Before you read on, please be aware that the analysis below is my opinion only and may include flawed assumptions and inaccuracy of logic; therefore, caveat emptor applies here. Furthermore, all emphasis (color-coded, boldness, and underlined) on the excerpts are my own.
Whoa! We did have a scary Monday when the Dow dropped a whopping 600+ points. The drop was somewhat anticipated because of the 79 & 89 MA daily resistance (blue and brown dash line on the daily chart below); however, the magnitude of the drop was not. As seen on the daily SP500 chart above, I see short-term support at recent Thursday low (see blue arrow) and another one at October 29th low (see 2nd blue arrow). Furthermore, this week drop created a downtrend line (see the downsloping blue line) that the bull needs to punch through to reestablish its dominant short-term uptrend momentum.
Meanwhile, from the weekly chart and a longer-term perspective, the bull bouncing off the weekly 79 & 89 MA supports this week is an encouraging sign. However, the weekly chart above showed that the 2nd short-term support on the daily chart is in the same area where the weekly 79 & 89 MA supports are. In other words, if this 2nd short-term support is punched through to the downside, we will need to take the bear more seriously because the next two supports below (3rd = April 6th pivotal low, 4th = lower parallel line containing the multi-years bull trend) are the last defense the bull has in maintaining the overall bullish stance. Not to say that once the lower parallel is broken, the bear will win, but it increases the probability that the bear may win.
Unfortunately, this week broad market drop also affected my portfolio quite a bit. My recent added $SOLOW took another hit due to an attack article from SeekingAlpha, and LRAD also took a hit as well. Giving the bearish momentum this week, I’m going to dial down my trading to preserve my cash position and just hold on to my four main positions which are AEMD, IBIO, LRAD, and SOLOW.
$SOLOW – Seeking Alpha bearish article, “The Real Story Behind ElectraMeccanica” was published late Wednesday and the stock took a hit on Thursday and Friday. After reading the article, I actually began to feel more upbeat because of the due diligence the author of the article provided. Per my 2 cents, the most important piece of information in the article is the revelation that the manufacturer Electra Meccanica partnered with is run by a Chinese billionaire. Zongshen, a motorcycle manufacturer, is headed by Zou Zongshen, the Chinese billionaire mentioned by the author. This piece of information, to me, is the golden nugget because it established the fact that Jerry Kroll, the CEO of Electra Meccanica, has found a solid backing for the Solo electric vehicles. What made me even more confident is the fact that Zongshen purchased about 10% of $SOLO.
Below is an excerpt from the SA article: And below is from the Electra Meccanica’s investors presentation: When I think about it, all other information about Electra Meccanica mentioned by the SA article is all noises and irrelevant to the business model of Solo and Tofino as far as I’m concerned. Let me explain.
- I’ll focus on the most significant noise since, to me, the author’s central thesis is his discovery that the CEO of EM is closely associated with another 3-wheeled electric vehicle company that has been bankrupt, possibly multiple times.
- My response:
- First of all, how many entrepreneurs were ever successful in their first few times? I’m sure there are some, but they are an aberration because all entrepreneurs have to start at the beginning, and it is no walk in the park to start your own business. Guess what, there were numerous founders of successful companies who failed many times before they made it big
- Click here to read the article, “9 Founders that Bounced Back from Failure to Build Successful Companies.” Below is the list of the nine founders mentioned:
- Reid Hoffman, Co-founder of LinkedIn
- Arianna Huffington, Founder of The Huffington Post
- Jeff Bezos, Founder, and CEO of Amazon
- Evan Williams, Co-founder of Twitter
- Tim Ferris, Author of the 4-Hour Work Week
- Peter Thiel, Co-founder of PayPal and Venture Capitalist
- Nick Woodman, Founder, and CEO of GoPro
- Melanie Perkins, Co-founder of Canva
- Brian Acton, WhatsApp Co-founder
- If the author insinuated that because Jerry failed in his past entrepreneur ventures, then he is likely to fail in his current venture; the above nine founders proved that it is NOT necessarily the case.
