The HUSA squeeze

As mentioned yesterday. I shorted a 'nothing' move yesterday at $2.15 and today got well and truly squeezed on it. I doubled up at $2.95 on this mornings spike. Today we have seen fades, but it is holding up well into close, we could see another morning spike on Monday. 


I will cover some on a push through $3's on Monday. The most likely scenario is we will see fades during next week, back to the low $2's. 


Its a shame, if I had waited for the trade, I could have been more aggressive and my av would be $2.95, instead I have $2.49 av.

Open Trades Short
VRML, MBLTY, GTIM, HUSA, CLNT 

Open Trades Long
UNIS, CLDX, HZNP, ALXA, SVVC

April Returns,  -3.6%

CHTP - took small profits

Its been a rough couple of weeks, so when CHTP popped the other morning I took the money $2.19 from my buy at $2.04.


I detailed the trade here. Looking for re-entry in the $1.9 - $2 range, which looks like its coming soon.

Will try to stick to the plan next time.


Open Trades Short
VRML, MBLTY, GTIM, HUSA, CLNT 

Open Trades Long
UNIS, CLDX, HZNP, ALXA, SVVC

April Returns,  -3.6%  

SVVC - the lows are in?

SVVC - my big long has so far not worked out, although today could well be the turning point.

It's been a slow grind down since dilution, but this mornings wash may prove to be the bottom, it will probably close green today. I am still confident of my overall thesis, but I expected SVVC to be running straight away, similar to how GSVC reacted to its first dilution. Some reasons for this:

• The surprise increase in capital raising has taken away potential SVVC buyers.
• GSVC have not closed their offering, thus taking away potential SVVC buyers.
• FB rumoured to delay offering by up to 2 weeks.

Some trading mistakes I have made, taking too large a position before it proved itself, should have went perhaps 1/2  on dilution day, 1/2 on a break ($27 o rbig green day) or a wash. Instead I day traded random, and kept large starter. Did get some on today's wash though. Need to be extra careful when I am really confident about an idea, always need to trade the action.


Will keep a stop at $25 now. And buy more on the $27 break.


Open Trades Short
VRML, MBLTY, GTIM, HUSA, CLNT 

Open Trades Long
UNIS, CLDX, HZNP, ALXA, SVVC

April Returns,  -3.6% 

Fat finger trade (FURX)

FURX received a CRL on Wednesday night. When trading resumed today, it squeezed up from mid $13 to the $14.50 area. Conscious of a MAPP like squeeze I still took a short position betting on fades throughout the day. I would have been in the trade for over an hour, in hindsight too long for it not to start fading. I had a stop limit in, but when the share price spiked the stop limit never filled. The stock went nuts through $15 in a minute. I went to adjust my stop to cover on the pull back, but stuffed up and sent the order at market. I ended up covering at 15.13, when I could have got 14.70's!


Mistakes:

• The best shorts work straight away. 
• Need to be extra conservative on low floats i.e. take trade off earlier.
• Need to be more cautious using stop limit on low floats.
• Be calm when placing trades.

The stock ended up surging to $16. So stops were necessary. But that raises another question, was this a high enough probability trade to be taking. I can only day trade so many times a week. I used up this day trade and it arguably caused me to miss two other trades (FURX @ $16 & RGEN @ $4.7's - another bad news bounce trade). 


But this is what really hurts - FURX is at $14 today...

I think I will wait for the squeeze next low float 'bad news short' trade.


Open Trades Short
VRML, MBLTY, GTIM, HUSA, CLNT 

Open Trades Long
UNIS, CLDX, HZNP, ALXA, SVVC

April Returns,  -3.5%

Getting squeezed on HUSA

My profits from my HUSA trade (here & here) last week are being undone!


HUSA really did sell off hard, it reached $1.50 this week. The dramatic sell down helped by the CEO getting margin called. This represented 1% of common stock, so it was certainly material. But now the the stock is at $2.50! Its up 40% on the day with big vol, and looks like it could go para into the close.


I shorted the morning spike, thinking it would fade through the day. The position was small just in case something like this would happen. I broke a rule though, I should only be shorting para like moves when stocks run on no news.


I will only ad on para or a gap up tomorrow.

Open Trades Short
VRML, MBLTY, GTIM, HUSA 

Open Trades Long
UNIS, CLDX, HZNP, ALXA, SVVC

April Returns,  -3.5%

Out of KERX

My KERX trade never worked. I sold my puts at 40c from 45c.


