Weekly thought on $DMRC, $AKAO, $IBIO, $BIOC, $AMRN, $ARTH

The market ended the week slightly higher but formed a spinning top candlestick bar.  I’m not crazy to see a doji or spinning top bar after a serious of up-week bars ’cause it has the probability of forming a potential topping formation.  On the other hand, if the bull is strong enough, it can simply charge ahead and this week bar is simply a resting bar.

SPY_Weekly

Even if the market corrects from here, there are the 5, 15, 79 & 89 supports directly below which could check the bear momentum if there is one coming.  However, it is preferably that the bull reclaims the upward momentum by taking out the downtrend line above soon.

Digimarc Corporation ($DMRC)

There is no question that $DMRC took a bad beating this week.  Welcome to the world of volatility in hi-beta stock speculation.  Since Digimarc is basically a BIG bet on its technology being adopted by the retailers across the world, a win on this bet will reward the patient investors many times over.  On the other hands, those who shorted the stock ain’t going to make it easy for the long.  As long as the shorts got muscle, they could weave havoc during the quarterly earnings update by focusing on the backward financial data and ignore the forward looking aspect of it.

For those who felt like a failed clairvoyant ’cause they didn’t sell on Thursday morning before the gradual deterioration of price that lasted all day, don’t beat yourself up.  Unless one is a consummate short-term/swing/day traders, it is not easy to muster the mentality to handle the stress of timing the market. From my experience, it takes a LOT to be good at swing-trading and often times a “bad timing” can easily cost you a whole month of profit as well as missing the opportunity of a strong rally ’cause you were on the sideline after locking in some profit. Been there, done that.

When speculating on hi-beta stock that rely on binary event such as adoption of the technology by well-known and large retailers, the progressive development can be driver for price appreciation. But the bear also knows that in the absent of an actual adoption, a bear raid is a “doable” event. Doable in a sense that there is no guarantee that the bear can succeed and if succeeded to what magnitude.  The fall of the last two days were not unique to $DMRC.  It happened to all hi-beta stocks and some eventually bounced back and advanced even higher over times.

Netflix is a good example:

NFLX_weekly

The weekly chart above reflected the sell-off after Netflix CEO’s infamous 2011 emails to all subscribers regarding price increase and the proposed spin-off of DVD rental into another brand that didn’t sound quite right (see rectangular yellow box to the left).  Anyone who sold and never looked back (like I did) due to the prevalent focus on the “exorbitant” cost of content fee that short-sellers claimed would destroy the company missed the whole ride to current price level.

One of the lure of hi-beta stock is that you never know when an unexpected positive development will surface to change the dynamic of the price direction.  With hindsight, Netflix not only got the benefit of having Carl Icahn’s blessing but its foray to the Netflix’s Original series that began with “House of Cards” changed the dynamic of the company for the better.  Those who still got stuck on the concept of “content fee” doom & gloom missed the whole ride in spades.  Also noticed how patience one have to be to realize the super gain- 3+ years.  Nothing comes easy when huge profit is to be realized.

Looking back at my ill-fated $LNG speculation in which I got out too soon after doubling my investment, I learned my lesson not to distrust my original intuition.  New technology in fracking made digging up natural gas from the ground a lot cheaper than before.  And with a higher selling price from exporting natural gas, $LNG poised to gain a lot by having a shipping dock with a huge natural gas storage facility for exportation.  I made my first large speculation and told myself that this would be a long-term hold   Unfortunately, not knowing the volatility involved in holding any hi-beta stock long-term, I was shaken out of my position.

Take a look at the multiple “corrections” below in the weekly chart during the beginning phase of the long-term rally which shook me out of my position:

LNG_Weekly

I got in around $3.xx in the late 2010, rode it up and got my first volatility scare in March 2011 when it dropped 26+% in a week.  I still hung on but the June 40+% correction got me nervous.  Price rebounded and I found relief. Unfortunately, by August another 23+% drop finally rattled me out of my position with a double on my money.  As I watched the stock a bit more, price continued to drop below my selling point so I patted myself on my back for a good job done.  And then I made my fatal error, I forgot my original thesis of investing in $LNG which is that exporting natural gas would be a very profitable business.  I allowed the short-term volatility of the stock to derail my investment thesis by closing the book on finding a re-entry point.  By then, I was  convinced that the short-sellers’ thesis was more correct than mine.  Now take a look at the $LNG monthly chart below:

LNG_monthly

By failing to look for re-entry point after being shaken out, every rally became more expensive to get back in when I went back to look at the chart weeks or months later.  What’s a miss!

