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A Winning Trading Strategy

In the past few weeks I have looked at my trades for the past year and realized I don’t have a winning trading strategy.  I have been making a lot of trades with varied amounts of success.  The trades put me in the hole quite a bit and I knew I needed to change something.  I signed up for one of Timothy Sykes’ education courses and hit the books studying!  Follow the links to get more details about those items.  Here are some of my early trades as my education starts to show.

Losing Trades = Learning Opportunities

On 8/29 I watched as GOL, a Brazilian Airline, was on the upswing after bouncing off support around $5.  As the stock pushed higher, I decided to buy in order to capture the momentum.  I bought 911 shares for $5.55 each, total cost $4,997.23.  The price seemed to stall but I stayed optimistic that it would stay above $5 and soon make a move toward $7 or $8 as it had earlier in the year.  On 9/4, I saw the price drop toward $5 and decided to buy more in order to lower my average cost.  I bought 1956 additional shares for $5.12 each, total cost $10,014.00.  My total position was 2,867 shares with $15,011.23 invested at an average of $5.24 per share.

That same day the $5 support didn’t hold and I sold all 2867 shares for $4.98 each.  In hindsight I could have seen this coming.  See the graph below, notice the obvious downtrend?  Despite the $5 support level, when the trend is down it will eventually come to a point, quite literally.   When it reaches this point, it will either reverse direction into an uptrend or fall through support.  The thing to remember is no one knows what it will do.

So the only safe move is no move.  Sure, you could guess and maybe you’d be right, but maybe not.  Either way, it’s a gamble, and to me it’s not worth taking.  This lesson resulted in a loss of $737.66, about 5.3%.  In perspective, I paid $1900 for my educational material.  I now have a firm understanding of what can happen on a downtrending chart.

Ford: Downtrend with Good News

Ford (F) had a similar graph when compared to GOL.  It was downtrending in a similar manner but was slightly different.  They released earnings and the initial reaction was positive.  I believed it could reverse its trend.  On 9/4, I bought 1571 shares for $9.54 each, total cost was $15,007.74.  Turned out I was wrong, the trend reversal didn’t hold.  I cut my losses quickly when the price dropped to $9.35 the next day.  This resulted in a loss of $305.53, about 2%.  Despite being wrong I think this was still a good trade.  They had positive news and were bouncing off a support level.  But it didn’t go the way I thought so there was no reason to stay with it and hope I turned a profit in a few days or weeks.  Hope is not a strategy; I am committed to playing my strategy.

ALERT!

On the morning of 9/5, I received an alert from the education program I bought.  WATT was flying upward and Tim Sykes himself had bought in.  In pre-market trading, I bought 361 shares for $13.94 each, total cost $5,036.97.  I didn’t have any other reason other than the alert to buy this stock.  I did take a smaller position, around $5K instead of my usual $10K – $20K, to limit my risk.  As 9:30 approached, the price jumped all over the $13-$14 range but never went above $14.  Tim had sold out only a few minutes after buying in but I held until the market opened.  After a few minutes the price continued on a downward spiral and I sold when the price reached $13.  Total loss was $349.03, about 6.9%.  The lesson I learned here is not to go blindly into any stock even if it comes from an expert alert.  You need a plan to make a trade, I had no plan.  $350 to learn that lesson.

The WINS!

OK so I’m down $1,392 after making those trades and learning those lessons.  Not everything went wrong, after enduring those losses, two of them completely avoidable, I hit a stride and started making money again.

NLST is a penny stock that had been moving quite a bit this week.  Twitter and chatrooms were buzzing and there was plenty of volume to support a quick trade.  On 9/7 the stock opened at $0.36 after closing at $0.16 the day before.  That is more than double in price!  It quickly moved up to $0.40 before going back to $0.30 in the first 10 minutes of trading.  After touching $0.30 it hovered around $0.31 until it began an upward move.  I bought 35,000 shares for $0.315 each, total cost was $11,029.95.  The chart moved up slowly and seemed to stall at $0.35, when the price retreated I sold.  I sold all my shares for $0.345 each, total sale $12,065.72, a profit of $1,035.77, about 9.4%!  All this happened in the first 20 minutes of the market opening.  I had ideal conditions, no one was bothering me at work.  After this trade I went on with the rest of my day!

This trade was on my watchlist of 6 stocks in the morning pre-market.  As 9am rolled around I checked again and 4 of those stocks weren’t acting like I wanted.  As 9:30 hit, NLST was moving quickly so I ignored the other stock I was watching.  Had this pattern not emerged I would not have traded.  Here is the chart I was looking at as the market opened:

It doesn’t matter that some people held overnight and doubled their money.  It doesn’t matter that the stock now trades at $0.38, so I “could” have made even more.  What matters is that I saw a pattern and took some profits from that pattern.  Don’t get greedy and don’t get scared.  Keep emotions on the sideline and take predictable profits when they are available.  This is the winning strategy of a day trader.

