Missions Accomplished: ARNA, SKYT

Well, my Covestor account has me worried (It's starting to look like the Supernova pattern Timothy Sykes has me all too familiar with). I was able to cover two stocks today, ARNA and SKYT. The first was ARNA. Below shows the incredible tanking at market open (the light blue column indicates After Hours trading from last night through today's pre-market). I was torn on this trade. I really didn't want to cover (even though I was showing a profit), but two things got the better of me:

1. It was one of those 'fall off a cliff' openings I was afraid would bounce back at any time (I actually covered on the first big bounce @ 5.95).

2. I was home this morning to watch it- usually a bad thing because my emotions and psychological quirks take over (I'm sure none of you experience this;)



Next came SKYT. I wanted to cover this one today for one main reason: It wasn't up enough imo to short in the first place. I was showing a profit, so when it finally fell a little (low volume stock that moves like once an hour), I covered @ 3.20- you can actually see my 150 shares on any chart.

Still waiting on MAXY to really lose some ground, and PALM to forget it was hyped so much.

Steadily gaining ground on Master Sykes,

Evan

Three Charts, Three Fates

I hope you're having a great weekend! I've decided to post charts of three of the stocks I've shorted over the past two months. You'll notice the same key elements in each of them: Volume gradually fades after spiking, once the seal is broken (first down day after big run-up) the stock gets as volatile as a bull seeing red, and finally the hopelessness sets in as it heads toward normal trading levels. In succession, I give you MAXY, SKYT, and GERN:

I'd just like to thank Timothy Sykes for bringing every single one of these stocks to my attention. I know how to find these types of stocks myself at this point, but if he's already doing the digging for me... :)

Mission Accomplished: GERN

It's a shame my Covestor widget (right hand side of page) hasn't updated yet. I'm at all-time highs (yeah, what is this- my first week active?)! We'll start with GERN, the stem cell stock I admitted to being a bit leary of after reading Yahoo! Finance message boards. Seriously, pick any stock I'm short, pull it up on Yahoo! Finance, and enjoy the ridiculous pumping and bashing that goes on 24/7! I'll always try to post a chart of my completed shorts, though the longer it takes to cover, the less detail online charts will show.

In other news, I bit the bullet and sold 3,000 of my 5,000 shares of SIRI. If it goes to the moon (like you'll see repeatedly in Yahoo! posts) I'll do alright, but if it goes belly up (probably 7 out of 10 posts on Yahoo!), I'll survive. I'm banking on these shorts for the time being, and my strategy was quite profitable again today. Enjoy the weekend and check out my Covestor account Sunday-ish (it should be updated by then and you'll be able to see my trade prices if you're a member- which is FREE!)

O.K. with two 'Not-So-Volatile' Days (hopefully),

Evan

Sirius Problem

No, that's not a typo. If you've been following my trades since I began this blog (and even more recently since I signed up on Covestor), you'll notice two stocks in my portfolio that I never mention: SIRI (Sirius XM) and THMR (formerly TMA, or Thornburg Mortgage). Everyone has skeletons in their trading closets, and these fellas are mine. I've ridden them down to almost nothing from about six months ago. I haven't the heart to part with them now, even though they continue to bludgeon me while yelling 'Yee-haw' on their way toward Subpennyland. Have any skeletons you'd like to share?

Besides the fact that Sirius's recent 'possible' bankruptcy news has eaten my gains from yesterday, I decided to short ARNA, and completely ignore rules #1-#3,#5 of my strategy. Everyone does this from time to time, but since I'm forced to ride my mistakes out (Rule #7), this trade could get ugly before the sun comes out. At least I only shorted 150 shares, and the stock is eventually due for a reckoning.

Learning about discipline the hard way,

Evan

My Four Horsemen

So while the world of finance came a-crumblin' down again today, being short MAXY, GERN, PALM, and SKYT (even though SKYT gained .01) paid quite well. Covestor is usually one day behind on updating their clients' portfolio values, but somehow my link (on the right) is two. I can't wait for it to show my most recent shellacking of the S&P. I would rather have the chart showing myself vs. Timothy Sykes (currently #1 on Covestor), but can't figure out how to configure the widget that way (any suggestions?).