The stock closed strong and then a Seeking Alpha article overnight helped it gap up to 1.95 before it faded. Some takeaways from the trade.

1. Management have recently been buyers;
2. Chart was beat and the stock has a history of running; and
3. because of the above reasons, I had to be more careful to assume the news was 'fluff'. Follows on twitter are normally right, but not this time. The news was alright it arguably increases the chances of approval in the US this year.

The real trade was on the crappy seeking alpha article. 

Open Trades Short
VRML, MBLTY, GTIM, HUSA 

Open Trades Long
CHTP, UNIS, CLDX, HZNP, ALXA, SVVC

April Returns,  -3.5%

A bunch of low float shorts (OPHC, GTIM, RCON & CLNT)

There has been a bunch of low floats float spikes over the past couple of weeks. These stocks have the ability to be manipulated up 100% to 200% in a day. But over the next month or so, the sp will most likely return to where it came from. None of the stocks listed below had either a reason for the increase in share price or a very poor reason.


I have decided to short a bunch of these low floats. Very small postion, I won't lose sleep even if they return to their previous highs. Over the next month or so I will aim to cover each stock on a a 25% to 50% decline.


OPHC - Mangement are unaware of any reason why the share price has surged.
GTIM - announced it has appointed a financial adviser to review strategy. Days later the share price goes crazy.
RCON - 'rumor' of contract.
CLNT - Mangement are unaware of any reason why the share price has surged.


None of the stock moves are because the underlying business is improving, it is all manipulation and often coincides with a NASDAQ letter saying they will be delisted if their share price stays below $1.


one week later...


I wrote the above a week ago, the strategy has been a disaster. 


OPHC - bought in at cost, gave back profits.
GTIM - s/s 1.67 now $4!
RCON - stopped at cost (post GTIM incident)
CLNT - small profit (post GTIM incident)


I didn't have a stop, I just had a really small position. But this really small position has grown into a fairly sizy loss.


Shorting low floats without a stop - getting burnt yet again. When will I learn! 


Open Trades Short
VRML, MBLTY, GTIM, HUSA 

Open Trades Long
CHTP, UNIS, CLDX, HZNP, ALXA, SVVC

April Returns,  -3.5%

Sell the news (KERX)

KERX has had a rough time of it lately. A key phase 3 drug had poor trial results earlier this month, destroying the share price. Today it announced some 'good news'.  But the announcement is really about the success of its partner. No solid details how KERX are involved. The twitter feed was quick to point this out.

The share price has reacted well, and surprising has held its gains. I am betting it will give most of the gains up over the next week. 

There were no shares available to short so I bought May $2 calls for 45c. Aiming to get them away for 60-65c later this week.

Open Trades Short
VRML, MBLTY, LQMT, CLNT, GTIM, RCON, KERX (May $2 puts) 

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA, SVVC

April Returns,  -1.3%

Covered SPU, TZYM & HUSA

As per my trade plans, I have covered SPU, HUSA & TZYM.


I covered SPU today at $1.78, from $2.10 s/s on Friday.


I covered HUSA on Friday at $1.89, from $2.33 s/s on Thursday. Perhaps could have waited some with HUSA, it looked like it needed a wash on Friday, that came this moring when the stock gapped down to low $1.70's, its now trading at $1.83.


TZYM I covered at $3.05av from $3.6's a couple of weeks ago.



Open Trades Short
VRML, MBLTY, LQMT, CLNT, GTIM, RCON, KERX (May $2 puts) 

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA, SVVC

April Returns,  -1.3%

Out of HEAT

Worst trade this month - detailed here.


HEAT - it just wouldn't fade, and I covered when big vol came in this morning. I panicked and envisaged it going to $9 in a flash, then getting a buyin notice later in the day.


How should have I played this? I should have reduced size a few days ago, plenty of opportunities to at low $7's and I wouldn't have been faked out like I was. Should have been much less patient when the fades never happened after the original spike.

Open Trades Short
VRML, TZYM, MBLTY, HUSA, SPU

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA, SVVC

April Returns,  -0.7%

Another China Fraud short the news (SPU)

This trade is in the same vain as GPRC.


SkyPeople Fruit Juice, Inc (SPU) has long been on the radar of Chinese fraud short sellers. Today it provided more evidence that its cash balances are real. The market doesn't care, news is being sold. We are s/s from $2.10. Will cover next week.

Open Trades Short
VRML, TZYM, MBLTY, HUSA, SPU

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA, SVVC

April Returns,  -0.7%

Houston we have a problem (HUSA)

Houston American Energy Corporation (HUSA) had some pretty shocking news yesterday, looks like its best oil well is buggered and the management are being investigated by the SEC.


This company has long attracted the attention of short sellers, and over the past month they have been proven right. 


So why are we short now, after all the bad news is out? Often when stocks are heavily shorted, the stock price decline is often more gradual (as shorts cover). And the bad news is likely to get much worse given managements history, the questionable nature of its assets and the lack of financial resources.


Got s/s yesterday at 2.35av. The fade is working well today, will likely cover on a sub 2 washout.

Open Trades Short
VRML, TZYM, MBLTY, HUSA


I had a small personal position of $7.50 April HUSA options, I covered the last of them today ($1.55 to $3.80 & $4.30)
Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA, SVVC

April Returns,  -0.8%

Long the best Facebook proxy (SVVC)

SVVC has been one of my favourite shorts - written about here, here, here, here, here. I am now long, in a big way.


This week SVVC raised $110 mill at $27. Three important things to note, they originally were aiming to raise $25m, they got the capital raise away at a premium to book value ($24.5) and the share price is now $26.30, down from $48 a couple of weeks ago.


Facebook lists in a few weeks. Even though the capital raising significantly dilutes their FB stake (about 10% of the portfolio now), it is still the most pure play out there in terms of getting exposure to FB before the listing. We have seen how this stock can run on FB hype, I am very confident it will again. I am long av $27's, will add on further drops.

Really f*cked up only having a small short at $44.


To back up my run-up to FB IPO theory. GSVC is a similar company to SVVC. It has a reasonably significant FB holding (7%) and has been trading at a large premium to book value (20% to 33% - estimated book value of $15). GSVC raised over $100m at $15 in February. The stock dropped to $15 and has since traded at previous highs. 

I think SVVC will at least do the same - 20%-33% over $27 = $32.4 to $36.9

Deloitte sticks with QIHU

Trade detailed here. I didn't think audit sign off was happening for a couple of months. Anyway, still wanted a position on it, figured there was a good chance of a fail or Deloitte walking away.


Took the loss at $26 pre-market, was worried about a squeeze, could have got $24's if I had kept it cool. Oh well, not a big position.

Open Trades Short
HUSA (April $7.5 puts), VRML, TZYM, OPHC, HEAT, MBLTY, HUSA

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA, SVVC

April Returns,  -1.5%

Starters in two longer term shorts (QIHU & MBLTY)

QIHU - well know suspected Chinese fraud. Citron Research lays out a compelling fraud case, and lately the popular media have been raising questions also. The catalyst is, will QIHU pass their audit. Deloitte, have been under great pressure after signing off several Chinese companies last year, only to be exposed as frauds since. Recently Deloitte dropped two Hong Kong listed clients, will QIHU be next. We will know by mid June. 

I have been eyeing this short for some time, its been frustrating to watch it drop. I was waiting for the most recent quarters profits to come out, they will probably be good and the stock will pop. Should have taken the starter when they released their revenue numbers. The company needs to file before the end of the month. I took a starter today @ $21.45.


Mesoblast (MBLTY) is an Australian company, but its dual listed. Its one of Martin Shkreli's short ideas. This is likely to be a long term hold, 1 year plus maybe. The company is very highly valued on questionable data.


Open Trades Short
HUSA (April $7.5 puts), VRML, TZYM, OPHC, HEAT, MBLTY, QIHU

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA

April Returns - +1.3%

Closing trades (GRPC, CMEDY & VRNG)

GRPC - s/s at $1.8 last week, covered mid $1.4's. GRPC is a suspected Chinese fraud that spiked big on earnings. I based the trade off DEER, it to is a well know suspected Chinese fraud. The trade being, s/s the large spike in the share price (the morning pop on the day after the spike) caused by the bumper profits, ride the fade down as investors realise the company is still cooking the books.

CMEDY - s/s yesterday at 3.05, covered today 2.35. Company got my attention after reading an article by a successful short seller. I should have been more on the ball and got a more aggressive short away mid to high $3's. Hopefully get a decent pop over the next week for another crack at it.

VRNG - as per my post, I covered early Monday morning, pre market ($3.75), it reached $4.50, but there were no shares to short. I will probably leave this one alone now.




Open Trades Short
HUSA (April $7.5 puts), VRML, TZYM, OPHC, HEAT, MBLTY, QIHU

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA



April Returns - +1.3%

Full positions locked for run-up trades (MSHL, ALXA)

Follow up post to here.


