The Stock Market

[DarterBlue]

Analysis of a bad trade: Trading for a living or even in pursuit of a serious avocation, involves being wrong a disquieting percent of the time. Those that cannot deal with the impact losses have on the ego, should not trade. For it will surely lead to frustration and unhappiness. For those that can, losses should be seen as a learning experience, with the actual loss viewed as tuition paid in pursuit of enhanced skills. With that said, below is a look at my LUV trade which resulted in losses of over $7k, or some 15% of the funds committed to the trade.

The purchase of LUV was not a typical DarterBlue trade. Normally, being a trend follower, I tend to purchase strength. What does that mean? It means literally what it implies. I usually buy stocks that are outperforming the market indices when I choose to go long. Clearly, LUV did not fit that criterion, as it was a part of the beaten down leisure and travel group. What, then, led me to purchase LUV? Norman Fosbak in his book Stock Market Logic observed back in the 1970s that coming out of deep bear markets, very often the best performers were the most beaten down issues, those that had lost the most ground in the bear market. I confirmed this observation coming out of the severe 2008/2009 bear market. So, given how badly the airlines had been beaten up I took a chance with LUV, which I know to be a well managed company. What went wrong? While the steepness of the recent bear market was unprecedented, its duration was equally unprecedented. For, assuming it is over, it would represent the shortest bear market I have ever seen. Fosback's observation and my subsequent confirmation, occurred coming out of much longer bear markets. The time element in those bear markets allowed for the actual effects on different stocks in different industries, to be fully manifested. In this very short bear market, this was clearly not the case. I sold LUV at prices ranging from 28.39 to 29.12. These were not the best prices I could have obtained. I could have gotten in the high 29 price range before the end of the day that I sold out the position and in the subsequent two days, I could have gotten over 32. However, LUV then fell apart and proceeded to trade in the 24 range at new lows for the cycle. So, on balance, I did the right thing getting out even though the exit was sloppy. Also, by getting out, it freed up cash to buy ZM, which, so far, has performed well. 

What lessons did I learn? In short bear markets, given my trading style, it is not good strategy to bottom fish. When exiting a losing trade, depending on the overall market action, it may pay to exercise a bit more patience in executing the exit. 

I could have made a deeper analysis of the above trade; however, I have declined to do so to get the major point across.  

[DarterBlue]

Increasing my exposure: Last week, I mentioned I had MSFT (Microsoft) on my radar. Well, I still like it; however, I have decided to go with a higher beta stock instead. Why? Because I honestly think this rally will run out of steam within the next 60 days. Therefore, I want to give myself a shot at making maximum profits in this relatively short time period. So, instead of buying MSFT, I have turned my attention to TTD (The Trade Desk). This is a much smaller company, with a much greater relative valuation (richly priced) and much higher beta and, I think, alpha, too. I am not going to chase this one, as the market ran up quickly last week. But if I can get it within 2% of Friday's close, I will buy it tomorrow. I expect to buy 175 shares only, as the stock trades over $300 per share. This stock is very volatile (high beta) and is not for the faint of heart or those that cannot afford to take risk. 

[DarterBlue]

13 hours ago, DarterBlue said:

Increasing my exposure: Last week, I mentioned I had MSFT (Microsoft) on my radar. Well, I still like it; however, I have decided to go with a higher beta stock instead. Why? Because I honestly think this rally will run out of steam within the next 60 days. Therefore, I want to give myself a shot at making maximum profits in this relatively short time period. So, instead of buying MSFT, I have turned my attention to TTD (The Trade Desk). This is a much smaller company, with a much greater relative valuation (richly priced) and much higher beta and, I think, alpha, too. I am not going to chase this one, as the market ran up quickly last week. But if I can get it within 2% of Friday's close, I will buy it tomorrow. I expect to buy 175 shares only, as the stock trades over $300 per share. This stock is very volatile (high beta) and is not for the faint of heart or those that cannot afford to take risk. 

I purchased 173 shares of TTD at an average price of $306.96. In uptrending markets, it is best to take advantage of weakness. 

[imaGoodBoyNow]

@DarterBlue what is this? And why did it happen 

 

 

We’re writing to inform you of a recent corporate action that has affected your account.

On May 11th, Aurora Cannabis (ACB) performed a 1 for 12 reverse split. This means that shareholders will receive 1 share for every 12 shares they held in their account on the effective split date, May 11th. Any fractional shares resulting from the split were rounded down if they resulted in less than 0.5 shares.

[DarterBlue]

10 minutes ago, imaGoodBoyNow said:

@DarterBlue what is this? And why did it happen 

 

 

We’re writing to inform you of a recent corporate action that has affected your account.

On May 11th, Aurora Cannabis (ACB) performed a 1 for 12 reverse split. This means that shareholders will receive 1 share for every 12 shares they held in their account on the effective split date, May 11th. Any fractional shares resulting from the split were rounded down if they resulted in less than 0.5 shares.

So, if you still own the stock, you are going to lose your old shares which will be replaced with new shares. in a ratio of 1 for 12. For example, if you owned 36 shares of the old stock, you will get 36/12 = 3 shares of the new stock. Also, they may end up screwing you as in the the number of shares you own are not perfectly divisible by 12, any fractional shares that are less than a 1/2 share will magically disappear.

Reverse stock splits are a desperate move by companies whose stock has been beaten down, to attract investors. Many institutions can't buy penny stocks (prohibited by their operating rules). By doing the reverse stock split, the hope is that the new stock will trade at 12X the old stock price. 

Reverse splits usually don't work out well for either investors or the companies that do them.

Hope that helped. 

[Troll]

9 minutes ago, imaGoodBoyNow said:

@DarterBlue what is this? And why did it happen 

 

 

We’re writing to inform you of a recent corporate action that has affected your account.

On May 11th, Aurora Cannabis (ACB) performed a 1 for 12 reverse split. This means that shareholders will receive 1 share for every 12 shares they held in their account on the effective split date, May 11th. Any fractional shares resulting from the split were rounded down if they resulted in less than 0.5 shares.

That's what they do usually when the price drops so low they risk being junk....

....as in 'not generally' good news for you.

but  have not been following your stock.

means for every 12 shares you own, after that date, you only own 1........theoretically if your 12 shares were worth $1 each then 'supposedly your new 1 share should be worth $12'........

as most don't see it that way, as it's usually a sign of trouble.

[imaGoodBoyNow]

8 minutes ago, DarterBlue said:

So, if you still own the stock, you are going to lose your old shares which will be replaced with new shares. in a ratio of 1 for 12. For example, if you owned 36 shares of the old stock, you will get 36/12 = 3 shares of the new stock. Also, they may end up screwing you as in the the number of shares you own are not perfectly divisible by 12, any fractional shares that are less than a 1/2 share will magically disappear.

Reverse stock splits are a desperate move by companies whose stock has been beaten down, to attract investors. Many institutions can't buy penny stocks (prohibited by their operating rules). By doing the reverse stock split, the hope is that the new stock will trade at 12X the old stock price. 

Reverse splits usually don't work out well for either investors or the companies that do them.

Hope that helped. 

Well shit Darter, why didn’t you warn me not to buy penny stocks 

[DarterBlue]

19 minutes ago, imaGoodBoyNow said:

Well shit Darter, why didn’t you warn me not to buy penny stocks 

The above is clearly fake news!!🤣

[BUFORDGAWOLVES]

19 minutes ago, imaGoodBoyNow said:

Well shit Darter, why didn’t you warn me not to buy penny stocks 

Darter did warn you.... I take it you were being sarcastic. 
 

Lol. 
 

bgw

[imaGoodBoyNow]

15 minutes ago, BUFORDGAWOLVES said:

Darter did warn you.... I take it you were being sarcastic. 
 

Lol. 
 

bgw

Atleast 15 times lol

[BUFORDGAWOLVES]

1 minute ago, imaGoodBoyNow said:

Atleast 15 times lol

Well, you won’t forget this “little” bump in the road. 
 

bgw

[DarterBlue]

3 minutes ago, imaGoodBoyNow said:

Atleast 15 times lol

Market mistakes should be viewed as tuition. If you pay tuition to go to college you not only want to get the degree or certificate, but also to gain some knowledge you can use later. View things like this as paying tuition and make sure the lesson is taken!

[imaGoodBoyNow]

3 hours ago, DarterBlue said:

Market mistakes should be viewed as tuition. If you pay tuition to go to college you not only want to get the degree or certificate, but also to gain some knowledge you can use later. View things like this as paying tuition and make sure the lesson is taken!

I know you advise against Nabors industry . I sold all my stocks with them at noon today for a nice $100 profit off $320 3 week investment  ,

I jumped the gun selling it at Lunch cause todays gains doubled by 4 pm,, 

 

my question is do you see the stock getting back to $150  where it was in January... it was at $9 last month so it nearly doubled in April May

 

 

 

 

 

[DarterBlue]

Stocks closed mixed on mixed volume. NYSE volume rose while NASDAQ volume declined slightly. The volume pattern was the opposite of ideal as the NASDAQ was the best performing of the two exchanges. On the day, the range was from a loss of .76% on the MID Cap index to a gain of .85% on the NASDAQ 100. Big cap technology stocks were the big winners. Losing stocks led 19-10 and 18-15 on the NYSE and NASDAQ. Coming off a big up week for the indices, the day, while on balance negative, was understandable. And leadership remained intact. So, as of now, I remain firmly in the bullish camp, at least for the short to intermediate term.

 Today, I purchased 173 shares of TTD at a price of $306.95. TTD and JD, which gave up early gains, were my two losers. However, a big gain in ZM and a decent gain in COST more than offset the two losers. TEAM remained positive, also, despite giving back the majority of its gains on the day. As a result, I outperformed the averages being up over 1% on total trading capital that is now only 60% deployed. The purchase of TTD was sloppy. My limit order was placed about 1.5% below Friday’s close. At the time, the stock was trading in the premarket just below breakeven. So, I was comfortable with the order. Unfortunately, the stock was downgraded by a brokerage firm shortly after I placed the order. I was unaware of this, and thus got filled at the open, albeit at a price over 1% lower than the limit order. The lesson to be learned here is that limits should be placed after the open, not before, unless there is a situation where I am going to be tied up (for example a face to face meeting). Anyway, despite the inauspicious start, I have high hopes for TTD which exhibits strong accumulation and a powerful chart pattern. With that said, as a technician, this could change in days, so, I will monitor it carefully, as I do with all my purchases. With the purchase of TTD, I have probably completed my buying for this cycle. The only event that would induce me to go all-in is a clear and compelling signal that we truly are in a new bull market.

[DarterBlue]

50 minutes ago, imaGoodBoyNow said:

my question is do you see the stock getting back to $150  where it was in January... it was at $9 last month so it nearly doubled in April May

For Nabors to get back to its January prices, the price of Oil and will need to get back to the $40s or higher per barrel. If this happened, it means that the economy would be well on the road to recovery leading to the excess supply being worked off. Can this happen? Sure it can. When you analyze markets, you need to be aware that any eventually is possible. Is it likely that oil gets back above $40 and holds there or works higher? I am sure eventually it will, but I don't see this happening in the next few months. For that reason, I would be careful about owning any oil patch holdings. Short term trade, perhaps. Longer term trade or investment? I think there are better opportunities out there. 

[imaGoodBoyNow]

 

Going incognito this morning, about to dig up some insider information 

 

 

[DarterBlue]

24 minutes ago, imaGoodBoyNow said:

 

Going incognito this morning, about to dig up some insider information 

 

 

You doing work there, today? It meets the price criteria, it's not a penny stock at all. For me, from a technical standpoint, it seems to be in the process of making a bottom, but has some work to do. 

[imaGoodBoyNow]

4 minutes ago, DarterBlue said:

You doing work there, today? It meets the price criteria, it's not a penny stock at all. For me, from a technical standpoint, it seems to be in the process of making a bottom, but has some work to do. 

Ya it’s some million square foot Labs , that creates GPS for all of our military equipment...their knocking down all their old rooms so they can open it up more because of covid

[DarterBlue]

9 minutes ago, imaGoodBoyNow said:

Ya it’s some million square foot Labs , that creates GPS for all of our military equipment...their knocking down all their old rooms so they can open it up more because of covid

Makes sense; make sure you get the inside info. They are one of our bigger military contractors. 

[Horsefly]

5 hours ago, imaGoodBoyNow said:

 

Going incognito this morning, about to dig up some insider information 

 

 

They’re big time!  They hold a lot of the Air Force aircraft maintenance contracts and upgrades 

[DarterBlue]

20 minutes ago, Horsefly said:

They’re big time!  They hold a lot of the Air Force aircraft maintenance contracts and upgrades 

Yeah, these are the kind of stocks he needs to trade if he wants to make money. Big and liquid. 

[DarterBlue]

Today was a bad day. There is no getting around it. In fact, it was worse than the actual percentage losses put up by the averages. Why? The market suffered a negative reversal day. In fact, it was a double reversal as the averages opened up, quickly turned negative, only to reverse higher late morning. And then, at about 1pm, the averages drifted into a downward trend that accelerated in the final hour of trading. Indeed, in the final half an hour, there seemed to be not a single firm bid out there. Volume accelerated as the selloff picked up steam and was higher on both exchanges. At the close, the range of losses was from 1.89% on the DOW & NYA to north of 3.5% on the Mid Cap index. The nature of the day’s action indicates that the selling did not exhaust itself. As such, I would not be surprised if the selling continues tomorrow, or if we get a bounce back, it returns on Thursday. So, is this the end of the Corona market rally? I don’t think so. However, depending on the severity of any further selling, my current opinion may easily be revised. Let’s just say that I hated today’s action.

On the day, my portfolio of: TEAM, COST, JD, ZM and TTD behaved erratically. Interestingly enough, within minutes of the open, it was down over $2k. However, by the lunch hour, it was up over $5k and seemed to be cruising along as TTD was having a great day with JD and TEAM playing great supporting roles. Well, as one would expect, during the final hour, it went negative again. However, the losses only amounted to $2.2k, which, given the losses in the averages, and the higher than average volatility of the group, was indicative of overall strength. ZM and COST had bad individual days. But in ZM’s case you could even use the excuse (I won’t) that it was just giving back a portion of yesterday’s big gains. As I stated yesterday, I have no intention of adding to my long expose for this cycle unless I get compelling evidence that we are in a new bull market. Well, given the nature of today’s selloff, I must now consider the possibility of getting flat or even reversing course and going short, if the market proceeds to roll over. In this sense, the next two trading days are very important ones for me. 
 

[DarterBlue]

Stocks had their second consecutive bad day. All major indices lost significant ground on higher volume. At the close the losses ranged from 1.23% on the NASDAQ 100 to 3.37% on the Mid Cap index. With a half hour to go, the losses were quite a bit more severe. However, unlike yesterday, when the averages sold off into the close, stocks of all stripes bounced off their lows. The bounce represents a mild respite and can be seen as a hint that the selling may be getting to the exhaustion stage. However, there is little doubt that a lot of damage has been done to the current rally the past two days. Losing stocks swamped winners 8.5-1 on the NYSE and 3.5-1 on the NASDAQ. As a result of the two day hammering, the McClellan Oscillator, which is a measure of overbought/oversold conditions in the market has moved from moderately overbought last week, to significantly oversold as of today’s close. It is not at extreme levels yet, though. So we could have further weakness on the agenda the rest of this week. How do I view the past two days? I am now very concerned. This morning the Fed Chair Jerome Powell gave a speech in which he stated that the Fed will continue to use its full arsenal excluding negative interest rates to support the market’s liquidity. He further stated that his tools may not be sufficient and likely further fiscal stimulus may be needed. The big money crowd did not seem to like his blunt assessment. Hence, the market selloff. Funnily enough, my read on his speech was bullish. But what do I know? I am just a poor, ignorant third world type. So there is that.

 On a personal note, I again lost money but enjoyed the pyrrhic victory of being down only $0.5K on the day. TTD had a horrible day, but ZM had a very good day, offsetting most of the TTD losses. Likewise, JD and COST largely offset each other (JD up over a percent, COST down just under a percent). Finally, for the second day in a row, TEAM hardly budged. My overall market view has shifted from being very bullish to being on the brink of getting a sell signal. If we cannot draw a line in the sand over the next two trading days, I could exit the market tomorrow or Friday if either day is a repeat of today. When I got my buy signal on April 6, it was a strong one. Such strong signals are usually indicative of a strong three months or more ahead. Well, we have had strong gains. However, it could be that they have been compressed into half the time I had expected. I don’t intend to give them all back.

[DarterBlue]

Rally on the Brink: The very powerful stock market rally off the late March lows is now on the brink of failure. The recent selloff is the first since the market bottomed that seriously threatens it. And it comes at a time when I am over 60% invested; therefore, it is imperative that I take necessary precaution if it proves to be the real deal. What kind of action would warrant going to the sideline or shorting the market? Should the market have another sharp selloff today or tomorrow (Thursday or Friday), it would be a clear sign that the current rally has probably run out of steam. Another sell signal would be derived if the market sold off after a rally attempt today or tomorrow. Such a selloff would not have to end in negative territory. If the market had a strong day early (up 1% or more) and then gave back the great majority of those gains, I would view such stalling action as a sign of weakness that will likely lead to further bouts of strong selling. 

From the get go, I have been suspicious of the current strong rally. The chief problem I have had with it is the economic and social backdrop. While I fully get the fact that the Fed has essentially provided a guarantee that it will do everything in its power to ensure that large investors are protected (a flagrant violation of textbook capitalism, I may add), I have felt from the very beginning that such Fed action may not be sufficient, given the magnitude of the problem being faced. This is not December 2018, where the selloff then was largely due to Fed tightening. This time, the bear market was caused by fear triggered by the rapid spread of a currently incurable disease, coupled with what I consider to be necessary governmental action to prevent the spread. This kind of exogenous catalyst calls for bold, creative fiscal action in addition to the Fed's monetary mechanisms. What has been done so far does not meet that criteria due to both the state of Federal debt and prevailing ideology. As such despite the very strong technical action which led me to venture in on the long side, I suspected from the beginning that we probably had not seen the end of the Corona bear market. 

Comparison of the current market action to various other periods in market history, leads me to conclude that the situation today is somewhat akin to what prevailed in the summer of 2000. Back then, the market rallied after the initial busting of the "Dotcom Bubble," with the NASDAQ 100 briefly approaching its March 2000 highs as several of its then stalwarts (Oracle, Cisco, Lucent, Sun Microsystems, etc.) rallied mightily.  Then the bottom fell out ... I don't think I need to remind anyone over 40 what happened after that. I view the current market as treading on similar shaky ground. 

[DarterBlue]

I got Flat: Today, between 10:45 and 11:04 EST, I liquidated all my long positions. My net profits on the sales amounted to $27,045. Subtracting the losses on LUV realized earlier on, the net profits from re-entering the market on April 7, 2020 amounted to $19,481.68. Could I have made a mistake? Of course. Do I regret getting flat? Absolutely not. If I am wrong, I can always reset and get long again. If I am right, I will have just saved myself the frustration of seeing, at its peak, approximately $26,000 of net profits evaporate before my eyes in a matter of days. Trading is about assessing the relative risks versus the rewards. To do this effectively, you must at all times adhere to your discipline. You cannot entertain the fantasies of your mind. Realizing that you are unable to make reality conform to desires is the key to long term success. 

I will evaluate where the markets are at day's end and decide whether I should stay on the sidelines, go short, or consider reentering the market over the next few trading days.