It has been a really long time since I’ve had a winning trade. So long that I honestly can’t remember when the last time I sold a stock position for a gain, large or small. Even though these losses have not been more than 10% lower than where I purchased, they still sting and have been chipping away at my capital.
When I look back to figure out WHY that has happened, the only half-way decent reason I can come up with is the choppiness of the market. I don’t like making excuses, but things have been really choppy over the past couple months in the stock positions I’ve taken.
On the bright side, I’ve been pretty happy with my discipline in setting a stop and honoring that stop no matter what. Most of these stocks (if not, all of them) ended up much lower than where I jumped ship. Some of the more recent stop outs that I’ve had are…
…and the list goes on! Yes, that is a lot of stop losses and they are beginning to mount. However, I’m trying to see the “learning experience” in all of this. To me, this lesson has been 2 fold…
Expensive Market Lessons
So what did I get from this expensive market tuition? A couple valuable lessons…
- First, this has been a lesson in trying to time the bottom in stocks. Looking at that list, it is primarily made up of energy/oil plays, and a couple silver stocks (and CENX which is aluminum). The oil and precious metals sectors have been getting killed and I was bottom feeding. While this can be lucrative, it’s also pretty risky and I one of my main objectives is keeping the risk to reward ratio skewed in my favor as much as possible. While many of these stocks presented “Low Risk Entries”, they were within a volatile sector and were just yo-yo-ing (is that a word?) back and forth. I am not experienced enough of a trader to be able to trade those up and down movements in a shorter time frame.
- Second, this has been yet another lesson in patience. Patience is required to allow these sectors to fully bottom out and then change their overall trend. That has not happened and I was simply trying to time the bottom too quickly and not allowing things to reverse.
A Change In Perception
Recently, I’ve been reading different books on the Stock Market and trading in general. All of the ones I’ve read have been really good. The one that I’ve looked into a bit further is “How To Make Money In Stocks” by William O’Neil. The basic premise of this book is a system that he’s developed, called CAN SLIM, that screens stocks for the very best fundamentals and the highest potential for growth. O’Neil is the founder of Investor Business Daily (IBD) and plugs his “service” many times throughout the book. I can’t stand incessant self promotion, so I was immediately turned off by that.
However, I decided to go to the IBD website and take a look around. I also saw some of the more respectable traders on StockTwits talking about IBD and how great it is for stock ideas. So, I decided to try one of their services, “Top Rated Stocks Under $10”. I’m about 2 weeks into the subscription and I really like what it does. For me, this is perfect because I am NOT…by any stretch of the imagination…good at evaluating companies and their business fundamentals. IBD does this work for me so that all I have to do is look at the charts of these “top stocks” and decide which ones I like and what the buy points are.
One of the main reasons that I decided to take a different approach is because I found myself investing in companies that had huge debt loads and were fighting an uphill battle. I used to think that the big money was being made finding the “bargains” and bottom feeding. While this CAN be a good way to make a lot of money in a relatively short period of time, there are more losers than there are winners and it’s a pretty risky game. So, I’M DONE WITH THAT…I’m changing my perception.
The challenge is going to be “divorcing” myself from my thinking and perception that the “value is at the bottom” and looking for potential 100% gainers. IBD goes by the “Rule of 72”, which basically states that it’s much easier to find 3 stocks that return 24% gains, than it is to find 1 stock that returns 100%. Here is their way of thinking, which has been BURNED into my brain!… IBD Rule of 72
My focus now is finding great companies with high growth projections (via IBD), and then finding the ones with the very best chart setups. Plain and simple. I have a few on my list and now I’m simply waiting for the chart setup. I’m waiting for the stock price to come to me. If it doesn’t, I move on….practicing patience!
Feel free to comment below if you are an IBD user or have in the past. So far, I love it!
It’s been a few weeks since I’ve updated you on my watchlist and positions, so let’s take a few moments to get caught up. In my last post, I was watching UNXL, CENX and IVFH for possible entries. But somewhere in the meantime, I saw a rather nice setup in SFY stock so I purchased some shares with an average price of $2.88. I wasn’t able to post that trade, but long story short, I got stopped out after they released this past week for a small loss. No harm, no foul…but yet another lesson in how important stops are!
