You didn’t misread the title. As 8/18/2018 I am down $18,663.62 since the beginning of the year. As I do the math I realize it is only my side hustles and weekly contributions from my day job that are keeping this pipe dream alive. Continue reading “Down $18,000: Time for a New Trading Direction”
Dilution is a powerful weapon in the stock market and the dilution of HMNY is wreaking havoc on the share price. Dilution is legal and you don’t always see it coming. MoviePass parent HMNY is a prime example of what dilution can do to a company’s stock price. The other week when HMNY dropped below $0.10 per share the data being provided was there was only 1.7 million shares available, at a price of $0.06, the market cap (or valuation) was around $100,000. That’s it! The price of a high end car.
Most penny stocks have valuations of more than $1 million. The fact that only 1.7 million shares were available was what brought my attention to this stock and what made me think it was a good buy. Since then the company has released more data including the very useful share count; remember, we thought it was 1.7 million.
On 8/15 HMNY released a report, you can read it here. They went from 1.7 million shares outstanding to 636.9 million shares! You can do the math but I’ll save you the time. That’s a 37,365% increase in shares! Let that sink in, over 37,000%!
I strongly believe that much of the way we look at economics is fundamentally flawed. However, that is another discussion for another day. The basic underlying principles of supply and demand are, from everything we can tell, accurate. So for this post, we will assume that the laws of supply and demand as you learned them in high school are unchanged.
More buyers than sellers, in other words, more demand than supply will push the price of a good up.
More Sellers than buyers, or more supply than demand will push the price of a good lower.
Let’s consider some real world examples. When a sports team makes the playoffs, the tickets typically sell out very quickly. The demand for tickets many times vastly outweighs the supply. This drives the price of the tickets up. If you want to see the game and you didn’t get tickets from the box office before they sold out, you will have to purchase from someone else on Craigslist or StubHub and pay more than the original price. The demand is higher than the supply so the price goes up. This demand can cause a $300 ticket to sell for over $1,000.
When supply exceeds demand, the price will drop. Consider a pair of designer jeans, bought new from a department store they might cost $250 or more. At the end of the season the leftover inventory will go to discount retails like TJ Maxx, Ross or outlet stores. The surplus supply of jeans is sold at a discount, usually under $100. This surplus supply will drive the price down.
Supply & Demand and the Stock Market
Stocks are just like everything else that we buy and sell, the same rules of economics apply to them in real time. More demand will drive prices up, more supply will drive prices down. Typically, most big companies we hear about don’t buyback or sell more shares. But this problem plagues many penny stocks. One of the biggest reasons people don’t trust penny stocks is because the owners of the company can dilute the share holders by supplying too many shares to the market. This will eventually drive the price down.
Companies sell shares to raise cash to make investments or cover operating expenses. HMNY is burning cash much faster than they are bringing it in. With the unstable business model it is unlikely they will be able to get a loan to help them stay afloat. They have shares of their own stock and they are selling them as fast as they can. This is how the supply went from 1.7 million to 636.9 million in just a few weeks. HMNY sold 635.2 million shares to help cover operating expenses.
This selling “diluted” the market and made the existing shares less valuable, just like the designer jeans. The last few weeks as tens of thousands of traders and investors rushed in to buy up what looked like discount shares, HMNY was selling them as fast as they could, which kept the price from rising and actually pushed the price lower.
The Dilution of HMNY
The management at HMNY diluted the shareholders’ current stake and made everyone’s shares worth less. However, if they did not sell these shares they could become insolvent which would make their shares worthless, truly worthless, $0.000000.
When I decided to buy some shares it was truly a gamble. I might lose the entire amount I invested or I might make a handsome profit. No one knows for sure, anyone that tells you different is lying to you. This stock is a gamble plain and simple. With BIG risk can come BIG REWARDS!
Thanks for reading and happy trading! If you have any questions please post them below. Don’t forget to follow me on Twitter for all trades live!
In the past 2 weeks, I have become a little more active in my trading, Bitcoin is on the rebound and Facebook recorded the biggest single-day loss in the history of the stock market. Bitcoin it’s your move. This may be the last chance to get in cheap(ish). Facebook and FAANG decline, what you should make of it.
Bitcoin’s $6,000 Bounce
Bitcoin, as you can see on the graph to the left, has been a bit of a roller coaster in the past 6 months. With its all-time high of over $19,000 from December seeming like a distant memory no one was quite sure how far the price would fall. In June the price dropped just below $6,000 and quickly jumped back up above it. After getting back over $6,000 it seemed to stall for several weeks, which led to much speculation about the end of Cryptocurrencies.