More Victories

With a similar mindset as the trade above, I typically select a few stocks to watch between 7am and 8am, before the market opens.  As it gets closer to 9am, I check on all those stocks again for a strong open.  At 9am I typically cross off any stocks that are not acting favorably.  As 9:30 arrives, the markets open and this is when I look for patterns to develop; the one above held support at $0.30 and began moving up.  I don’t try to predict the move, I wait for the move to show itself and then capture a portion of it.  If the stock moves against me I get out immediately.  No “hoping” because hope is not a strategy.  If you are hoping for a stock to go in your favor, you are better off buying a lottery ticket and hoping you win.

9/11 CVSI was just one of these stocks on my pre-market watchlist, and survived multiple list reductions to be the sole survivor.  I bought 3,000 shares for $5.25 each, total cost $15,754.95.  Within a few minutes I sold them for $5.37 each, total sale was $16,104.48.  This was just another disciplined trade.  Total profit was $349.53, about 2.2%.

The Gap-Up Strategy

Another strategy I am using is the Gap-up strategy.  This is a simple move that is relatively safe.  All you do is look for a stock that made a large move, 5% or more, and see if it closes near or at the high of the day.  The next day, after a strong close, you will typically see a strong opening.  Even when you don’t get a strong open, you will usually have a chance to get back out even.

9/12 No trades in the morning but as 4pm neared I bought 50,000 shares of SGMD for $0.1175 each, total cost $5,879.95.  I was attempting to use the gap-up strategy.  The next day it worked!  The stock opened at $0.1190 and began inching upward.  I got distracted in another trade and missed an opportunity to sell above $0.13.  I did manage to sell at $0.1227 per share, total sale $6,126.52.  Total profit $246.57, about 4.2% a solid profit!

The trade that was distracting me was NIO.  Today I worked from home as hurricane Florence moved toward North Carolina, so I had plenty of time to prepare a watchlist and narrow it down as the market open came close.  I was still holding the SGMD I discussed above so I had to pay attention to that, too.  RIO is an IPO (Initial Public Offering) that claims to be challenging Tesla (TSLA).  The day before it made gains but failed to break through $7.  Today it moved through and rocketed past $7.  I made a typo on my first order and ended up buying higher than I hoped at $7.20.  I bought 1,000 shares for a total of $7,204.95.  A few minutes later I sold as it was rising and distractions from house guests increased.  I sold for $7.49 per share for a total sale of $7,484.83.  A profit of $246.57, about 3.9%!  I made over $500 before 10am!

Final Thoughts and Notes

From all the trades above I netted a profit of $519.53.  Including all my trades since beginning the training course, my profits are $1,558.60!  I have nearly recouped the entire $1,900 cost of the course.

Contributions of $450 in side hustle income.

Contributions from my paycheck totaled $200, $100 each week.

I am finally beginning to feel more comfortable trading!  I am confident in my plans and the profits are proof of concept.  There is still much more studying to do.  Please follow my blog to learn with me and get inspired yourself!

Check out all my trades here at Profit.ly, the social media for traders!  You can keep your account private to create an easy to use trading journal.

Follow me on Twitter for live trades!

Thanks for reading and happy trading!

Penny Stocks to Watch: HMNY & SGMD

The past couple weeks have brought MoviePass and it’s parent company HMNY to its knees.  With no path to profitability and massive losses piling up, the stock has lost 99.9% of its value in just a few weeks.  The reverse split puts its original share price at $0.0002, that’s 2 hundredths of a penny!  With the original share structure it would take 50 shares to make a full penny.  Is this company done-for?  Or is this an incredible once-in-a-life-time opportunity to make some killer profits?  I’ll share my thoughts and moves below.

Sugarmade (SGMD), is a small California-based company that supports the legal cannabis industry.  They have a few innovative products and have made several acquisitions in the past year.  This is also the stock I have made my single largest profit on, you can read more about that here.  They sent out a press release last week which sent the share price soaring!  It gained 40% in just one day!  This company has a lot of potential between now and the end of the year.

The Fall of MoviePass and Impacts on HMNY

HMNY (HELIOS AND MATHESON ANALYTICS INC.) is the parent company of MoviePass, MoviePass Ventures, Moviefone, and Zone Technologies.  We will start with the big news, MoviePass, which has been in the news and has been declared dead by many.  I disagree and actually see some potential with its new business model.