I’m still watching some oil and energy plays, but for now I think I will wait and see if we get a pullback in oil. I would like to see oil come back to test support in the $55/barrel range then go higher. I believe that would be a nice time to get back into some oil plays to catch the next wave up. We’ll see…
So what about these other stocks that I was watching? For the sake of time and effort, I won’t even post the chart of UNXL. It’s that ugly. Needless to say, I am no longer watching that one and have turned my sights to stocks with brighter horizons.
CENX – Century Aluminum
Things are developing rather nicely for CENX. It’s dropped to it’s longer term support line and seems to be going sideways here, possibly building it’s strength for a move higher. It’s doing exactly what I wanted it to do and it might be time to get in….
Taking a closer look at the daily, we can see that it’s trading within a box and the 50 day moving average seems to be acting as a resistance area….
I really don’t think there is a whole lot of time left to get into this one, so I will be watching closely this week. I would like to see CENX retest the lower box line and also that long term support (red line). I would be a buyer there with a tight stop around 12.25. To be honest, I think it’s a buy right where it sits, but I have learned to be greedy, so I will wait. Hopefully it doesn’t backfire on me like when I missed my planned entry in SZYM. Still mad about that one…
SSRI – Silver Standard Resources
I am always watching gold and silver…probably too much. But the charts on many silver plays look to be at low risk entries. SSRI is one that I have liked for a while and is currently trading in what looks to be a rising channel. I like the higher lows, and it looks like it’s sitting on that lower trendline and is a buy in my opinion…
It’s also touched the 50 day and reversed higher a couple days ago. If I’m going to get into SSRI, I’ll buy the lower trendline and set a stop just below the 50 day at around $5.00. The problem is that the short term direction in silver and gold is not clear. So, this one could go either way.
New Position – IVFH
Another stock I’ve had my eye on is an OTC stock that I think has a lot going for it as a company. I normally don’t mess with OTC stocks but I’ve read a lot about the company and I like what they are doing, a lot. Plus, I liked what I saw in the chart and thought we were approaching a low risk entry point.
Here is a link to my original post about IVFH if you missed it.
Well, we got that entry point and I jumped in. I made two purchases of IVFH stock: one at $1.24 per share and then I got greedy and tried another chunk at $1.20 a day later. That one hit as well, so I have an average price per share on IVFH at $1.22.
Looking at the chart…the blue arrows are where it previously bottomed then reversed. The green arrow is where I bought in at…
Since my purchase, the stock has fluctuated between $1.10 and as high as $1.40. The red lines are roughly the trendlines I’m paying attention to so if things happen the way I expect them to, IVFH should start to travel upward sometime by the end of May. Volatility in these types of stocks puts the risk factor a little higher than I’m comfortable with, but I’m confident it will start back upward soon.
My price target on IVFH is $1.75/share.
Thanks for taking a look!…
So the past couple weeks have been very interesting, to say the least. I had my eye on SZYM, which didn’t materialize so I now have my sights set on IVFH which you can read about here. My target still has not hit on that one, but I am exercising some patience and I’m pretty confident it will hit.
In looking at some other charts and getting ideas from Stocktwits members etc, I have a couple more that have moved up on my watch list. Let’s take a look…
UniPixel Inc (UNXL)
The chart below pretty much explains it all. UNXL seems to be just breaking out of the wedge and may be set to pop. I’m not convinced just yet as there wasn’t a ton of volume conviction on the break, but I do think it’s a relatively low risk entry at this point…
As you can see, UNXL has stayed above the 50 day for the past 6 or so trading days. If I get involved with this stock, my buy will be between $7.50 and $8.00 with a stop just below the 50 day moving average. If it falls below that, we’ll have to see if it revisits the lower trend line for a possible buy there.
Century Aluminum (CENX)
CENX has a very interesting chart and seems to be trading at a really good discount. The chart below shows the longer range, weekly look at the stock price. Here, we can see that CENX is approaching a long term support line, which looks to be in the $10 range…
CENX’s recent price action suggests that it’s found a temporary bottom and may be consolidating. The big question is: What does it do from here? Does it break to the downside to revisit that trend line, or does it reverse and go back into the $20’s?