I made two trades today, both profitable and loss preventing. I don't mind admitting that the talking heads over at Yahoo! Finance message boards are beginning to get into my head. Seriously, I don't know why I even read the ridiculous posts (9 out of 10 are bias with an agenda), but GERN is a stock focused on stem cell research, a science nobody really knows what to expect from yet. Given that Obama fully supports this type of research, I sold 100 of my 200 shares of GERN today at 7.48. I know, I know- I'm letting fundamentals interfere with my technical positions. I'm still learning the 'true' relationship between fundamentals and penny stocks.

Today was all MAXY needed to finally drift back below my initial buy (how many months ago?), so I covered 100 shares of my 300 at 8.17 near the close. I did this for three reasons:

1. Didn't want to be greedy (been there done that at the end of a down day only to see a gap up the next morning).
2. There was an earnings announcement after close. Don't think MAXY has a prayer (announcement hasn't come out yet 7:27pm 2/10/09), but why risk all 300 shares?
3. The stock downtrended aaaalllll day, and I followed Rule #6 of my strategy.

Unfortunately watching the market tread closer to year lows,

Evan

My Strategy

     It's about time I lay out all of my rules/criteria for choosing the stocks I short. There are always minor variations in the chart patterns (and I'll be the first to admit to bending these from time to time), but I like to stick to these 7 'unbreakables':

1. A stock that's had an incredible run (think 300%+ gains) over a short period of time (not longer than three months, and preferrably within three weeks).

2. I like the $2-$6 range, meaning the stock's around $2 at the beginning of it's run, and $6 near the top (or when I would consider shorting). I've found $1-$4 and $3-$8 can also work, but you get the idea.

3. It has to have had it's first down day. Period. Why short into something that hasn't shown the first sign of weakness?

4. Try to short stocks with a market cap <$500 million. You don't want extremely small market caps, though, or the broker you borrowed the shares from may force you to cover.

5. Large Volume spikes at onset of run have dissappeared (looks like a downhill slope).

6. Commit 100-300 shares initially to a short, and add only once more if it spikes (short squeezes) more than $2.

7. Fight every urge to cover!!!

     I haven't completely mastered the decision-making process when comes the covering for a profit. Currently, I'm using the same stair-stepping strategy used in shorting (Rule #6): Ease in and ease out. With the exception of Rules 6 and 7, this is pretty much the strategy I've learned following Timothy Sykes.

Warning: Do not try this at home!

Triple Play

I am now officially short MAXY, GERN, and PALM. All three met my strategy's criteria, and after having posted about each (except for GERN, which I had on my Stock Status's 'Mission Briefing' watchlist), I'm pleased with my initial entries. I had off this morning, and was ready with reserved shares for both PALM and GERN by market open (compliments of Think or Swim). I'll skip any rationale on MAXY, since those of you following this blog know I've been short about a month. As for PALM (which happened to be my first short of the day), all you pretty much have to do is look at this 1 year chart:

Sure, it may go higher in the near future (which is why I eased in with 100 shares), but I doubt the 'PRE' phone is enough to sustain this quick rise from the $1's. I know I said I could care less about the fundamentals, but this really isn't a true penny stock- it's the company that brought us the Palm pilot. Regardless, it's either consolidating or losing steam (volume leans toward the latter). Now that this account is on Covestor, you'll be able to watch the outcome. Since I don't plan on selling (aka 'covering') for a loss, this could be a wild ride!

Last but not least...GERN! This stem cell play gave me the perfect entrance on it's midday spike. I shorted at 7.96 and already have a decent profit on my 200 shares. If I listened to some of the posts (pumpers galore) on Yahoo! Finance message boards, I'd be freaking out! There's a reason most financial sites claim to be 'For entertainment purposes only':) Does this 1 year chart look familiar?

If you're a trader, and haven't opened a Covestor account yet- do it! It makes posting sooo much easier, knowing you don't have to take screenshots of your positions (like I did numerous times last month) for people to believe you. Thanks for annoying me enough, Tim:)

Happy transparent trading,

Evan