Some Updates

OK, updates. Still holding $YRD. Still love the stock and think it will be trading over 50 in twelve months. I have prepared myself mentally to pyramid on the way up with smaller and smaller add sizes. Earnings is coming up on the 4th. The stock could ramp into earnings or breakout on earnings. Safest play for a new entry is to wait until earnings come out.

What I love about the stock: explosive earnings and revenue growth, low float (7M shares), low valuation (600M market cap), and good sector (fintech - see $SQ also setting up). This is a stock that the CANSLIM crowd should just eat up.


I was right on the broad-based commodities move. It's being driven by a weakening dollar and all the basic materials stocks have been moving higher. I expect them to continue to move higher over the next year or two.

However, I was wrong on steel being the commodity of choice for participating in the move. All of the relative strength has been in gold and silver. I think silver stocks are better since the gold/silver ratio is out-of-whack from historical standards, but any of the gold/silver stocks should do well. My picks are $EXK, $FSM, and $AG.

I am also avoiding oil stocks now. They will continue moving higher along with the price of oil, but I would place them nearer to the bottom of the relative strength rankings. Some of the oil stocks will still go bankrupt or struggle even if oil goes higher. The market is pricing those in since those stocks are not rallying. See $NADL as an example.

In short, lots of gains to be made in gold/silver names going forward. Or gold/silver futures if you are especially bold.

I need a new broker

My broker bought-in my shares in $GBSN today. At literally the worst time -- highs of the day. I suspect the spike was likely caused by my broker buying everyone in at the market at the same time.

I was so disgusted. When the spike happened it occurred to me that it might be a good spot to add even more to my short position (that is how bad $GBSN is... 100% conviction to be shorting near all time lows), but then I checked my position window and saw that my position was no longer there.

To make matters worse, I received an email from my broker that they bought me in like an hour ago. Gee, thanks. I could have used that email like 10 hours ago.

I'll be looking to move money over to either Cobra or Centerpoint eventually.

In other news, there's a sector move in oil stocks right now. Most names are getting ripped higher and that should persist for the next few days.

If you want to get long names, make sure it's in names that show relative volume for the day (and ideally news). Names like $CHK, $VALE, $SDRL, $BCEI, $DNR, etc. These should be good for the move, but tomorrow could bring additional high volume plays depending on news. The point is, you should check each stock's relative volume. I don't have the software I used at Opus, but you can determine the relative volume by just eyeballing the first 5 minute volume bar and comparing it to the first 5 minute volume bar in the previous days.

Some of these bankruptcy-risk oil stocks that are moving higher with the group will also be great shorts if they continue to go higher. My indicator for when to short them will be when $XME and $OIH are both gapped down pre-market. That should be a sell-off day, and I'll want to be short the crappiest companies that have ripped higher the most... $LINE, $LNCO, $UPL, $REXX, $NADL, etc. 

You could also short anything that has moved up a lot as well, so a lot of these longs can be shorted. But those will be 1-2 day positions and should not be held for long. When a stock changes its weekly trend and is exploding higher, you never know when buyers will step in.

Updates on Portfolio

Still holding my $YRD position. Saw this short-term correction coming and did not sell.

Put on a short $GBSN position with a $4 average. Plan on covering at 50 cents. Did a lot of fundamental DD on this one and poured through SEC filings.

Company is a dump and dilute scam that exists only to enrich management. It's a dilution machine and should have gone bankrupt a long time ago. I consider it a "zombie" company.

Looked through the SEC filings to really understand the warrants. They created a price ceiling on the stock and contributed to overhead supply.

There's also zero chance the stock won't be delisted. They will not be able to meet any of the 3 Nasdaq CM listing standards. It's incredible the spin these companies put on their PRs. They mention that they're going to fight the de-listing and all of a sudden all these people on stocktwits are believing that the company won't be delisted.

Huge edge on shorting these garbage stocks if you do your DD.

The Trading Formula for Success

I've been receiving good mentorship lately and it's really opened my eyes to how to make the best trades. Good trades all have some key elements.

1) Context

Context is the overall "picture" or "story" of the stock. Why are we making the trade?

