Weekly Thought on $IBIO, $SEED

Last five trading days week were all about greed and fear and how it messed up my trading performance.  While I didn’t have a bad week, I sure left a lot of money on the table ’cause of the imbalance of greed and fear in my mental state.

Please elaborate

Too much greed and too little fear at the wrong time…

and

Too much fear and not enough greed at the wrong time

Care to share some examples?

Most of the trades were focused on $CARA since its momentum from Monday was on the up and up. In principle, if I’d bought on Monday and held, I would have made a very nice chunk of unrealized gain by Friday; on the other hand, if I’d traded it like a “focused day trader”, I would have made even more money than just buy and hold. Unfortunately, I achieved neither; instead, I only made a small sum that did not take advantage of the range of the price movement for the week.

What happened?

Here is how I messed up. I was doing fine on Monday and did even better Tuesday morning when I added more on the dip to low $14.xx.  Price rallied all the way to $15.68 and I was sitting on some pretty serious gain in only two days. However, my greed level was very high and I wanted to believe that price could just keep on going up.  Thus, instead of taking profit when price started to tumble down from intraday high of $15.6x, I watched my unrealized gain shrunk when price dropped back down to $14.5x.  By then, the SP500 was also correcting and my mind was going, “Uhh Ohh… the market may be heading south from here.”  Without hesitation, I sold my trading shares and later on in the day, the rest of my $CARA core position.

What’s wrong with the picture above?

First, too much greed when price hit $15.68 and not enough fear about giving back gain.  But when price started to fall off, safety protocol kicked in and I sold without the lion share of the unrealized gain I had earlier.  In retrospect, if I had no intention to hold the position (demonstrated by my action of selling at $14.xs), I should have taken the nice morning gain when price was at $15.xx.  If I had done that, I would be more than happy to buy back the shares when price stabilized at the low $14.xx before heading back up.  Because I sold at the low $14.xx, not only was I not willing to buy back when price appeared to bounce later in the day but I was out of cash to buy back the number of shares I sold ’cause of the three days cash settlement.  In a way, my non-margin cash account tied my hand even if I wanted to buy back.  The non-margin feature is my way of protecting myself from myself.  It’s supposed to act as a deterrent so that I don’t over-trade. It forces me to be mindful of my own action. In theory, this feature works from time to time; but not during time when I need the cash to jump back in a stock with a high probability of continuing momentum run. Regardless, I was “too fearful” of market crash that I even sold all other positions I bought that day that would have made me more money if I held onto them before market close.

As market sometimes do after I made my decision to exit a position, price rallied back to close above $15 without me on board.  My action of selling out at the low of Tuesday became even a bigger blunder when price opened on Wednesday at mid-$15 and headed higher.  I finally gave in and bought back when price broke the $16 resistance to the upside.  Right there, I missed about $1.50 per share in profit from my $16 entry and prior day exit.  That was quite some missed profit giving my sizable position I had.  You would think that I learned my lesson and would not repeat it again.

Wrong.

Price rallied a buck from entry at $16 to over $17.2x and yet I did NOT take profit.  Price closed back to mid-$16.  Thursday morning, price traded down to low $16.xx and I added more.  So far so good.  Price then climbed back to $16.99 (High of day) rather quickly which was close to a buck on my unrealized gain and again I did not take profit.  Even worse, price then began to drop at an accelerated pace. Again, safety protocol kicked in and I started to reduce my position. But before I could finish selling down my position, the dam broke and price fell off the cliff from below $16 suddenly.  Although I was already liquidating my position, the severe drop caused my selling the balance of my position at bigger losses than I wanted.  Although I got out pretty decent with a smaller losses than if I had sold at the bottom of the day range at low $14.xx. My not having available cash to buy at the low $14.xx really got me.  It was a bargain but my money was tied up in the three-days cash settlement.  Needless to day, I missed the bounce back to mid-$15.xx.  On Friday, I gave up on $CARA ’cause I did not trust the price action after the carnage from the day before.  Of course, price went up and closed $16.65 without me on board.

I’m writing all this down so that it can imprint the lessons into my mind hoping that it may minimize the chance of my repeating the same error again and again.  What I’m doing now is to acknowledge my shortcoming here.  While I mentioned in my earlier posts that I need to focus on practicing guerrilla trading tactic, the last five days showed that my mindset is not completely following this concept.  Old habit as well as my greed are still dominating my action.  Nevertheless, the old habit of executing safety protocol is still very much intact.

Thus to rate my performance for the week, I give myself a C- for trading for short-term gain and a B+ on following safety protocol.  Obviously, I need to up my grade by becoming more self-aware during market hours.