My point of telling you my $LNG missed opportunity is that it taught me a lesson and probably prepared me for this $DMRC speculation.  I realized that in order to capture the potential long-term benefit, I need to stay in the stock despite extreme volatility.  I could time the market and perhaps even got out last week before the earnings update but that would put me at risk of missing a rally.  While my position is not as large as some of the serious investors, it is large enough that I wouldn’t get a good price selling them off and then try to buy them back if the volatility and volume are not large enough for me to go thru the trouble.  Of course, by not trading, I’m subjected to unusual volatility like last week.

Now that I had the $LNG experience behind my back, I no longer fear the volatility.  And having understand the risk short-sellers are taking also gives me the confidence to ignore their action.  Meanwhile, the continued progress of Digimarc infrastructural development per last week earnings update convinced me that this current short-sellers’ attack is a blessing in disguise.  Instead of resisting the downward draft and cry over the paper-loss, I see this as an opportunity to add if one is still building a position.

While the risk is there, the reward is also unmistakably obvious.  As far as I’m concerned, speculating in an event play (aka binary event) that have the possibility of changing the paradigm shift of an industry for the better, the only way to capture the eventual huge gain is to sit tight for the whole ride.  And I plan to ride $DMRC for the singular bet that its technology will be adopted, and NOT what the short-sellers wanted me to believe by way of manipulating the stock price.  $LNG is a lesson I’ve no intention to repeat twice.

Sidebar: another way I chose to look at my speculation in $DMRC is to look at it like real estate speculation when you believe that the city will eventually grow into the area you’ve bought land in.

DMRC_weekly

From the weekly chart above, $DMRC found support at the long-term uptrend line. Still holding long and strong.

Achaogen, Inc. ($AKAO)

$AKAO is still trying to recover from the biotech sell-off.  While the weekly was slightly down, I believe it is at a point where a bounce is about to happen.  Obviously, being a biotech, Achaogen is all about the binary event based on the success of its antibiotic drug in the trial.  Giving $DMRC’s recent progress report, I sold 1/4 of my position (at losses) and bought more $DMRC due to attractive lower price.

AKAO_weekly

Price still finds support at the $5.30 level.

iBio, Inc. ($IBIO)

The more I learned about fibrosis, the more I like my speculation in iBio.  If you review the video presentation again by Dr. Feghali-Bostwick (click here to watch the video), you can feel the unmistakably confidence she has in her discovery.  Notice how she spent quite a bit of times showing the past “accidental” discovery of drugs that ended up saving millions of people.  By associating her “accidental” discovery of a way to reverse fibrosis with the previous famous accidental discoveries, she expresses confidence that her discovery will work.  I’m liking my iBio speculation as much as I like Digimarc.

IBIO_weekly

This week green bar proved that $0.65 support is holding strong.

Biocept, Inc. ($BIOC)

$BIOC bounced Friday which was a good sign.

BIOC_weekly

The weekly chart also shows that it bounced off the uptrend line as well.  If you look back all the way to February, the uptrend line is still intact.  A bounce from here will show a continued uptrend momentum.  My thesis on Biocept is actually quite simple-Liquid biopsy is here to stay.

Amarin Corporation plc ($AMRN)

$AMRN formed a green spinning top bar next to support at $1.82.  The supposedly FDA settlement talk due Friday was again postponed to December 17th.  We can speculate the pros and cons of this postponement but I believe the FDA wanted to learn about the coming Cherry study that was to release this month.  Perhaps, a positive Cherry study in support of Amarin’s Vascepa thesis may allow the FDA to be more tolerant to Amarin’s off-label promotion.  That is just my 2 cents.

AMRN_weekly

Giving the spinning top is right next to the 79 MA support, I could see a bounce coming.

Arch Therapeutics, Inc. ($ARTH)

$ARTH found support above $0.18.

ARTH_weekly

Human trial is what I’m waiting for and everything else is just noise.  Yeap, it’s a binary event.  A high risk trade with a high reward to go along with it.

Needless to say, my port was taking another step down but that is the necessary volatility I’ve to absorb while waiting for the fundamental to develop and eventually vindicated my investment thesis.  Remember, my speculation is as aggressive as it can get using swinging for the fence style; thus, I’ve to weather the drawdown that comes with a few eggs in the basket.  It will be interesting to see where my port will be in 2016.  Risk has to be respected and acknowledged and it’s the only way to deal with volatility.

Current holdings:

Main port: DMRC, AKAO, IBIO, BIOC, AMRN   Trading port: ARTH

My 2 cents

From my camera (click on photo to see image at 100%)

Purple rose



Categories: Daily trading Journal

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