It starts with ideas. The idea could come from anything - something fundamental about the company, a news report or catalyst, explosive earnings growth, projected bankruptcy. It could also be a statistical edge (e.g., wide range days are likely to put in a reversal the next day).

Some of these may go against each other, which makes the contextual bias not as strong in a given direction and can lead to choppy price action. You should know at what time frame these ideas or drivers of stock price will act on and unfold.

The context gives you an overall bias. Long or short? The context can also give you a clue about price targets or a time frame. Companies on the verge of bankruptcy can be terminal shorts and a good place to make a 90-100% return if you can hold that long.

2) Conviction

Conviction can dictate your position size. Position size is related to how much room you give for risk, but it is also related to conviction. You should be taking BIGGER size on trades with more conviction rather than risking equal amounts on all trades. This was a mistake I was making before.

Conviction comes from the context. When the context is screaming in a particular direction, that gives you the conviction needed to size up and hold.

This is where the information war aspect of trading comes in. The more information you go through, interpret, and understand, the better you will be able to evaluate context and build conviction.

You don't need a ton of conviction to make a trade... but your size should be smaller.

3) Confirming Price Action

After you have a context, you should wait for the market to confirm your thoughts. Ideally the market gives you a recognizeable price pattern or setup for entry.

$YRD

Still holding $YRD from the $10 purchase. Don't intend on selling this until it hits $50 or so (2.5B market cap). If it bases before then I'll even add on with margin in the breakout.

The stock is acting superbly. The float is only 7MM and the insiders are in the lock-up period right now. It's a CANSLIM-type winner with explosive top-line and EPS growth. What we are seeing now is nothing short of panic buying.

The lesson I learned from $YRD is you have to stay tapped into the markets every day. Always review the daily gainers and figure out why they ran. With $YRD's March 9 blowout earnings, I could have bought $YRD around $8 or so if I was thinking clearly and had the conviction. Instead I waited for price confirmation and had to buy at higher prices.


$TRXC is getting pumped higher and I wouldn't be surprised if it runs tomorrow.

OK, lots of work to do.. signing off.

Updates

I haven't really been updating recently, but that's because I've been trading less than usual. All my money is tied up in $YRD, which I think is heavily undervalued and will continue to move higher as a leading growth stock in the emerging bull market.

There was phenomenal revenue and earnings growth disclosed and the stock has been moving higher since. Amazing growth projected into 2016. I can't see a scenario in which the stock does not eventually print over $50, especially once it hits the IBD 100.

I think another great opportunity is $HIMX, since that stock will benefit from the success of AR/VR. It's a pureplay on the AR/VR idea and you don't have to pick which of the AR/VR companies will succeed. I could see this trading for over $50-60 as well, but I like $YRD more with the smaller market cap.

My short tight oils idea continues to work, but I'm not in it. There's more money to be made sitting on growth positions in a runaway bull market than holding terminal shorts in the tight oil companies. The most a short can ever give you is 100%. Buying stocks on their way up early in margin can yield thousands of percent.

I may continue to trade a small piece intraday in order to stay in-tune with the market.

Setups

Down day for me. Played some setups that didn't work out. Made a few mistakes, but didn't make egregious mistakes with position sizing or anything like that.

Obviously didn't end up buying $CPXX or $VCEL. Don't like buying into weakness, and these breakaway gap stocks usually have such high RSI that they tend to reverse after a week or two. They do eventually become good buys in the washout though. See $ERII for what I mean. $ELMD should do the same.

I didn't have shares available to short $CBDS. Missed the short in $VCEL even though I was watching it, I should have had a stronger short bias -- that was the trade to make today. With today's weakness in $CBIS and $CBDS, I have a short bias for the parabolic move in $TRTC tomorrow. Looking to put on a starter short in a gap down or green/red move, and then add into any pops that are lower highs. I can actually get shares to short of it. If instead it spikes, I know what to look for there too.

Still watching oil stocks for a bigger bounce to get short in.

My decorrelated long plays are $SPIL, $YRD, $TRXC

With $TRXC I am looking for the stock to hold 4.50, which it has had problems doing. If it holds 4.50, my bias is for the stock to have a wide range day to the upside assuming the market is not weak that day.