclosure: No Positions. I am an affilliate of Tim Sykes as well as a customer (although I did not become an affiliate of Sykes until after I had gained over $20,000 in trading profits using his system), having purchased multiple of his DVDs (I recommend Pennystocking Part Deux; it is by far the best) and being a Lifetime TimAlerts member. I own Pennystocking, Pennystocking 2, and TimRaw. I have a disclosure policy.


    Profit from Penny Stocks. Learn from a millionaire who shares everything! Learn from Timothy Sykes.

    August 17th trade recap: Blah

    Another video trade recap. In addition to trades in the video I shorted QGLY in my SogoElite account; it was a poor imitation of a fat-fingered short. I netted about $5 on that. I will not do a real watchlist tonight; I do not see anything that calls out to me to short it and I need a break from trying to go long.

    +    SLD    10,000    DNE    false    Stock    .120    USD    NSX    09:31:06        6.04
    BOT    100    GY    false    Stock    4.3999    USD    SMART    12:42:26        1.00
    SLD    100    GY    false    Stock    4.4002    USD    SMART    12:42:36        1.00
    +    BOT    200    ALGN    false    Stock (NMS)    12.260    USD    SMART    12:51:19        1.00
    +    SLD    200    ALGN    false    Stock (NMS)    12.460    USD    ARCA    12:55:41        1.00
    +    BOT    400    GY    false    Stock    4.440    USD    ARCA    13:20:39        2.00
    +    BOT    400    NANO    false    Stock (NMS)    4.200    USD    ARCA    13:34:03        2.00
    +    SLD    400    GY    false    Stock    4.390    USD    ARCA    13:52:20        2.00
    +    SLD    400    NANO    false    Stock (NMS)    4.120    USD    SMART    14:20:38        2.00

    Stocks from last night’s watchlist that I would have shorted were not worth playing today because everything gapped down big.

    Today’s profit: ($234.59)

    Disclosure: No positions. I have a working buy order out for ZRBA. I have a disclosure policy.

    Watchlist for August 17th: Gencorp Inc (NYSE: GY) on watch

    Newcastle Investment Corp. (NCT) had another nice white candle. I think this move is getting over-extended. It should make for a nice short on green/red action, although it might have another up day.

    nct

    GreenHunter Energy, Inc. (GRH), China GrenTech Corp. Ltd. (GRRF), and GENCORP INC (NYSE: GY) all had big gains on Friday and are on watch for continuation. GY had the strongest close so I may look to buy it if it shows strength tomorrow. However, considering it has some resistance in the $4.50 to $5.00 area (from last October-November) it may also fall and it could make for a nice short when it goes negative for the day.

    gy

    Disclosure: No positions. I have a disclosure policy.

    An interesting swing trade idea: Buy 249 shares of Zareba Systems Inc. (ZRBA)

    This idea from Stockbee. I find his thoughts on swing trading to be very good, even though I don’t trade that way myself.

    Buy 249 shares of ZRBA ,they are doing a 250-1 reverse split and cashing out shareholders with less then 250 at $5.20.

    Don’t know how long it will take to complete the split but it could be months or maybe just weeks.

    ZRBA currently at 3.95

    5.20/3.95= 31% return
    I really recommend you read Stock Bee consistently (this post on how stock chart patterns change depending on timeframe is a must read). This type of trade really is not so much a swing trade as a type of risk arbitrage. I have done these sorts of trades before and they are a very nice way to get a nice percentage profit on a small amount of capital. Keep in mind though that it could be some months before the reverse split occurs.

    Disclosure: No positions. If the price is right I intend to go long 249 shares of ZRBA soon. I have a disclosure policy.

    August 14th trade recap: Nailed Newcastle Investment Corp (NCT)

    Yesterday I wrote about Newcastle Investment Corp (NYSE: NCT), saying “Nice move today and after hours it broke multi-month resistance at $1.25. A buy if it breaks $1.25 during regular trading although if it gaps up it will be much riskier.” It opened at $1.23 and quickly broke above $1.25. I hit the ask at $1.30 to buy 1200 shares and soon enough it spiked above $1.50. I sold as it fell off that spike for a not very good exit of $1.43. Overall, a nice 9% profit ($144.00) on an easy trade. A better trader could have profited over 20 cents. I alerted NCT as I traded it on Twitter.

    +    BOT    1,200    NCT    false    Stock    1.300    USD    SMART    09:32:13        6.00
    +    SLD    1,200    NCT    false    Stock    1.430    USD    NYSE    09:37:10        6.00

    My only two other trades today were CHINA and ZAGG, both of which were scalps off of TimAlerts. +$65 on the pair.

    +    BOT    2,400    CHINA    false    Stock (NMS)    2.648    USD    BATS    09:56:45        12.00
    +    SLD    2,400    CHINA    false    Stock (NMS)    2.660    USD    ISLAND    10:00:18        12.00
    BOT    1,000    ZAGG    false    Stock (OTCBB)    6.1900    USD    SMART    10:31:47        5.00
    BOT    2,000    ZAGG    false    Stock (OTCBB)    6.1900    USD    SMART    10:31:49        10.00
    SLD    1,500    ZAGG    false    Stock (OTCBB)    6.2000    USD    SMART    10:36:01        7.50
    SLD    1,500    ZAGG    false    Stock (OTCBB)    6.2400    USD    SMART    10:36:26        7.50

    After I first published this post I made the following attempt at a fat-fingered short on MTXX, forgetting that MTXX has faked me out before. It is a little too high in volume to be good for this:

    +    SLD    1,000    MTXX    false    Stock (NMS)    5.510    USD    SMART    15:30:46        5.00
    +    SLD    500    MTXX    false    Stock (NMS)    5.600    USD    ARCA    15:32:49    BookTrader    2.50
    +    SLD    500    MTXX    false    Stock (NMS)    5.600    USD    SMART    15:33:02    BookTrader    2.50
    +    SLD    500    MTXX    false    Stock (NMS)    5.620    USD    SMART    15:35:34    BookTrader    2.50
    +    BOT    2,500    MTXX    false    Stock (NMS)    5.604    USD    ISLAND    15:47:21        12.50

    ($115.66)

    Today’s Profit: $93.34

    Weekly Profit: $573.93

    I am holding DNE over the weekend, although that is looking less and less attractive to me.

    Disclosure: Long 10,000 shares of DNE. I have a disclosure policy.

    Watchlist for Friday August 14th

    Short and sweet tonight. I’m not a fan of being short over the weekend so I’m not aggressively looking to short anything.

    TRX, Inc. (TRXI):  Nice big two day move on no news and fade after morning spike today. Would be a short on green/red action but it is lower volume and lower-priced so I will likely not trade it.

    Newcastle Investment Corp. (NCT):  Nice move today and after hours it broke multi-month resistance at $1.25. A buy if it breaks $1.25 during regular trading although if it gaps up it will be much riskier.

    Craft Brewers Alliance, Inc. (HOOK):  Beautiful move today. I almost bought it but instead bought TPI as it was a late hit to the pre-leader list; I was scared off because of lower volume.

    GRRF:  Arggh. (No reason, just wanted to say that; too low of volume to interest me.)

    Tucows Inc. (TCX):  Way lower volume so it doesn’t interest me too much, but that is a nice breakout on big volume relative to what it normally trades with.

    Disclosure: No positions. I have a disclosure policy.