Below is a chart of the CENX daily view. The green arrows represent areas where the stock price has bounced off the 50dma. If CENX continues it’s decline, it may fall to the trendline and wait for the 50dma to catch up…but that’s a big “if”…
My gut tells me that CENX is not finished declining and will revisit the support line. If it does, I’m a buyer in the $10’s with a stop just below the trend line. I’m going to keep a good watch on this one, but it may take a while for everything to play out. If it reverses higher, I will move on.
Just an FYI, these are pure technical plays and are not meant as long term holds or investments.
Thanks for looking!
So, my watching of SZYM has not exactly gone to plan. Over the past couple weeks I’ve had various buy orders in at/around the lower trend line to try and catch a dip, then bounce. That has not worked as SZYM’s stock price has stayed off the lower trend line and pretty well above the 50 day moving average.
As you can see below in the chart, my buy prices at $2.65, $2.70 etc never got filled. Today’s closing price looks to be at $3.06 per share, which is a pretty good day for the stock….
My feeling now is that the stock is running away from me and my gut says not to chase it. I think this one will run to the $3.55 area, but I just don’t know when…and I just don’t want to be wrong here. So…I’m keeping SZYM on my watch list but right now I think I will be moving on. Congrats to those who got in and good luck! There is always another trade…
I’ve had my eye on IVFH for quite a while now. It’s an OTC stock and is actually the ONLY OTC stock that I’ve ever considered buying. From a fundamental standpoint, they have been growing at a pretty impressive rate over the past year and a half. They’re revenues have grown tremendously YOY and they just recently expanded their operations by acquiring The Fresh Diet.
However, what really caught my eye was the chart, which is shown below. IVFH stock price has fluctuated, relatively regularly, between roughly $1.20 and $1.80. What it looks like to me is that IVFH likes to run to the highs, then slowly decline to the lows over the course of a few months.
But, it only takes a couple weeks for it to get back to the previous highs. Take a look….
The blue arrows indicate the bottoms that seem to happen every few months. Also, look at the trend lines…IVFH’s declines have all been on a pretty predictable 45 degree angle. Toward the right I have a green arrow where I think I will get an opportunity to buy some shares.
I currently have 2 buy orders in for IVFH stock…one at $1.22 and another at $1.20. If this stock follows its previous cycles, I will be looking to sell around the $1.70 area, or higher.
One problem that I might run into is that the stock is pretty illiquid. Some days it only trades less than 20k shares, while other days are double that. I’ll have to be “choosy” as to when and where to sell my shares.
Thanks for taking a look!
In my last post, I talked about what I was seeing in Solazyme (SZYM) and how it was forming a pretty good base. I set a buy on the stock at $2.65, which looked to be right on the bottom of a lower trendline. It has been an exercise in patience here as SZYM has not returned to touch the lower trendline since I set my buy limit. So, I am still not involved with the stock and have no position.
So later in the week, I think it was Thursday, I raised my buy limit to $2.67 as we see the lower trendline moving up. While I still believe SZYM stock is in a basing process and will eventually make a nice move up on some volume, I have to be careful here that I’m not chasing the stock.
In looking at the chart, I will probably need to raise my buy limit again to $2.70 if I want in…
The 50 day is currently at $2.57 so if I do pick up SZYM at the lower trendline, my stop will be just under that 50ma level…say, $2.50-ish.
So that’s just a quick update on SZYM. If I don’t get in, that’s ok but I really don’t want to continue raising my buy limit. If it move up without me, so be it…there are plenty of other stocks out there. My gut tells me that the longer this stock trades in that channel (red lines), the better chance it has to break to the downside. That’s just what I’m thinking…not real sure here and when you aren’t as sure as you should be, there is no need to rush in.
Stay tuned on SZYM…
Other Areas I’m Watching
Below is a daily chart of how I’m seeing the dollar right now. To me, this looks like a normal pullback as it touched the lower trendline and looks like it wants to move higher…
You’ll also notice that it seems to bouncing when it touches the 35 day moving average. It did so in the middle/end of October, middle of December and then again at the end of February. We are at that point once again, so it will be interesting to see if it bounces yet again. My money says it will.
If that happens, that is not good news for precious metals and oil…which are two areas that I always have my eye on. After this week, we should have a clearer picture of what the dollar wants.