MSHL - partial position taken at 78c, and then the price collapsed. Picked up some more at 71's this morning. Price action isn't good, but wild swings are the norm with a stock this small. Confident we will get a news based price spike or at least some momentum before ASCO. (76c av).

ALXA - back in as per plan (62.2c).

Open Trades Short
HUSA (April $7.5 puts), VRML, TZYM, OPHC, HEAT, MBLTY

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP, ALXA

April Returns - +1.2%

Letting short profits vanish (VRML, OPHC & VRNG)

I lost my first blog post yesterday, I can't be bothered re-writing it. Here's a brief summary.


I got squeezed on three of my shorts yesterday (VRML, OPHC & VRNG) . All three positions were working perfectly and had made 3/4's of the profits I had expected to make i.e. I was very close to covering the positions. Perhaps I am not taking my profits quickly enough. Working out the risk return ratio for keeping all of these shorts on was extremely poor, one I would never take when entering a trade + I was unable to re-short one of the trades, this is also a real cost. I need to:


1. Consider risk/return payoff when taking profits, include reshort op's & IRR when making the call.
2. Take partial profits, particularly on big positions (VRML).
3. Constantly assess take profit price range, price action dictates this (not me).
4. Trim positions when sitting on large unrealised profits on the total portfolio.

Mark Cuban wrecks havoc with my VRNG short

I described the VRNG trade here. It was working well, and thought about covering some on Friday at $2.80's from $3.50 s/s, but I decided to hold out for $2.50's.


In after hours Mark Cuban disclosed a 7% stake in the company. Cuban acquired the stake before the recent price spike (cost around $1.50's). He must like the chances of a patent settlement with Google. He follows the patent area closely.


I had shifted my stop to $3.20, but the stop was programmed to only go off during market hours. The share price has spiked to $3.50 post the news. This news is a game changer, and I want to cover, in hindsight I wished I had just taken the $3.50 after hours. I think the stock will run big on Monday morning, I just hope I can get out close to $3.50. The position is small, so if it gaps big and runs, I will not panic sell.


VRNG is a potential short if the stock jumps enough - $4's plus, but I may be lucky to locate shares.

Giving up on EXEL

EXEL is my most costliest trade this month, and I threw in the towel this week after losing for a second time on it.


I followed another trader into EXEL. Generally they are great to follow but I think they have this one all wrong. Unfortunately I just followed and didn't really think for myself. EXEL is a bio-runup setup - buy a biotech stock with a major catalyst 1 to 4 months out, sell on the hype before the catalyst. A good biotech setup contains the following:

• Defined catalyst date.
• Major catalyst for the company.
• Small company.
• Reasonable chances of catalyst success.
• Good entry point.
• Healthy share market

EXEL had the following:

• Defined catalyst date - Yes, ASCO 
• Major catalyst for the company - No, nine data points at ASCO - but its all minor
• Small company - No (700m)
• Reasonable chances of catalyst success. 50/50
• Good entry point. No & Yes (discussed below)
• Healthy share market. Maybe a little hot, market had a great run.

As you can see EXEL is failing many of the key aspects that makes a great run-up. I should have just avoided it. Instead I bought a starter at $5.70 & low $5's, stopped at new lows $4.8. Reckless trade.

 Then had another go over the last couple of days.

I bought after the huge $2m trade crossed on Thursday, My theory being, the selling has been relentless over the past few weeks, maybe the big seller is gone, this could be the turning point. I went in with size too given my stop (new lows - $4.8). The next day was a weak market day and EXEL was awful. The trade entry was better, with the vol & close stop. But I should not be trading EXEL - its a poor bio-runup setup. 

Open Trades Short
HUSA (April $7.5 puts), VRML, GPRC, VRNG, TZYM, OPHC, HEAT

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP 

April Returns - 2.2%

More Biotech Runups (ALXA & MSHL)

ALXA - owned this for the past couple of weeks (61c), it took a real tumble recently, but has bounced back quick, helped by a director purchase on the recent dip. I tried to pick up some cheap calls on the dip (May, 50c calls), but they never got to 15c. 


I was looking for 70c plus on the run-up to the May 4 PDUFA, but yesterday a spike was caused by this video. The person interviewed is respected biotech writer Adam Feuerstein. News headlines reported the video as bullish, this caused a massive spike in the share price. I had watched the video, the only thing bullish about the video was the the title. So I sold at 66c. I will look to re-buy early next week (61c to 63c).


But have I just made the same mistake discussed in a previous blog post? These 'no real news' price spikes have often proved to be the catalyst for a further run-up in share price. In hind-sight, I could have been more patient on the spike, and got my shares away at 68c+, a higher sell price can justify selling into these price spikes and ALXA of the last couple of weeks has proven it is prone to very wild price spikes. 

MSHL - Missed round 1, but in for round 2. I was too slow on the trade alert when the company announced it was announcing data at ASCO. The share price ran to the 90's over the following days then spiked on this 'no real news' announcement. MSHL is notorious for the share price spikes and consequent fades on news such as this. The sp spiked to $1.10 and has since faded to as low as 77c. We got in for the ASCO run up (May) at 78c.

Open Trades Short
HUSA (April $7.5 puts), VRML, GPRC, VRNG, TZYM, OPHC, HEAT

Open Trades Long
CHTP, UNIS, MSHL, CLDX, HZNP 


April Returns - 2.2%

Closing MAPP - $$$$

The MAPP trade was fairly simple. The company had shocking news, but somehow a short squeeze was created after the CRL. How this happened I have not a clue, insto's managing the sell down process well, is my best guess. But it created a great short opportunity. And it worked out a treat.

I was short at 16.30av, and bought April $15 puts at 55c. I have been gradually selling down the positions over the past week or so. Covering the stock at $14.50 av (guess) and the puts at $1.60 av. A really great trade. The stock is still a short, $8-$10 is closer to fair value, but I will try and wait for a decent pop to re-enter + the April puts are expiring shortly and I didn't want them to lose all the value if the sp was to turnaround.

Taking my profits, I probably did it the wrong way round. I should have been covering the puts first, given they still could have lost allot of value. Instead I did it the wrong way round. But cannot complain too much on this one.


Open Trades Short
HUSA (April $7.5 puts), VRML, GPRC, VRNG, TZYM, OPHC, HEAT

Open Trades Long
ALXA, EXEL, CHTP, UNIS, MSHL, CLDX, HZNP 

Solid SVVC Trade

As per my plan, I was to re-enter my SVVC short on any price spike.


I got my opportunity, but I really chickened out and only took a small position. The stock was down slightly in the morning after a negative seeking alpha article. The article points out the extreme over valuation as I have on this blog. I was skeptical the article would move the stock though, it is pretty obvious to all how much of a premium to book value SVVC is trading at. And shares were available to short for the first time in about a week. I was skeptical it was a trap. So I took a position at $44, that would allow for a squeeze to $50.

I shorted on the morning of April 5 ($44) and covered on the gap down on April 9 ($33's). The gap down was dramatic and caused by general market weakness. Gutted at the small position. I should have had triple the position and a stop at $46. More aggression is needed on great setups.


Look to re-short on extreme price spikes prior to the capital raise pricing & IPO.


The FB IPO is going to happen in May, and related stocks are starting to squeeze up. Looking forward to the post FB IPO market. Have a large watch list of potential shorts - starting with SVVC. 

Open Trades Short
HUSA (April $7.5 puts), VRML, GPRC, VRNG, TZYM, OPHC, HEAT

Open Trades Long
ALXA, EXEL, CHTP, UNIS, MSHL, CLDX, HZNP 

How to Not Play Biotech Run-ups (CLDX & HZNP)

I have made some good money shorting biotechs over the past few weeks. But the easy money has been to be long biotechs. They have had a great run. But I have managed only modest profits. My poor trading can be summed up easily, selling to early. I think I'm still gun shy from last years sell off that decimated biotechs within a couple of days. The second reason, I am following others into trades, thinking less for myself and being less convinced on the trade. 


CLDX, it was an excellent setup, small cap, important ASCO data (May 16), has had a history of running up, dilution at 3.80. I bought a little early at 3.90. Picked up some more at 3.70's, I then sold some at 3.70's after the 3.50 dip. Reason being the stock had jumped on fairly meaningless news, my logic was that I would buy back cheaper once the stock fades. It never did, a couple of days later I sold the rest at $4 using the same logic. It went to $5's. 

I pretty much did the same on HZNP, sold the day after purchase on news of them suing a competitor. I looked smart for the rest of the day. 2 days later the stock is over 4.30's 

On both cases the minor spikes have been the catalyst for the run-ups. 


Fortunately, over the past couple of days I have been lucky enough to get back into both CLDX & HZNP. With starter positions at $4.32 & $3.58 respectively. I guess the lesson is when taking profits, stick with the trade plan, unless you get an opportunity to take some decent profits.


Open Trades Short
HUSA (April $7.5 puts), VRML, GPRC, VRNG, TZYM, OPHC, HEAT

Open Trades Long
ALXA, EXEL, CHTP, UNIS, MSHL, CLDX, HZNP

Small Positions (TYZM, VRNG, CHTP & OPHC)

TZYM – s/s 3.6’s. Biotech up $1 b/c of bullshit sell side research note. The company recently halted its phase 3 trial. Its amazing the stock is above $2. Only small position cause it is super low float and may be manipulated higher, lesson learnt on NGSX. Would have added on any pop into $4’s, looking for sub $3 covers.

VRNG – Up huge on recent article about it suing Google. All this info was already out, but the blog article got the stock  moving. Would have loved to short it at $4, but no shares at my broker. Court date is not till later in the year. Went short at 2.9, but covered the next day at $3.04 (new highs), the stock got a second run due to AOL's Patent sale. I then re-shorted at $3.50 and its fading well, looking to cover mid 2's.

CHTP - long $2.01. CHTP recently received a CRL on its drug Droxidopa. Company still has a good chance approval, within the year. An approval would send the sp to $10. Will add on fades to $1.70’s, and sell some on the price runup into the next catalyst (FDA meeting or trial results). Martin Shkreli likes it. 

OPHC - s/s 3.12, had to chase down in pre-market to get shares, do not like doing this but the its a very small position, this is nothing but manipulation. Management have commented that they 'do not know' what is going on with the sp. Will add if it goes to $5's. Cover mid 1's.

Open Trades Short
HUSA (April $7.5 puts), VRML, GPRC, VRNG, TZYM, OPHC, HEAT

Open Trades Long
ALXA, EXEL, CHTP, UNIS, MSHL, CLDX, HZNP

Chinese Small Caps Go Mental (HEAT & CREG)

Been really disciplined since I have started the blog, I had kept all losses small. That changed on Wednesday, I didn’t follow my plan and got squeezed on a dramatic  share price spike.

HEAT is a Chinese micro cap ($30m). The spike last Tuesday was caused by earnings, the company lost $30m for the year, but forth quarter cash flow was flat. The stock reacted very positively to the news, increasing by almost 100% to $5’s. The company has lost a huge amount of money over the last few years, and has a mere $12m in the bank. Although cash flow was neutral for the quarter, sales are plummeting and inventory is sky high. They will be lucky to stave of bankruptcy (or a huge dilution) this year.

My plan, based on other Chinese stocks reacting to earnings, was to sell the news. Other Chinese stocks up on earnings have faded well (FMCN & DEER). There were two differences in HEAT, it is not a strongly suspected fraud and it was much smaller.

My plan was to sell the morning spike, hold for a couple of days and pick up a 10-20% gain. What happened was a disaster.

As per the plan, I sold the morning spike, this was rushed, instead of giving it 15 to 30 minutes to setup, I sold straight away at $5.6’s, the spike continued I justified doubling up my anticipated position (@$6.40), av $6.0, the trade started working, not holding $6, fades looked set to continue. Then the turnaround came, new highs were hit at 25m, I should have been taking my loss here, particularly given the move was on big volume. The rest of the day was torture.

I started to get paranoid. I re-read the 10k, had I missed something, was the business going to turnaround? But, why was the stock not re-rated yesterday, when the 10k was released? And why was volume 4 times greater today?

At the end of the day the stock began to collapse. Closing in the 7’s, the next day the volume was gone, I covered half of the position near cost ($6.14). I will hold the rest for expected fades over the next week or two (which I'm not getting!!).

So what caused this dramatic price action? The dramatic fades from $9.50 show it was nothing more than price manipulation. $15m shares traded on Wednesday, the company only has $5m shares outstanding! The entire float was bought and sold three times over in one day! Remarkable how the SEC cannot prevent this sort of stuff from happening.

HEAT set off a whole heap of other China plays. No announcements, just pure speculation.

  

We grabbed some CREG April $2.5 puts for 30c, 2 hours later the share price had faded 70c and we were up 100% on our position. We sold at .85 a couple of days later.

HEAT mistakes:

Did not take loss (at day highs – 6.50 break)

Did not wait for trade to setup - traded to early given 

Traded twice (this added to the decision not to take the days loss – using up two day trades)

Position size was way too big (micro cap & dismissed possibility of a pump occurring)

Ignored volume on the break (this meant it was a definite sell!)