Why Clovis Oncology Stock Plunge Didn’t Hurt Me, Did It You?

Clovis Oncology stock dropped -7% on Friday but I only took a very small loss in the trade, did you?

You need to understand the Internet and what goes on with stock trades to protect yourself. First, I’ll show you why I was protected from larger traders targeting my position.

Take a look at this chart. Where do you think I set a mental stop?

Clovis Oncology stock

If you guessed here then you got it right:

us-economy clvs 2 1100x585 - Why Clovis Oncology Stock Plunge Didn't Hurt Me, Did It You?

You have to understand that large players as well as institutional traders monitor social network sites as well as non-protected and open free stock trading blogs like GuerillaStockTrading.com

There is a war going on beneath the surface that you may never see. I win that war more than I lose. What I’ll do is that I’ll often post stocks that have institutional trader accumulation and then I’ll watch larger players target a stock I blog about and then I joyfully watch them get crushed and stopped out for a loss. About 60% of the time that happens. Approximately 40% of the time that doesn’t happen. For the times that doesn’t happen, your stop loss will save you.

I’m under no illusion that all visitors on my website are here to go long my stock picks. I assume as much as 40% of my web visitors will attempt to short my picks. Many webmasters have put their stock picks behind a password protected site for just this reason. I don’t because I enjoy sticking it to short sellers most of the time.

My favorite tactic is to post about a stock I like but hold back a key chart or SEC filing that shows an institutional trader heavily accumulating the stock. I put forth a weaker case for why I think a stock is a good swing long entry. I watch the 1 minute chart for the usual short selling I see right after posting a stock pick. Then BAM! In comes a wave of buying and the short seller covers which pushes my stock up even higher, often on a gap up open and I sell and take the short sellers money.

There’s a constant battle going on of me beating short sellers and short sellers sometimes beating me. It goes on below the surface of every trade I post on GuerillaStockTrading.com It happens on every website that posts about stocks including mainstream financial media websites. You have to know and understand this and protect yourself with a clearly definable stop loss level. I did a lesson on setting a stop loss here. Try not to set a physical stop loss order on a trade (always set a mental stop loss order and then market order it when the level is hit) and never enter a long position the night before so that your order is filled automatically at market open the next day. Always move quickly with guaranteed time execution and a market order so that institutional traders and market makers with special access to unfilled orders can’t game your moves.

If a stock does a gap up open in your favor, sell immediately and book those profits.

These are a few trading pointers that you should already know and be doing. Remember, it’s dog eat dog. You are attempting to take money from someone who has no intention of giving you their money. They are attempting to reach into your trading account and take money from you. Hope for the best but always prepare for the worst.

Following these pointers will help you avoid big losses in trades like CLVS when they go against you.

Am I going to play the bounce in CLVS? No. There’s too many other juicy swing long trade setups elsewhere right now but that doesn’t mean you shouldn’t.

How Nasdaq Technical Analysis Stopped Me From Losing Money

Everyone is doing Nasdaq technical analysis in order to decide if it’s a good time to short this market. The technicals show that it is too early to short this market.

Nasdaq Technical Analysis

Look at the beautiful hammer right off the support line I drew and talked about in Saturday’s show. I talk more about the Nasdaq 100 in tonight’s video embedded below.

Back when I first started trading years ago, I would have shorted the Nasdaq today but experience has taught me to be patient and wait for key support levels to be broken before blindly gambling on market direction. Don’t get me wrong, blind gambling works sometimes. The market could sell-off from here but you would still be wrong in your decision to short. Be patient. There will be plenty of time to short the market if it goes into a strong downtrend.

Question On Dividend Paying Income Fund

Albert writes, “Hi Lance; you had another great show tonight. A couple of questions if you don’t mind. First is, I read on your website that you think STM might be a good long term trade. Aside from margin issues (if one doesn’t buy on margin), do you think it’s still a good long-term stock even though it jumped up 17% on bad earnings?

Second, you said you temporarily jumped into a dividend paying income fund. I take it those still have downside risks? And if interest rates start to rise those type of funds would not be good to stay in? Thanks.”

Hi, Albert. I think STM is a good long term hold for several years but watch out for share dilution and stick with a stop loss.

You are correct about dividends and rising rates, so you want to stay away from bond income funds IMO. I like a dividend player that would
invest in something like small businesses with significant growth potential. The growth of small businesses can outpace the growth of inflation and rate hikes. The danger is if rate hikes negatively impact the economy, aren’t small businesses the most susceptible and likely to crash? Yes, but what do we know about this rising rates environment? Rates will be raised unbelievably slow (think Fed dot plot) so even moderate growth from small businesses will easily outpace the rate hikes.

Dividends also keep a lot of short sellers out of the stock because if anyone is short the stock, they must pay the dividend (as opposed to collecting the dividend if long the stock).

A really good website to research dividends is https://www.dividend.com

There’s a Halloween special sign up right now where you get 20% off for a one year Premium membership.

After you sign up, go to the monthly dividend payers section.

You can research high-income monthly dividend stocks. There’s energy, gold, silver, and so on. My preference is something that can outpace coming inflation and hence tied to the growth of small businesses.

I will be talking more about my favorite dividend stock next week.

Thanks Albert for your kind words about the show. Your kind words mean so much.

Great Panther Silver Exploding Twiggs Money Flow

Holy Miss Moly! Great Panther Silver ripped higher today on heavy volume at 1.62 million shares. The Twiggs Money Flow has exploded higher.

Great Panther Silver broke above its 50-day moving average today and all its speed lines. The next resistance is the 150-day moving average at $1.42. If we get a break above $1.42 tomorrow, we’re going to $1.50, and if $1.50 is broke, it’s all the way back up to $1.60.