- Will Jerry Kroll join the founders and CEOs above to bounce back? The jury is still out, but I’m getting a good feeling that he will. With a Chinese billionaire who runs the motorcycle manufacturer believing in Jerry’s idea of a micro-mobility, there’s a good chance Solo will take off if there is demand for it. In other words, per my 2 cents, Electra Meccanica’s significant risk factor is now centering on the company ability to market the Solo successfully. The manufacturing part of the equation is far less of a hindrance thanks to Zongshen owning about 10% of the company.
The other noises covered by the author:
- CEO’s political campaign and affiliation
- My response> I don’t see how political affiliation affect running a business. There is a lot of communists who made it big. Just check the successful entrepreneurs in China and Russia.
- The issue of product safety
- My response> If there is indeed a safety issue, Electra Meccanica will not be able to sell the Solo anywhere. If it is approved to sell in Canada and the U.S., that means it passed the safety tests.
- Pre-orders dropped 100,000
- My response> Per my 2 cents, refundable pre-orders cannot be taken seriously. What is important is that there is the demand to absorb the first 5,000 units of Solo that is coming out in 2019. If all 5,000 are shipped and sold, then we are really talking. That means the current 20K+ pre-orders have leg; by then, the words will be out as more people adapt to the idea of the Solo and micro-mobility and the pre-orders will go through the roof. But to assume that because refundable pre-orders of Solo dropped 100,000 units means the business will fail is jumping the gun too early. Besides, the Tofino EV, in my opinion, is the real meat here. If they can launch the Tofino successfully, Electra Meccanica can become very big relative to where it is now in market cap.
If anyone reading this bought $SOLO, this is because we also believe in the future of micro-mobility. While competition may be fierce if Solo succeeds, Electra Meccanica will still have the first-mover advantage as long as Electra Meccanica keeps on improving the Solo platform.
I noticed some doubters believe the Tofino is pie-in-the-sky, I beg to differ. Now, we are dealing with the risk elements of speculation. The short-sellers and doubters believe the Solo and the Tofino are vaporware; meanwhile, I believe the Solo is legit, and the shipment from Zongshen will be arriving soon in early 2019. I also believe that the money they recently raised is going to accelerate the development of the Tofino as stated by the prospectus. Thus, I’m going to hold on to my warrants and see how my speculation plays out. $SOLO is a highly speculative bet, I will either lose it all or make out like a bandit in a couple of years with the bonus of driving a Tofino as well.
$AEMD and $IBIO are both gaining ground slowly and steadily while waiting for breaking news. The major ones being the following:
- any announcement of FDA approval for AEMD’s hemopurifier to be used for either viruses removal or cancer treatment, and iBio provides the bio-materials inside the hemopurifier
- Filing of IND of its lead therapeutic candidate IBIO-CFB03 for the treatment of systemic scleroderma, idiopathic pulmonary fibrosis, and other fibrotic diseases.
- Fear of the Ebola virus spreading to the city. Click on the title to read an article, “Outbreak: Ebola spreads to Congolese city of 1.2 million sparking containment fears.”
$LRAD took a beating this week. However, two possible catalysts may boost the price for $LRAD. They are:
- Fiscal year earning update coming up in December
- I feel that they may beat in both revenues and earnings since they’ve been racking up sales so far
- Click on article heading to read, “Trump says ‘good time’ for a government shutdown if no money for the border wall”
- LRAD is in three of the five border wall prototypes
- This mean LRAD has a 60% chance of being picked if the border walls funding is approved by Congress (3/5=60%)
- LRAD is in three of the five border wall prototypes
Due to setback from $SOLOW and $LRAD, my port gave back some more this week.
Current positions (in alphabet order):
AEMD IBIO LRAD SOLOW & cash (up 8.9% YTD)
My 2 cents
From my camera: