This week trading lesson that surfaced to my consciousness is about knowing my “frame of mind”.
Am I going into this trade as a long-term play or am I in it for a day-trade?
Often times, hindsight had me doubting myself so it’s important that I understand fully my frame-of-mind regarding my trades..
What do you mean?
A perfect example would be the trade I did for $CARA on Friday. On Thursday after-hour, Cara released earning with a net loss. What do you expect from a biotech company which only product CR845 is still being under trial studies for the purpose of getting FDA approval? Regardless, market dumped the stock in the morning and I took the opportunity to add more below the $16 level which effectively lower my average cost. Price bounced back above $17 and I was back in the black with a profit. (Did anyone sense a deja vu here from last week post?) So, with the position in good shape, I left it alone and focused my attention elsewhere. Lo and behold, by late morning, $CARA began to trade lower and before I realized it, it broke below $16 again later in the day. (Yeah, it was $AMRN all over again like last week).
Now, you would think that I learned my lesson last week from $AMRN and “should have” taken profit when it went back above $17. That would have been the case IF I had thought of it as a day-trade or a “let price bounces back to my break even point so I could get out without a loss” trade. But that wasn’t my original intention. I was just happy to be able to lower my average cost to bet for the Cara’s pruritus trial result.
However, when price erased the morning bounce and broke below $16 support for the second time in the same day after reaching above $17, it gave me pause. “There are more people exiting than staying for the bet” was going through my mind. One thing I learned from the years of trading is that you do not try to fight the action of the mass. The mass, for some mysterious reason, has a high probability of being right for the current moment. So, without thinking too much about it, I cut my loss and exited my $CARA position as well. The reason I needed to do it is because any further price deterioration will multiply my losses by the additional shares I bought in the morning.
So what is my point of the above thought? Simple. It’s to tell myself not to beat myself up for not taking profit when it reached above $17 ’cause my original objective (frame-of-mind) was not to make a quick buck. My action to cut losses later in the day was a matter of protecting my port from further erosion. Now, I feel better after putting it in writing.
Believe it or not, I got back in $AMRN on Friday morning when I found out the weekly script went over 21,000. That is a new all time high script number. Feeling positive about the increased script number, I started to build a position and added more as price paced downward. But something was not right when price kept on going down, down, and down. Again, I did not want to fight the action of the mass and decided to cut my losses to get out of the way. So far, I had taken two losses for the week.
My other action that costed me was my reduction of my $PI position after I accumulated to a swing-for-the-fences position size during the early week price drop to below $27. I was actually quite happy to lower my average cost. However, my irrational fear of a possible general market fall later in the week prompted me to reduce my position size back to standard size by Thursday. I said “irrational fear” ’cause $PI momentum was actually quite strong going into Thursday and there was no reason for me to lighten up. The fact that my shares was gobbled up quickly with no sign of weakness when I unloaded my first batch should have given me pause to stop selling further; however my fear ruled the day and I ignored the sign and sold some more. On the following day, the general market did not fall and $PI was holding quite well actually even with a slightly negative close. The overall support of $PI price is actually inching higher. The cost I mentioned is that if I’d hold my original swing-for-the-fences position size, I would be ahead more and the extra gain would help offset some of my two losses I mentioned above. Lesson from the $PI trade- listen to the price action when unloading instead of letting my fear dominated. I did buy back shares on Friday above what I sold for on Thursday though.
Despite my “bad lucks” mentioned above, I do have a giant elephant in the room that literally dwarfed the losses mentioned above and brighten up my week. It’s $IBIO.
$IBIO finally is in the process of waking up.
As mentioned last week, I was expecting the 15 MA to inch back up to support the bottoming process. What I did not expect is the strong upward price movement for the week with high volume (2.4 million shares) as opposed to last November rally (492K shares). See yellow circle highlighted under volume indicator. Because of the volume, I believe this rally has strong legs to keep going. If you go back to look at the strong rally to $3+ in late 2015, you would see that volume also increased significantly before the spike up to $3+.