Zacks is pumping GPL hard on Yahoo Finance with this article on October 19, 2016 entitled Why Great Panther Could Shock the Market Soon. Zacks hit the pump hard again today, October 25, 2016, with this article entitled 5 Top-Ranked Stocks with Rising P/E for Blowout Gains.

The short interest in GPL is starting to unwind. Previous short interest was 2,847,000 shares. The most recent short interest is 2,688,300 or a -6% decrease in the short interest in GPL. Only 1.64% of the float is short with days to cover of 2.8. While I’m not suggesting a big upward move from a short squeeze, more short sellers are covering their positions in the $1.40 area than are taking new short positions.

GPL is set to announce earnings on November 2, 2016. We will have to see if GPL runs up ahead of earnings.

Disclosure: I will be taking a long position in GPL at market open on October 26, 2016.

Regeneron Pharmaceuticals Short Update

Satoshi writes, “I’m short on REGN because I think it’s oversold. Could you give me any tips of how to confirm this or if it’s also in a downtrend that could go Lower? Earnings are due on the 4th, and I want to get out before they release, but I’m expecting it to pick up in the next few weeks. What are your thoughts?”

Regeneron Pharmaceuticals is on track to hit $4.65 billion in sales this year. The annual revenue growth for the last five years has come in at a hot 55%.

Short interest in REGN is falling. Short interest in REGN was 3,851,900 but now is 3,800,300, a decrease of -1%. Not a huge drop in short interest but something you should know. On the whole, more traders are buying to cover their short positions at this level than are taking new short positions.

The strong metrics tell me that you’re shorting Regeneron not because you fundamentally believe the company is going to go out of business but instead because of temporary fundamental weakness and technical analysis of the chart.

The Symmetrical Triangle break down, and then a break below the 150 day moving average (white line) was the place to enter the short trade. Target level 1 has been hit and short sellers are taking profits as evidenced by the reduction in the short interest. These traders are the ones that got in the short early on the Symmetrical Triangle break down and confirmation break of the 150 day moving average line.

The Twiggs Money Flow suggests that REGN could go lower to Target level 2. Further, if we draw a vertical line (orange vertical line) and measure the distance at the mouth of the triangle, then extend that distance past the Symmetrical Triangle break down, we see a target of 290 on REGN.

Personally, I would take profits ASAP depending how much I was up in the trade, especially with the earnings report coming up. In a sidelines rated market, it’s too dangerous getting greedy. I played the AT&T and Time Warner merger news on Friday, and two IPOs over the last 3 weeks. In all cases, not being greedy and taking a 2% to 5% profit immediately after going long, usually within 15 minutes, saved me from taking huge losses. In my opinion, trying to time tops and bottoms is much too risky. Instead, I like to scalp the trade by getting in and out quickly and walking away with a couple hundred dollars on the trade. I’m a small little fish in a sea of sharks and so I want to just nibble and take a quick bite somewhere between the top and bottom of the swing and then swim away as fast as possible (i.e. Guerilla warfare tactics of hit and run). That $200 dollar win is worth $400 to $600 on my next trade depending on the margin requirements on the stock I’m buying. With compounding wins and margin, that $200 turns into a lot of money in just a few weeks. Getting too greedy on your trades usually results in having a winning streak, then giving all those winnings back on a losing streak.

Disclosure: I do not hold any position in REGN.

Cotton Explodes Higher As Hedge Funds Move In

US cotton has exploded higher as speculative hedge funds have moved in. For two years cotton has been trading sideways because of China’s massive dumping of cotton onto world markets.

The WSJ writes

The government also lowered its estimate for U.S. ending stocks to 4.6 million bales from 4.8 million.

Shorting Cotton

I recommend against chasing cotton higher. Instead, shorting the cotton ETF BAL might be the better trade.

Shorting BAL is a very short-term scalp fade on a gambit that cotton has extended too far beyond the mean trend line and that a mean reversion move is likely coming.

[graphiq id=”l9vQrp0Hvi5″ title=”Cotton #2 Futures (NYMEX:KG) – 5 Years” width=”440″ height=”523″ url=”https://w.graphiq.com/w/l9vQrp0Hvi5″ link=”http://mutual-funds.credio.com” link_text=”Cotton #2 Futures (NYMEX:KG) – 5 Years | FindTheData” ]

Disclosure: I do not hold any position in cotton.

The Big Oil Short

The EIA Weekly Crude Stocks report showed crude oil inventories fell -0.9 million barrels in the June 17 week to 530.6 million, the fifth weekly decline in a row.

Falling crude stocks are bullish for oil; however, if you chart the weekly crude stocks report, you will see a pattern emerge.

Crude stocks cycle back and forth between drawdown and surplus. Notice how weekly crude stocks correlate with the price of oil:

I used two different charting tools for the charts above and used color coded lines to show the correlated sections between the two charts. Notice that when the weekly crude stocks report shows a rise in inventories of oil, oil falls. Conversely, oil rises when the inventories go negative as the result of a drawdown. It’s a straight up supply and demand correlation.

The EIA Weekly Crude Stocks chart shows tradeable cycles back and forth. Inventories have drawn down in oil for the last three months which has resulted in a run up of +85% in the price of oil. The EIA weekly crude stocks chart looks ready for the supply of oil to rise again.

Crude Oil Options Traders “Most Bearish” Since At Least 2010

Zerohedge writes

The skew between bearish puts and bullish calls has not been this negatively positioned since at least 2010 (when Bloomberg data began).

Notice that the options skew was right in predicting the run up in oil back in January. Is it also right in predicting a swing down in oil? My money is on yes, and the short side of oil. I took a short position against the price of oil today.