Thanks for taking a look!…
As you may know, I frequent the StockTwits message boards on a regular basis. I would even go as far as to say that I am on there TOO often! Most of my time spent there isn’t posting comments, but rather to soak up as much knowledge and information as I possibly can from some of the best and the brightest traders and investors the site has to offer. I don’t have a particularly long list of people I follow as to not clutter my stream, so I do my best to only follow who I consider to be the best and offer the most insight.
For me, StockTwits has truly been an invaluable tool in helping me learn the in’s and out’s about trading stocks.
One of those traders that I follow is Robert Alexander from ChartFreak.com. I’m also a subscriber to his free newsletter, which I would recommend. Just follow the link and sign up if you’re interested. If you are already a StockTwits member and do not follow “Alex”, do yourself a favor and follow him.
Watching Solazyme (SZYM) For Entry
The reason I bring him up is because this week he brought Solazyme (SZYM) stock to my attention and it’s now on my watch list. The chart below is how I’m seeing SZYM…
There looks to be a clearly defined lower trendline (red) in both the price and RSI. In keeping with my theme of only buying low risk entries, my plan is to wait for SZYM to come back and touch the trendline. That should be at roughly $2.65 per share if all goes to plan.
If I do get that buy price, I will set a pretty tight stop just below the 50 day moving average (blue line). Right now that sits at $2.52 per share. Yes, that’s a pretty tight stop but if you notice, SZYM stock has not closed below the 50DMA since the beginning of February.
2 Upside Factors That Caught My Eye
You’ll also notice that SZYM is establishing a nice, relatively tight base and has traded in the $2 to $3 range since November 2014. These bases are ideal because it gives you a good low risk entry and can often lead to explosive upside, which I believe is only a matter of time before it happens. All it will take is a little boost from a positive PR, more insider buying, an upgrade etc.
The other factor that I like is that huge gap between $4.12 and $7 (light blue shaded area). If SZYM can get over that $4 hump, we could be in for a nice ride/gap fill to $7. That would be in a perfect world though, and we all know how that works. Do I think the gap will fill? Yes…most gaps fill and eventually it will. I’m just not sure it will have enough gusto in the near term to get there. We’ll see I guess, but I’m not going to hold my breath.
The fact of the matter is this: if SZYM didn’t have such a nice base and a large gap, I would probably not be involved with the stock. I will give this one some time and if it doesn’t revisit that trendline, I will not buy. If I do, I’ll keep a close watch on that 50 day as support.
If it pops, I will be quick to lock in some gains, but I do not have an exit plan just yet.
I should probably get to work on that 😉 …
Good luck this week…
In my last post, I shared a play on silver that I made in the form of Endeavour Silver Corp (EXK). My purchase was at $1.90 a share, but I’ve since sold that entire position for a very modest loss (just under $1.90). The reason for this is that I simply didn’t like what silver was doing and my gut told me to sell first and ask questions later…which happened to work in my favor as it usually does.
Now, EXK is still on my list because I love the upside as long as I can get in under that $2 mark. EXK has traded in that $1.80 and $1.60 per share range for a week or so now and is looking to be forming a new base.
Take a look at the daily here. It’s starting to look like the $1.65 area is a good low risk entry…
What I also see here is a nice, orderly decline after a run up to begin 2015. Also, if we zoom out a little bit we can see that EXK is a falling wedge, which could be a bullish sign…
Make no mistake though, EXK is still in an overall downtrend since 2011. What I’m looking for here is a run back to the $3.00 or $3.20 area if silver and gold turn upward. But, therein lies the problem…
Keeping an Eye on Silver Price
It’s no secret that precious metals have been a pretty bad investment, overall, in the last few years. But, I’m still watching a long term support level on silver and it seems to be holding up…for now. If this support breaks, with conviction, then all bets are off. But so far, it’s looking ok.
Silver seems to be holding…or at least pausing… around the $15.50 area, which I talked about in my last post. Now what I’m watching is what it wants to do from here. As you can see below, it’s sitting on a long term trendline support. What it does from here will be interesting…
Here’s a closer look at where the price has stopped. It could go sideways here for a week or two…or three, which I think it will. What it does after this “rest stop” will be big. My money says it turns up…
Personally, I like what it’s doing here but there is really no clear sign as to what is going to happen over the next couple of weeks. Will it bounce off long term support?…or will it break lower making silver plays even more unattractive? Time will tell, but I am pretty close to jumping back into EXK.