Now, in order for price to repeat the same feat of 2015, there have to be some real catalyst to move it. I can think of possible catalysts for the coming rally:
- Current urgent catalyst could be the yellow fever outbreak in Brazil
- Yellow fever outbreak could spread to US (Mar 10, 2017 7:43 PM PST)
- On the heels of Zika comes its deadlier relative, yellow fever, experts warn (3/9/2017, 11:20 AM)
- An outbreak in Brazil has U.S. health experts wondering if yellow fever could be the next Zika (3/8/2017, 3:50pm)
- If there is an outbreak in the U.S., IBIO has the technology to produce vaccine for yellow fever quickly and cheaply.
- I do not know the status of human trial on the yellow fever highlighted above but the fact is that iBIO can produce the vaccine for yellow fever.
- I’ll let the Form 4 filing do the talking:
- On February 23, 2017, an entity indirectly owned 100% by Kenneth B. Dart (“the Affiliate”) acquired one (1) share of the Issuer’s Preferred Stock designated as iBio CMO Preferred Tracking Stock with a par value of $0.001 per share (the “Preferred Stock”) in exchange for 29,990,000 units of limited liability company interests of iBio CMO LLC (“Units”) held by the Affiliate. iBio CMO LLC is a subsidiary of the Issuer. The shares of the Preferred Stock are exchangeable for Units only after March 31, 2018 (“Mandatory Exchange”), or an event which triggers a change of control of iBio CMO LLC, or in connection with a winding up, liquidation or deemed liquidation (such as a merger) of the Issuer or iBio CMO. The Preferred Stock is not convertible into or exchangeable for any of the Issuer’s securities. The Preferred Stock has no voting rights with respect to the Issuer.
- For those who don’t know who Kenneth B. Dart is, I’ll let Wikipedia do the talking:
- Kenneth B. Dart (born 1955) is a United States-born Caymanian-Belizean-Irish businessman and billionaire. His wealth was estimated in 2013 at $6.6 billion. He is an heir of William F. Dart, who founded the Dart Container Corporation (originally the Dart Manufacturing Company) in Michigan in 1937.
- You’ve to ask yourself why Kenneth B. Dart wanted to convert 29.99 million shares of iBio CMO LLC into 1 share of preferred stock. It could be nothing or it could be something big.
- This one is the main reason why I’m even in this stock
- Dr. Carol A. Feghali-Bostwick’s fibrosis study is about to begin Phase 1 trial.
- So far, we have no indication of when it’s going to happen; but after a year or so waiting, I can’t help but feel that it is happening in 2017.
- Dr. Carol A. Feghali-Bostwick’s fibrosis study is about to begin Phase 1 trial.
There you have it. Three possible catalysts for continuing rally in $IBIO. Of course, the above is my opinion of what can happen; caveat emptor applies here. Watch the video again:
Enough about $IBIO. Let’s talk about my next favorite $PI
I was at one point early in the week holding a swing-for-the-fences position size on $PI. Now, I’m still holding a decent size position. If price continues to head higher, I’ll add more to get back to swing-for-the-fences position size.
I’d done the same for $DMRC in the past but that one did not work out. Actually it did work out back in early Jan 2016 but I was too dug in to take profit and ended up giving back unrealized gain. I mentioned $DMRC ’cause both $DMRC and $PI are technology stock related to the retail and supply chain industry. Thus, I’m going to give $PI a chance to prove my thesis.
From the weekly chart above, I’m seeing a potential bottoming here IF price can take out the high of this week high in the near future.
Due to time limit on my part, I won’t dwell into the fundamental detail of $PI since I already mentioned them in my previous posts. In a nutshell, I believe RAIN RFID will dominate the retail and supply chain industry simply because it offers the BEST technology to increase inventory management efficiency for production and distribution to retail stores. While cost is a major issue, I believe the benefits will out-weight the cost especially when cost is coming down. Of course, the benefits will be realized when everyone in the retail industry is on board. So the possibility is enormous if the supply chains catch on.
Despite my bad lucks with $CARA and $AMRN, $IBIO makes my port shine for the week.
Main port (no margin): IBIO PI and 56% cash. (up 11.7% YTD)
Trading port (with margin): MENXF IBIO & GRWG
My 2 cents
From my camera: