Overtrading Is Bad, Smart Trading Is Good

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TIM $14,395 (up $173 on the day)
Covered 500 NG @ $8.45 ($115 Loss)
Shorted 1,000 CBAK @ 5.64, Covered @5.40 ($220 Gain)
Shorted 200 CSUN @17.22, Sole Overnight Holding ($40ish Gain So Far)

Today I traded quite a bit, but they were all good trades. Good trading vs. bad trading, it makes all the difference in the world. Yesterday was bad and I lost $, today was good and I won $. It was good to cover (NYSE:NG) right at the open because it showed strength, so I was obviously wrong. Even though it faded nicely in the afternoon and as it turns out, I covered near the day’s highs, I cut my losses quickly and moved on. TIM Lesson: Make your price predictions, if you’re wrong, cut your losses quickly, don’t pout or double up, just move on.

I can’t predict morning strength to be followed by afternoon weakness, for all I knew, it could’ve been morning strength followed by afternoon strength. Last time a stock followed this pattern, it was Jambe Juice (Nasdaq: JMBA) and I got out on the morning strength, again, wrong since the stock later dropped 20%. Sure, it stung, but the beauty of this pattern is that even when you’re wrong, losses aren’t so bad and, more importantly, once you’re over the $25k hump, you can re-enter and day trade freely when the pattern starts looking perfect again.

Within minutes of taking my loss and watching my account lose all of December’s gains – putting me at a dismal $14,135 – I saw (Nasdaq: CBAK) dropping quickly. I’d wanted to short it at the market close yesterday, but was weary of any morning spike. Right on target, it spiked and then dropped near yesterday’s low of $5.50. This is called a gap and trap because all the people who bought on the morning spike, hoping for a big run were now trapped and they were selling quickly. At $5.60, I had 2 choices, wait for the $5.50 crack or short immediately and take my chances that $5.50 would indeed crack. Since the stock was up from $4 just one day before on no news, I decided to be aggressive and short immediately, I got 1,000 shares at $5.64. It hung around there for a bit, but when the bid was $5.50, sellers rushed in and it cracked wide open down to $5.35. I thought it’d crack further so I held, but when it showed some strength I said screw it and covered at $5.40, for a quick $220. The trade lasted 10 minutes. Sure, the stock went lower to $5.25, but later spiked past $6, so, in the grand scheme of things, my exit price wasn’t so bad and was worth a day trade. These China/solar plays are slippery suckers (as evidenced by CTDC’s late day runup yesterday and today, both of which ultimately failed).

All that early trading made me forget about (OTC BB: TWRT) – a perfect breakout play. Very low volume, but my 200 shares wouldn’t have mattered much and it’s up $1.50 on the day. Oh Well, feast your eyes on their chart, it’s perfect.

In the early afternoon, I had an hour long interview on Blogtalkradio about transparency (or the lack thereof) in the finance industry. Check it out here.

After doing two more interviews, it was already the late afternoon and I was thankful as these interviews forced me to be disciplined and wait until the market close to trade. I had two main stocks I was watching (Nasdaq: CSUN) and (Nasdaq: OPTT). Both were 2-day runners and I had hoped they could squeeze shorts (as often happens on Fridays), but they could not. They were both only down 50 cents or so on the day, but I knew they could fade into the close and gap down nicely on Monday.

Thinkorswim had borrows available on both, but I favored CSUN because it’s more liquid and volatile. So, I watched as it tanked another 50 cents with 15 minutes before the close, but I stayed on the sidelines, scared of any bounce, which was basically a given since shorts like to close their positions before the weekend. I was right. It bounced 40 cents and I shorted 200 shares at $17.22. A close at $17 and after-hours trades in the $16.80 range bodes well for Monday morning, but I wouldn’t be surprised to see strength (just as fellow solar and 2-big-up-day, 1^st-down-day chart pattern play SOLF surprised a few people this morning), so I’ll be quick on my exit, hurting my chances at holding through any break below $16.35 (the low for the past 2 days) aka the thrill of being a part of a stock that cracks through support, which may or may not encourage a further break of $16 and the ultimate thrill of being short if it goes to $15.50 or worse during the morning session.

I’ll leave you with my latest AOL Video.

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