If I do get back in, my target for a buy would be in the mid $1.60’s with a tight stop probably right around $1.55, maybe a bit lower. It’s going to be on a short leash though, that’s for sure.
I think much of what’s to come here in the precious metal environment has to do with the dollar and it’s recent strength. For any type of strength in gold and silver, the dollar needs to cool off.
I wanted to do a quick update on my current holdings, as well as a new position I started on Friday. Currently, I’m in 2 oil/energy plays…REXX and CRK.
I blindly purchased CRK back in November when it looked relatively cheap, and then the bottom in oil fell out. So, I’m underwater on that stock which I vowed to be the last time I ride a bad stock purchase all the way down. I’ve since revised my approach and refocused on low risk entries and capital preservation. It was a dumb move because I wasn’t patient, and so I’m going to live with it until oil recovers, which could be a while.
I’ve recently established a position in REXX as well at $4.90 average. My max pain on that play is the 50ma which currently sits around $4.30. I will be watching this level, as well as crude oil prices. If crude decides to dump again and breaks below $46/barrel, all bets are off and I’ll take my lumps and move on. As of right now, REXX has been bouncing between $5.10 and $4.40 since the beginning of February and staying above it’s 50ma.
My EXK Purchase
So on Friday I started a position in EXK at $1.90/share. Endeavour Silver Corp reported slightly lower than expected earnings, which wasn’t much of a surprise given the silver and gold price environment we’ve been in over the past year. I was actually happy that they didn’t report good earnings because I’ve been watching the chart since December, patiently waiting for it to get back to the $2.00 area.
Ideally, I’d like to scale into a full position with an average at or under $2.00. Looking at the chart, it’s looking close to oversold and pretty close to bottoming again around the $1.83 area…
EXK is still in a pretty clear downtrend and I think it continues for a little while given the dollar strength.
However, I’m also watching silver prices and looking at the weekly chart, silver is approaching a long term support where I expect a bounce around 15.50/oz….
So, will it bounce or will it break down? If it breaks down, I will be cutting my losses in EXK and getting back on the sidelines waiting for the next low risk entry to present itself.
For EXK, I have a mental stop just below that recent bottom of $1.83. In other words, less than a 10% downside from my purchase at $1.90. I think we see an oversold bounce this week, but we shall see! This play isn’t a day trade. I plan to hold this for weeks or months. It depends on what precious metals and the dollar do over the near term.
Good luck to everyone!
It’s been about 1 year since I started my journey in the Stock Market, and I will be the first to say, it’s not been without it’s ups and downs. It’s also been a while since I’ve updated the blog, so I figured now is as good a time as any to bring you up to speed.
2014 started off pretty well as I made a good amount of money in PLUG and BORN in the first half of the year. I was disciplined, entered the stocks at relatively low risk prices, and had the patience and discipline to stick with these stocks and SELL when I felt that they weren’t acting right. Well, that was about the extent of my “winning” as the 2nd half of the year proved to be pretty disappointing. The good news is, I think I know why I was unsuccessful…
Results From An Undisciplined Approach
I’m not really sure what happened mentally that caused me to be so undisciplined with a number of trades. The only thing I can really think of was that my account was up literally 150% and I thought I had a little “room for error” and got relaxed. Whatever it was, the trade I made in ANV was particularly bad. And the main reason for that is I ignored my mental stops and got away from my rule of capital preservation. Specifically, ANV was a bad trade for me and accounted for a large loss.
Now, I didn’t lose every ounce of discipline during this time of losses. I made 2 trades that, when looking back on them, ended up being good moves despite losing money. My trade in RXII actually made me a small profit, but the reason I exited the trade was because the price action told me to. And, looking at it now, I dodged a big bullet as the stock continued to decline and now sits at half the price I sold it for.
The other trade, CLNT, went against me as they released earnings that the market did not like. I set myself a mental stop at a specific level and when CLNT traded down to it, I immediately sold. No questions asked. Here again, this ended up being a great move and preserved my capital.
Pressing the Reset Button
So here I am, about a year later since I started actively trading, and my account is just about even from where I began. I spent a couple thousand dollars of that money on some home improvement projects, but overall I’m starting 2015 at square one!
I’m not viewing this as a negative though. It’s actually a good thing as I could be in a much, much worse position. I look at this as a year of market education. I paid my tuition with pretty much all of my $19k+ profits from PLUG and BORN, but it was money well spent in my opinion. As an educator working with high school kids for over 14 years, I’m a big believer in learning from experience. You can read all the books you want, on any subject, but until you put these things into practice, you will not truly learn the skill.
This is especially important when trying to play the Stock Market. It requires a solid plan and the discipline to follow that plan. So, over the past couple months I’ve decided to get back to basics, educate myself a bit more, and put this into practice….and REFOCUS…
Discipline and Laser Refocus
To help me get back to basics and disciplined trading, I did some reading. I found a copy of Reminiscences of a Stock Operator (Edwin LeFevre) and read it. It’s a great book and has a number of lessons in it that will ring true no matter what year it is, or what type of market conditions we are in. I highly recommend it if you haven’t read it. You can use google to find a free .pdf of it. 😉
I also picked up a copy of How to Make Money In Stocks (William O’Neil). I’m currently reading that one, but so far I think it is also an essential read. Both of these books I mentioned were recommended by Jesse Stine in his book, Insider Buy Superstocks, which I am currently reading for the 3rd time. Yes, I’m on my 3rd go-around with Jesse’s book! There is so much information in it that for me, who is still relatively new at trading, it needs to be ingrained in my head so that I don’t lose focus again.
These readings have done a couple things for me that are very positive.
1. While reading these books, I’ve decided to step away from the markets so that I don’t make any rushed, bad decisions to buy stocks that I shouldn’t. I’ve forced myself to simply have a “watch list” and as I read the books, I can go back to this watch list and decided whether they are good plays, or not. This has helped me develop a new level of patience and discipline that I have not yet known.
2. These books have some great content and as I read them, I’m trying to take notes of the best parts. In this 3rd read of Insider Buy Superstocks, I’m actually highlighting parts of it in the margins so that I can skim back over the book in the future as a quick refresher! It’s amazing how much of this book I FORGOT, and it’s really helping me to see exactly where I went wrong in EVERY bad trade this year.
Refining My Approach
Overall, I feel rejuvenated and have developed a new passion for the markets. Specifically, I’ve got a new found passion for charts! All the time we hear about people that “have a passion for _____”. Whether that be a passion for the markets, for helping people, or for trading baseball cards…it doesn’t matter. When you truly have a passion for something, you make it your life. The one thing that I’ve found is that when I look at stocks and charts, it’s not a chore…its enjoyable! For me, that is when I do have a passion for the markets.
So, in my next post, I’m going to update you as to what stocks I’m currently in and also my newly refined approached to investing. I’ve come up with a new list of criteria that I believe to be the important factors in investing my hard earned money, and they are a little different than what I previously believed in.
Also, I’ve updated My Watchlist if you are interested.
Thanks for reading, and here’s to a profitable 2015!…
Wednesday was a pretty interesting day to say the least, so I figured this would be a good time to post a stock update. As you may or may no know, I’ve been in RXi Pharmaceuticals (RXII) since this past April. A couple weeks ago, I doubled my position and averaged down to a $2.97 pps.
I did this with high hopes in mind and looking ahead to RXi’s release of preliminary phase 2 data on their RXI-109 anti-scarring drug, which looked to be VERY positive judging by a number of factors! Well, long story short, RXi presented at the Rodam and Renshaw Conference and the results were less than stellar…at least, that’s how the stock market perceived them!
A huge selloff incurred right after the data slides were presented and the stock took a nosedive from around $3.50/share and settled right around the $2.50 area, where it’s spend the majority of the past 3 months. I believe it was even halted for a few minutes because of so many people trying to find the exit! Luckily I jumped ship a prior to that mess.
3 Areas Of Personal Growth & Improvement
That’s pretty much what happened, in a nutshell, to my RXII investment play. It definitely didn’t go as planned, but didn’t end as badly as it could have much thanks to my averaging down, which I’ll get to in a moment…
I’m using this RXi debacle as a learning experience and I’ve identified 3 areas that I’ve noticed improvement in myself. Below I will get to those…
Overly Bullish Sentiment Usually Ends Badly
That’s about all I keep thinking right now. In the past couple weeks leading up to Wednesday, the RXi Stocktwits board was overwhelmingly bullish. So much so, that over the past couple days I kept telling myself that “this is not good”. However, I bought in, stayed the course and remained long as I believed in the management and science. Luckily I had averaged down prior to the run up over $3, otherwise I would be a bag holder once again. By the time everything was said and done, I “escaped” with an $800 profit on my RXII investment, and I’m happy about that. It could’ve been much, much worse.
Needless to say, this was yet another valuable learning experience. When setiment on a stock or sector gets to that “we can’t lose…we’re all going to be rich…pat myself on the back” level, there is a very good chance it’s not going to go as you expect.
That being said, I still like RXII. I still believe in the science and the results of the study were actually pretty good! Despite the lack of PR, I do still think the management team is top notch. If I get back into the stock, I will wait until it calms down and bases for a while. Last time I checked they still had no debt!
It’s coming up on a year now since I started being more active in my trading, and I have to say I’ve learned some hard lessons. The cost of this “real world education” in the stock market is turning out to be much more expensive than any class I’ve taken in college or grad school! To be honest, I feel lucky to still be up 50% in my portfolio after taking some of the losses that I have.
However, I’m getting much better at capital preservation, indentifying low risk entries, controlling my emotions etc. With that in mind, here’s what I’ve learned as it relates to a few very important points…
1. Low Risk Entry (LRE) – The way in which I invest, it’s all about identifying a low risk entry to a stock. It really doesn’t matter if you are a day trader, swing or momentum trader, or long term investor. If you can’t find the patience and discipline to WAIT for a low risk entry to present itself, you are at a disadvantage and putting your capital more at risk than you otherwise would. I’m still working on this aspect, but I’m getting better.
The proof is in RXII and CLNT, which I sold recently. I gave CLNT around a 10% downside risk from my entry at $5.55 and as soon as it hit the $5.20 mark, I was ready to sell and did! After that it continued lower into the high $4’s and I was happy to take the small loss and move on after the earnings weren’t as good as the market expected.
RXII was a little different. I originally entered at $3.50 and then watched it slowly bleed down to the $2.50 area where it seemed to have bottomed. I more than doubled my shares there, averaged down to $2.97/share and then watched it climb over the break even point. Had I not identified the LRE at the $2.50 point, I would be underwater and still holding RXII. I’m disappointed by Wednesday’s action obviously, but happy that I didn’t get too emotionally involved in the stock. You have to always be ready to part ways!
2. Capital Preservation – For me, capital preservation is the 2nd most important thing I’ve learned in the past 10 months next to finding LRE’s. As I’ve said, you have to be ready to sell and preserve your capital if the stock’s price action isn’t going the way you had envisioned…even if it’s at a loss.
If you find your LRE to a stock the right way, this shouldn’t be a problem as your sell point should be clearly defined. Don’t deviate from that mental stop! I have, and everytime I did I regretted not selling for a small loss and moving on.
Remember, preserving your capital allows you to fight another day. It’s ok to be wrong (everyone is from time to time), but it’s not ok to STAY wrong!
3. Accepting loss – The third most important thing I’ve learned is to accept loss (failure) and move on. In the past two stocks (RXII and CLNT) I was able to detatch myself from what I wanted and hoped the stocks would do, and sell. No one ever wants to take a loss on a stock, but I think it’s much more difficult to admit to yourself that you were wrong and start from scratch with another stock.
I’m finding this to be much easier the more I’m able to do it. Honestly, I hope I never have to dump a stock and move on before I want to, but I’m realistic enough know that it’s going to happen.
Well, right now I have a good chunk of cash burning a whole in my investment account, so I am currently on the search for a nice Low Risk Entry. I have to remind myself not to be too quick and exercise some patience.
As of today, nothing is jumping off the screen at me but I do have my eye on the Commodities sector…specifically WEAT (Teucrium Wheat Fund ETF). 😉
As always, thank you for reading! If you have questions or comments, please feel free to post them below! Until next time…