Now, on to my other positions…

I bought back $SEED this Friday ’cause I believe price is stabilizing at the weekly 79 & 89 MA supports.

seed_weekly

Since I’m a strong believer in the 79 & 89 MA support, I always make it a point to buy back position when price reached these support level.  To me, the weekly moving average has stronger support than the daily ones.

On the fundamental side, $SEED should be finalizing the sales of their production and distribution business in quarter one of 2017 (announced last year).  This mean the company is expecting to receive approximately $60 million between now and end of March.  I believe once the money is received, price will bounce back from here.

Of course, I’m still holding $IBIO.  Perhaps, one day I’ll fully appreciate my resolve to hold iBio.

ibio_weekly

The weekly chart is showing strong stabilization of price in the $0.40.  I wouldn’t be surprise for price to start a slowly steady climb from here.  Any positive news on development of the fibrosis will make this one run hard.  Watch the video again!

In summary, I let my fear of a market crash dominated my whole mental process which forced me to be overly cautious which in turn forced me to execute safety protocol.  While hindsight made my safety protocol seemed premature;  I like to believe that the safety protocol is an automatic circuit-breaker instilled in my trading mindset.

When you think about it, missing a profit opportunity only slow down my advance. On the other hand, taking a big losses by not executing a safety protocol would set me back for sure. This mean I have to work much harder to regain my losses.  There are and always will be profit opportunities in the near future even if I miss the ones I’m trading in.  So, while it is painful to miss profit opportunities, it sure beats sliding back down on a slippery slope when you’re trying to climb higher.  In essence, if I focus on making sure I don’t slide back down the slippery slope too much, the steps I’m attempting to take to hike up will take care of the ascent.

Thanks to small uptick in $IBIO and small gain from $CARA, my port is able to gain some this week.

Current positions:

Main port (no margin): IBIO   SEED  and  68% cash. (up 8.2% YTD)

Trading port (with margin): MENXF  IBIO  &  GRWG

My 2 cents

P.s. Have a Wonderful and enjoyable Superbowl Sunday!

From my camera:

052

 

 

 

 



Categories: Daily trading Journal, trading journal

Tags: , ,

2 replies

  1. Zen: Thanks for this continuing round up/observations. Im interested to know, how much time per day do you spend monitoring the markets movements? Your style and relatively few number of stox followed suggests its a lot or you simply wouldnt have time to react to and exploit these intra day moves.

    • Hi runningrep, Excellent question and observation. In fact, your question enlightened me on why I kept missing those profit-taking opportunities I mentioned above. Let me explain.

      In general, I watch the market from the open to the close. To tell you the truth, even with only a few stocks, I can still easily get distracted by my focus on other stocks/activities..

      Here is an example:

      The several times $CARA rallied hard in the mornings, my mindset was like, “CARA is looking good so let me look for other opportunities.” It was these distractions that sometimes took away those precious “seconds or minutes” that would allow my mind to go, “Look like CARA is topping out here with a “fill in the blank” bearish candlestick pattern on the 5 min chart. Let me take some profit here.” Thus, by the time my mind wander back to the CARA screen (btw, I’ve seven monitors from two computers in front of me), price already dropped from the intra-day high and my mind would go, “price is bouncing here, so let see before I do anything.” The issue here is that once I missed the small window of opportunities to take profit from the intra-day high, my mind may not think in term of profit-taking but focus on the possible bounce. Sometimes price will go back up (which was usually the reason why I didn’t take profit after missing the profit-taking window) and sometimes price will just fall further back down. In a strong momentum day, the odd of bouncing is usually higher than the odd of continuing falling price. So, my not willing to take profit after missing the window was still based on “sound” probability assessment. Unfortunately, I failed to see that when you have a stock that had been running for many days, the volatility will increase during intra-day and the probability assessment will be more like 50/50 or even worse 40/60 in favor of more correction to come. Lesson here-> when price has advanced for many days, be prepared to take quick profits when they become available.

      Sometimes, my missing profit opportunities could be as simple as reading an email and not paying attention to the market. However, the truth is that I still have not cultivate a true short-term trading mentality to trade; and it is this reason why I allowed myself to be distracted ’cause my mind was going, “this is a swing trade position for a few days or more so let’s not worried about intra-day profit.”

      There are also other factor such as “If I take profit right now, I will not have the cash to buy back due to the 3 days settlement.” This one is a hard one for me to tackle especially in CARA. Despite a nice chunk of profit, I was worried about being out of the stock if I took intra-day profit.

      Your excellent question allowed me to bring up other points that I had not consciously revisited during my weekly thought post. Thank you for bringing it up.

      You may wonder why I don’t use the trading account with margin to take advantage of those trades I missed in the main port. The fact is that I did but the trading account is a much smaller account and the money I made from these are nothing compared to the gain from the main port. In general, I only use the trading account (w/margin) to buy the OTC stocks to keep them separate from the main port.

      Thanks again for the excellent question.

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