Nothing could be further from the truth, Bitcoin is not dead and likely has a long future ahead. Many institutional investors have been flocking in since the beginning of the year. Some governments around the world are holding large quantities and even Goldman Sachs, the bank with the closest ties to the US government, has invested heavily in setting up their own Bitcoin exchange. Goldman is one of the few large, well recognized, well-established banks that is welcoming the world of cryptocurrencies. In my opinion, they see the writing on the wall and don’t want to get left behind. If you can’t beat them, join them!
At this writing, the price has rebounded above $8,000, essentially bouncing off of the $6,000 support level. The coming weeks may see a strong continuation, $10,000 will provide a challenge; if it can break through that, the sky is the limit.
Bitcoin It’s Your Move
This is quite possibly the last time that Bitcoin will trade this low. A year ago today Bitcoin traded at $2,800 and the early investors celebrated with lobster and champagne. While Bitcoin is a long way from its all-time high above $19,000, it is currently trading at an attractive level for those wanting to get started.
I invest in Bitcoin with Coinbase, follow this link to start your own account. We will both receive $10 worth of Bitcoin if you purchase at least $100. While I believe the price of Bitcoin will grow exponentially in the next few years, there are no guarantees. Invest only what you can afford to lose.
FAANG and the Fall of Facebook
FAANG is an acronym for the big tech stocks that seem to have limitless growth potential. Facebook (FB), Apple (AAPL), Amazon (AMZN), Nexflix (NFLX), and Google’s parent company Alphabet (GOOG, GOOGL). These stocks have been exploding, gaining between 50% and 150% each year since the great recession ended in 2010. The bigger the gains the bigger the falls.
NFLX was trading near its all-time high of $420 per share when it’s earnings report came out, the share price has dropped to $340, a 20% decline in about 1 week. This was a result of slowing subscriber growth.
FB was trading at $217 per share but when it reported a loss of users, it dropped to $175 in a single day. This loss equated to more than $100 billion, the largest single-day loss in value of any stock in the history of the stock market.
AMZN reported strong earnings but with the constant attacks coming from President Trump’s Twitter account the stock has declined since the earnings report’s rally.
GOOG, GOOGL, and AAPL all showed strong earnings but have been declining over the past week, too, most likely being brought down by the rest of the FAANG stocks.
Your take away from this earnings season is to understand that all stocks can be dangerous. Stocks are capable of falling faster than they gain. The market has no sympathy for anyone who decides to play in its dangerous waters. If you are an investor you can ignore this headline. If you are trading, take note and know that no matter the indications, it is dangerous to hold a stock during an earnings report. Past results have no guarantee of future earnings and growth.
Here are the trades I have made over the past 2 weeks. These moves have brought me $792.61 in total realized gains, not bad for part-time work! Follow me on Twitter for all my trades live!
7/16 Sold 13 shares of GOOG for $1,180.00 each, total sale $15,334.85. Profit $509.90, about 3.4%.
I had bought those shares on 6/13.
I sold these before earning because I did not want to take the risk of losing the gains I had already made.
7/16 Bought 56 shares of TSLA for $309.32 each, total cost $17,327.39
7/17 Sold the same shares for $312.00 each, total sale $18,429.15. A profit of $139.42, about 0.8%.
When the share price declined, I took the small profit that was available.
7/17 Bought 48 shares NFLX as it rebounded from the poor earnings report. The share price was $383.84, total cost $18,429.15.
Sold them a few minutes last as the price reversed direction. Shares sold at $380 each, total sale $18,234.80. A loss of $194.35, about 1%.
7/18 as oil prices have jumped around I saw that MRO was at an attractive level to buy in.
Bought 920 shares of MRO for $20.17 each, total cost $18,557.49.
7/24 sold all 920 shares of MRO for $20.74 each, total sale $19,075.49. A Profit of $518.00, about 2.7%.
7/24 Bought back into TSLA, 66 shares for $301.56 each, total cost $19,907.57
I missed several great cash-out opportunities because I was working and not able to watch it.
7/27 Finally sold for $302.95 per share as the price began to plummet. Made a profit of $81.91, about 0.4%.
7/27 Bought 548 shares of TWTR, for $36.44 each, total cost $19,974.07.
I was thinking the share price might rebound after a bad earnings report sent the shares on a premarket slide.
I was wrong, the price continued to decline, I sold when the price reached $35.98. Total sale $19,711.80, a loss of $262.27, about 1.3%.
New CRYPTO Investment
As the week drew to a close and Bitcoin continued to look strong I bought into RIOT, a company whose primary business is the mining of cryptocurrencies. I bought 1,300 shares for $7.69 each, total cost $10,001.56. As the price of Bitcoin rises this stock will likely follow. If the price of Bitcoin declines this stock is likely to follow. I will hold this stock until I can cash out a good profit or Bitcoin collapses.
Every Friday I contribute $50 into my Brokerage account and $105 to my IRA. I did so on both 7/20 and 7/27.
On 7/27 I bought 25 shares of MJ an ETF that follows the legal weed industry. I paid $26.50 per share, $667.45 total.
This is part of my retirement, my goal is about 25% in this ETF and the other 75% in PRGFX, a fund that follows the S&P500.
You can always view all my current investments here.
I had a side hustle come through for a nice profit of $1,270.00. I deposited this into my brokerage account on 7/17.
R2B coin, a new cryptocurrency, that I put $543 into back in February, is scheduled to begin trading on 8/23. The current listed value is over $32,000. Follow this blog to see if I can actually sell the coins for anything close to that.
I have made several high-risk, high-reward bets in the past few months. Follow this blog to see what makes a profit and what goes bust. Real Profits, Real Losses, FREE LESSONS!
Thanks for reading and Happy Trading!
We all have aspirations of buying into the next Apple or Amazon for a few dollars or even pennies a share. The problem is the waiting, we all want that return tomorrow. Take a look at the charts for Amazon and Apple below; a $10,000 investment 15-20 years ago would make you a millionaire now.
I want you to understand something right now, no one knows what a stock will do tomorrow. Apple is an industry leader with revolutionary products. One of Apple’s most successful products was the iPod. It’s mostly obsolete now but they were all the rage in the early 2000’s. Do you remember the Zune? That was Microsoft’s competing product, it was a total flop. Had the Zune become the dominant product, Apple might never have achieved all the success that the iPhone and iPad have brought it.
AAPL was able to build off its success and start the smartphone as we know it today. Without that initial success of the iPod, we might only remember that AAPL built the first personal computer then competed with HP and Dell in the personal computer market. Instead, we have a revolutionary company that leads the tech sector in innovation.
One more thing to note on these charts, look at the dips that occur as the stock price rises. Some of the dips are 10-15%. Not everyone has the nerve to ride this roller coaster for this long.
Investing vs Trading
The INVESTMENTS in Amazon and Apple could have brought you fortune if you were able to accurately predict the future 15-20 years ago and had the discipline to hold the stock even during down times. Trading is very different than investing. While both are essential parts of the market, but they have very different requirements. Investing requires patience and diversification. Trading requires you to be able to gauge reactions in the short term. The topic of trading v. investing is more complex and I have addressed it further here.
Ok enough is enough, I promised you the secret to profitable trading. I can bore you all day with definitions and charts. What does it take?
The Winning Trader
Nothing worth having in life comes easy or fast. So if you are expecting to stand on your left foot and jump three times and trading success will arrive please stop reading and find another scheme. The secret to being a winning trader is experience. Not a special formula or chart overlay. No amount of artificial intelligence or reading will make you a winning trader. If you want to learn to trade and get good at it, you must start trading! That’s it! Simple right?
Simple, yes, but long, tedious and excruciating. You will lose money at some point, guaranteed; maybe not your first trade and maybe not in your first week. The key is to manage your money and manage your risk. Managing those two items takes, you guessed it, experience! Before starting this journey I read Toni Turner’s A Beginner’s Guide to Day Trading (follow the link to get a copy for yourself). She spent the first 4 chapters talking about the mental game of trading. It wasn’t until chapter 5 that she discussed actual trades and actual stocks.
Trading is a very emotional game and if you have read enough of my earlier posts, I have plenty of tales to tell about losing money when I let emotion get in the way. You must condition yourself to detach from the trades. Forget that the money you are trading with is real and your own. You must concentrate on making good trades and then you will become a profitable and winning trader. The discipline is only achieved with experience.
Your Next Step
Start trading! Open a FREE account with Robinhood and start trading for free! The money is real but they don’t charge any commissions. I have a full review of the platform here. Follow this link and when you sign up and make your first deposit you will receive a free share of stock! What better to start off you trading endeavor than with a guaranteed profitable move?
Thanks for reading and happy trading! Follow this blog for lots more insights and lessons. Follow me on Twitter for live trades.
Picking individual winning stocks can be an uphill battle. Sometimes when you think you have made all the right considerations, the price still goes Continue reading “The Case for Investment Funds”
Last week I began the process of buying and selling extremely volatile stocks in order to make small, quick profits. Although I do not currently meet the IRS’ & SEC’s definition of a Day Trader, I have been, in essence, day trading. Continue reading “Can You Make Money Day Trading? Here’s What Happened when I Tried”
We’ve got lots to go over for the past week. We have successfully moved to a new host and have begun making improvements to the website. Thank you for bearing with us as we make the site better for everyone!! Continue reading “Last Week: Website, Day Trading & Price Alerts”
There was a lot of activity in the market today after being closed yesterday for the President’s Day holiday! I went looking for some potential profits on my lunch break.