Weekly thought on $AKER, $IBIO, $MENXF and a short discussion on RISK

Get ready for modern day gladiatorial game- the surrealistic fight between the Trump and the HRC in which both are bad ass in their own right.  Some spectators are making huge bets on this fight and some are simply content to shun the bet and watch on the sideline.  Well, having made a decent profit during the week with $SPXU, I decided to lock in the gain and removed myself from the betting scene before the weekend.  If HRC can survive the weekend without any damaging news, market may simply open with a huge gap-up.  This is the risk I like to remove myself from.

While there are ugliness in this fight, you cannot dispute that this is probably the most exciting, stimulating, entertaining, and at the same time, the most dreadful election being held. A combination that make the gladiatorial game so popular during the period of the Roman empire.

The popular opinion is that a Trump win will create economic uncertainty that can easily spook the financial market to have a breakdown.  An HRC win may continue to create a temporary false sense of security and the market may rally in November until the concern of Fed rate hike in December reappears to spook the market once again.  In other words, a Trump win may create instant financial market collapse and an HRC win may delay the market collapse.

Therefore, with the uncertainty over the weekend, I decided to forego major risk taking and chose the path of safety and caution to safeguard my portfolio which is now 66% cash with only $AKER & $IBIO in my main port. I also hold $MENXF in my trading port.

Why not 100% cash? Why are you still holding the three stocks mentioned?

The three stocks are pure fundamental play and very little to do with trading charts even though I observe the charts diligently.  Due to their low volume activity, it makes no sense for me to trade in and out with the number of shares that I own.  I like to accumulate them when price dropped ’cause when the fundamental finally reflects what I believe it can be, I can make quite a bundle.

What is your take on $IBIO price destruction this week?

This is simply a matter of current market dynamic that doesn’t favor buying stocks.  My 2 cents is that the uncertainty brought on by the election is stopping a lot of people from buying anything.  Those who want to get out now is selling as an unfavorable market environment, and iBio, along with many other stocks, is facing this dreadful dilemma. Those who sold might be subjected to various reasons such as margin call liquidation or salvaging available cash to play safe.

Since I’ve liquidated my other more liquid positions to raise cash, I can afford to allow iBio to go thru these stomach turning volatility.  I expect the volatility and that was my reason for buying $SPXU to hedge. Although I missed the $SPXU from the week before, I was able to make a few bucks this week by hopping onto the $SPXU ride early in the week.

spxu_dailyThe $SPXU daily chart above pretty much embodied my entire trading sentiment for the week.  Seeing a potential bounce after a nice recovery on Monday price action, I was ready to jump back in $SPXU on Tuesday.  It was a right move since price shot up on Tuesday and I added more the following day when price continued to climb higher.

Without a doubt, this week activity in my main port was all about risk averting.  Starting with Monday, I sold off $DMRC ’cause price was not acting strong and I wanted to raise cash. Giving that $DMRC’s low float status, I knew I’d to sell before the tanking general market forced others to sell as well.  I sold some earlier in the morning and my sell-stop was triggered to sell the rest later in the day.  $CORN was not behaving well on Monday so I peeled off 2/3 of my position.  By Tuesday, further price deterioration triggered my sell-stop to sell the rest.  While I added to $CARA and $AMRN in the early part of the week, a plunging DOW forced me to liquidate both $CARA and $AMRN by mid-week.  By Thursday, with a continuing falling market, I decided to liquidate my position on $SEED as well to raise cash.  Friday market bounce in the morning forced me to lock in gain on my $SPXU position.  While the profit did not match my paper losses on iBio, it was better than nothing so the hedge was partially successful.

How come you didn’t buy back $SPXU after you sold?  After all, price did bounce back up by end of day.

That was because I made a conscious decision not to “gamble” ahead of the election.  There is a good possibility that if there is no damaging emails surfacing over the weekend to affect HRC, market can simply open with a gap-up.  This is the risk I’m avoiding; thus, taking profit on Friday was the right thing to do.

Giving your penchant to swing for the fences with only a few stocks in your port, what prompted you to be so risk avoidance all of a sudden?

Glad you ask.  Let’s talk about risk.

Here is the way I see risk…

If you are facing two doors with one open to paradise and the other open to hell, will you choose if you don’t know what is behind the doors?  Now, you can opt out of making a choice but then you will be stuck at where you are until you take a risk to open one of the door.

To me, if you decide to get out of your neutral boring position and choose a door randomly, you are gambling.  Gambling risk embodies the chance of luck like rolling the dices, flipping a coin, or drawing cards in the poker game. You odd of winning depend on pure luck.

However, if I take my times to study the doors; perhaps stick my nose against the key hole or press my ear against the door, I could perhaps increase my odd of picking the right door.

Hmm, this key hole smell like roses garden… the odd of this door to paradise is very high


Hmm, this door is kinda warm to my ear and I also smell something burning…

The above examples obviously provided some clear clues to which door you will pick which essentially eliminate most of the risk.  But in life, such obvious clues are rare.

Now, imagine that between you and the doors is three feet of empty space.  You cannot get close to the door to smell the key holes or press your ear against the door without falling into the three feet wide deep abyss.  However, in quiet day when there is no wind blowing thru this three feet of space, you can perhaps get a whiff of fainted aroma of rose if you are keen enough to quiet your mind and pay attention to the minuscule of activities going thru that three feet of space.  If you’ve the ability to smell the roses even slightly, then you’ve increased the odd of opening the right door.  And this is the condition where I want to swing for the fences.

Btw, the ability to smell the roses in the three feet of space only work for people who actually spend the time to learn to smell for it.  So, discipline and persistence are required.

Now imagine that there are strong wind blowing thru this three feet of space; suddenly, I lost the advantage of detecting the aroma since it will be blown away by the wind.  Without the advantage, choosing the door becomes pure gamble once again.

To me, the coming election is the wind that is blowing hard in this three feet of space.  No one know how the market is going to react after the new POTUS is elected.  Even though popular opinion is that a Trump win may collapse the market, it is also possible that market could rally as well for reason unknown at this point.  In a nut shell, giving the extent of market uncertainty due to the coming election next week, the entire stock market is a gamble.  Hence, my raising cash to 66% to reduce my exposure.

To me, the stock market favors those who spent the time to understand it- like the blackjack card counter who know when to make the big bet when the remaining cards in the deck favor the players over the dealer.  Of course, the casino will kick you out the moment they know you are a card counter whereas the stock market will simply reward you with the “calculated” risk you took by studying charts and the fundamental developments of the companies you speculated in.

By the end of day, nobody can ever win every single time when one try to profit by taking risk regardless of how “calculated” your risk is.  It is the ability to “manage” the risk by not playing when you realize you are relying entirely on chance of luck with no odd in your favor.  Sure, you can still win if you are lucky; but the punishment can be quite severe if you are wrong.  So, why risk it?

Current positions:

Main port (no margin): AKER  IBIO and 66% cash. (up 40.5% YTD)

Trading port (with margin): IBIO down 33% & MENXF down 18% on positions only and up YTD on port.  I’m still up YTD ’cause I did not load up IBIO and MENXF the way I loaded up $ARTH before which I doubled on the gain.

My 2 cents

From my camera:


Categories: Daily trading Journal, trading journal, Trading philosophies and thoughts

Tags: , , , ,

10 replies

  1. Thanx Zen,
    I think you ‘almost’ did the right thing :). Like you, Ive read articles saying that a Trump win will take 10-20% off the market due to uncertainty about his economic policies.
    ”There is a good possibility that if there is no damaging emails surfacing over the weekend to affect HRC, market can simply open with a gap-up”. However, we ‘know’ Hillary is gunning for cost/profit reduction in the bio sector…..that sounds like a lose lose for bio prices…..and you kept 2 bio’s???

    Personally Im tempted to go to 100% cash (keeping gold), but my timing is poor. Bio has generally suffered of late….I should have got out a month (maybe year) ago and gone on holiday. However, Im now torn as to whether the POTUS result has already been baked into the bio prices or not, so I could be selling at the perfectly wrong time.

    Re your 2 doors: Heres a similar old story.

    Youre walking down the road in a hurry to get into town and it splits into 2 paths….one to town and the other to nowhere. There are two brothers there…..one ALWAYS tells the truth, the other ALWAYS lies. You are only allowed to ask a SINGLE question of just one of them to determine, WITH CERTAINTY, which is the right road to take. Whats that question?

    Like sniffing at keyholes, asking the right questions (often of ourselves) helps us to improve the odds of making the right decisions.

    Try and work it out, but please dont anyone post the solution as it will spoil it for others…………Ill post later.

    • Actually, $AKER will win regardless of who becomes POTUS since its real-time rapid diagnostic tests reduce cost for hospitals and doctors’ offices around the globe. $IBIO’s fibrosis treatment is really the reason why I’m in regardless of price action; so a cheaper price offers me chance to add more to lower my average cost. Both have low volume trading activities with no news so it is not a good trading vehicle for quick buck. Let’s just say that I detected a faint whiff of sweet aroma from these three doors (AKER, IBIO, & MENXF) and is confident that I’m picking the “right” doors so to speak.

      Regarding your “riddle” question, I’m going to work with the assumption that I already know they are brothers, so the logical question to ask will be, “is this guy on the other road your brother?”

      I’m posting my answer even though you asked not to so I can discuss your question a bit further. First, your question is designed to filter out the truth or lies; so the essence of the question is really about “trust”. Do you trust the management of the company you’ve a stake in? Obviously, this trust issue is also a personal decision that can be polluted by our own personal bias and prejudices.