MoviePass’ original offering was to allow subscribers to pay $10 a month and see as many movies as they wanted with a few restrictions.  Moviepass was paying full price for the tickets, which can run well over $10 per movie.  I have read many articles where analysis have theorized that MoviePass wanted to use the gym subscription model where they sell many subscriptions but few actually get used.  I reject this completely because movies are already big business and the industry is making money hand over fist through people who come and pay more than $10 to see a movie.  If you offer them the same entertainment at a fraction of the price, people will flock to it and use it.  This is what Moviepass was counting on.

According their annual filing, HMNY intended to grow the subscriber base quickly and exponentially and leverage their  purchasing power into multiple revenue streams from studios, theaters, concessions and advertisers.  At the time of the acquisition, MoviePass accounted for about 6% of movie ticket sales in the United States.  With the incredibly discounted offer, they hoped to grow that number to well over 50% at a lightening pace.  If they control that much of the ticket purchasing they will have a lot of negotiation power and push movie goers toward or away from certain movies and theaters.  They would essentially take control of the market and be able to dictate the terms to the rest of the industry.

The Future of HMNY

Keep in mind that MoviePass is only one of HMNY’s multiple companies.  It is possible for a company to have one company go bankrupt and keep the others intact.  That in and of itself tells me that HMNY has a future even if MoviePass does not.

MoviePass Ventures is set to release a movie staring Bruce Willis, a top A-list celebrity.  His name alone will bring in $50 million in revenue even if the movie is terrible.  Moviefone is a website that has more than 6 million monthly visitors.  Zone Technologies is working a unique GPS that keeps you away from high crime areas.

The current market cap, or valuation, for HMNY is about $100K even though they have more than that in cash on hand.  At $0.05 this is a bargain in my eyes.  There is a chance the whole company gets de-listed from the exchange or declares bankruptcy, which means I could lose everything I put in.  On the other hand, the share price could climb back over $1 within a few weeks or months and even see $6-$8 in the next year or two.

My Move:

As the share price fell over several weeks I kept an eye out for a buying opportunity.
On 8/3 the price appeared to bottom out at $0.06 per share.
On 8/6 the price spiked to $0.18 on news of a new business model for MoviePass, $10 for 3 movies a month.

I sold 650 shares (1/2 my position) of RIOT for $6.75 each.  Total sale was $4,384.19 a loss of $614.31, about 12%.
I bought 52,000 shares of HMNY for $0.085 each, total cost $4,429.90.

I could be dead wrong about this stock, please trade at your own risk.

Sugarmade’s Upgrade

A press release from 8/8 stated that the company was now current with all it’s filings.  They had been behind for a while and many investors grew weary of the company because they took so long to get the proper filings in.  The press release, not yet confirmed by regulators, stated that they were now current on all filings required by the SEC.  They further stated that they were upgraded back to the OTCQB market.  See below for an explanation of these markets.

The Markets

OTC, over-the-counter markets, is where penny stocks live.  The OTC market is divided into 3 segments in order to give traders and investors an idea of how risky the stock is.

The lowest is OTC PINK, also known as pink sheets and OTC other.  These stocks are behind on their filings and no one really knows how legit the company really is.  There are few requirements to be listed in the pink.  Some are shell companies, some might not actually have any revenue, the pink are the wild west, this is the place to buy lottery tickets.  Some might skyrocket while most will fizzle out.

The next tier up is OTC-QB.  These companies are required to have a share price of at least $0.01, not be in bankruptcy, be current on all their filings and have a qualified sponsor.  This is the tier that SGMD claims to be in.

The top tier is OTC-QX.  These companies must have a minimum share price of $0.25 and market cap above $10 million. Filing and sponsorship requirements still apply.  These are the least risky of the riskiest stocks.

All stocks have some risk, the NYSE has the most stable and least risky stocks.  The NASDAQ is very tech stock heavy, so there is much more volitility here.  The OTC markets are the wild west.

Sugarmade (SGMD)

Last year the price spiked to $0.43 without prospects of an upgrade.  I am currently holding 41,000 shares with an average price of about $0.15 each.  My intention is to hold these as the price climbs and set a stop-loss order at $0.40 after it breaches this level.  The price has the potential to reach $1 or more within the next year.  I will likely be involved with this stock to some extent for the foreseeable future.

Final notes and Thoughts

The two penny stocks I discussed today are extremely risky.  My personal investment in these companies is not advice to do the same.  Please keep in mind that I could lose my entire investment in either of these companies.

On a personal note, I got a raise at my day job.  My new take home pay is about $100 more per week.  Beginning 8/3 I will be contributing an additional $50 per week to my trading account.  That is now $100 per week to my trading account and $105 to my IRA.

Please follow this blog to see if I can make trading my full time job by the end of the year.  Follow me on twitter for live trades.  Thanks for reading and happy trading!