      There is no better example than taking a look at the current election for the next POTUS. Despite information from Wikileaks, there are still plenty of people out there who trust HRC and will vote for her regardless. Same for the Trump. Who is telling the truth? Are we blinded by our own bias and prejudices? But in the world of speculation, trust is also a “risky” proposition you’ve to factor into your trading decision. Trust comes in many flavors as in who do you trust. Below are some example:

      List of who do you trust in the financial market (not in particular order of importance):
      1. management of the companies you invested in
      2. people you depend on for giving you the analysis (e.g. paid subscription of all levels- $50 to $5000+)
      3. Opinion you read on the blogs, twitters, stocktwits, etc.
      4. Yourself

      In my case, I chose to trust myself (#4) first to detect the faint whiff of sweet aroma… To do that, I don’t mind spending time to understand the companies I invested in with my best effort. Sure I could err on my understanding but the charts, risk management, and discipline will help me reduce the damage if I do err on my understanding.

      In a nutshell, we can do the best we can to understand the companies we invested in; but we still need to be mindful that there is always an element of risk involved which included global risk (general market force- e.g. current election) and local risk (companies you invested in). And once you understand the risks and allocate your position accordingly, the risks can be mitigated in some form. In other words, my holding only $AKER, $IBIO and 66% cash in my main port is my own way of mitigating my risk.

      Thanks for your comment.

      My 2 cents

  2. ”Regarding your “riddle” question, I’m going to work with the assumption that I already know they are brothers, so the logical question to ask will be, “is this guy on the other road your brother?”

    Strike one! The liar will say no….the truth teller will say Yes (or viz versa). But that doesnt tell you anything about which road to take.

    • After rereading your question, you’re correct. You did not specify if the honest brother is standing on the right path. Then I remember this riddle is similar to the one about a King sending a guy into a room with two doors and two soldiers. See below:

      “Someone was sentenced to death, but since the king loves riddles, he threw this guy into a room with two doors. One leading to death, one leading to freedom. There are two soldiers, each one guarding one door. One of the guards is a perfect liar, the other one will always tell the truth. The man is allowed to ask one soldier one yes-no question and then has to decide, which door to take. Which one question can he ask to find the door to freedom”

      One might respond to this in a manner similar to Brad Cane’s solution to his riddle, and ask one guard which the other would say lead to freedom. The lying guard would realize that the truth teller would tell which door lead to freedom, and then point to the door that lead to death. The truth-telling guard would recognize that the lying guard would lie about which door was which, and point to the door that leads to death. After asking, one would only need to choose the opposite of whichever door he was directed at.

      Riddle asides, trust is an essential element in finding the winning stocks. If you can find someone you believe have integrity, and this someone is either a part of management or working with management, you increase your odd to your favor.

      Thanks for the fun riddle…

      • Correct! The trick is to make the liar tell the truth, and/or the truth teller tell a lie….that way, whichever you ask, you will realise the same response.
        So whats the point of this riddle in respect of trading. Im sure several people have attended Conf Calls or phoned investor relations. You say ‘will the company be diluting soon?’
        But knowing that youre not gonna be told the truth, you can ask ‘If I asked your CFO whether a dilution was imminent, what would s/he say?’ Now the law prohibits them from giving a truthful direct answer, so theyll likely tell a lie. You will need to read between the lines, but if they say ‘Def no!’ beware. If they dodge the question, its prob ‘Yes’

      • Excellent insight! The same goes to the questions such as reverse split, partnership, up-listing, new loans, etc.

        However, sometimes they may be giving truthful answer at the time of the questions but then circumstances change for the worse later which made the original answers not so truthful. By then, it doesn’t matter whether the original answer was truthful or not ’cause things have changed for the worse. A nightmare that investors/speculators seek to avoid…

        Thanks for the insightful comment.

      • BTW, I dont trust anyone !! (other than myself and you 🙂 ). I trust my instincts. And I can read a lot more from voice tone than any analysts report.

      • Appreciate your candor… 🙂 Trusting your instincts is definitely a great trading strategy ’cause you learn to hone this instinctual skill with your trials and errors. As you get better at it, your execution becomes more fluid and less hesitation.


      • BTW BTW its always a good idea to record such calls…..after 5 playbacks, you start to hear the truth in voice tones and hesitations.

  3. Hindsight speaking, my not “gambling” on directional bet over the weekend by exiting $SPXU Friday to lock in profit paid off. Not only that there are no damaging news against HRC, “the FBI cleared Hillary Clinton for a second time Sunday, saying it hasn’t found anything in the new emails obtained from Huma Abedin’s laptop to change the findings from this summer that the former secretary of state was reckless with classified information but couldn’t be prosecuted for it.”

    Source: http://www.washingtontimes.com/news/2016/nov/6/hillary-clinton-emails-fbi-says-nothing-new-huma-a/

    SP500 is now up 26+ points. If I’d held on to my $SPXU, I would have given back all gains plus some. Whew!

    Always respect the risks you are taking.


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