2015-02-05-AMLH-1

Trade #15 – Ninja0n3 vs $AMLH – $AMLH Wins

I have been watching $AMLH since the promotion started, unfortunately the stock didn’t behave as I expected and I ended up taking a $179 Loss.

The Process

Here is the intraday for this play:

2015-02-05-AMLH-1

And here is the 1-Day chart for the stock

2015-02-05-AMLH-1-daily

The stock promotion led by Elite Penny Stocks started on the 20th of January after a big announcement the week before that they would release their next pick (Illustrated by the orange arrow on the daily chart). I took a chance given the availability of shares to short at IB with the expectation that this Pump and Dump would be on its last legs. I was clearly proven wrong. My entries and exits are shown by the blue arrows.

Right after my entry, there was a bit of minor spike, setting me back a about $30 down. the following day the stock uptrended slightly and I kept the conviction that it was ending shortly. On the 4th, there was lots of sideway price movement after a slight morning spike bringing the stock price to around $0.23, however late in the afternoon another mailer went out and the price suddently spiked to the mid $0.24s. At this point I wasn’t willing to take any further losses and attempted to exit, without a fill.

I finally managed to get my exit the next morning trading pre-market, and shortly after the price spiked to 0.26.

Through the both days I could see the price being manipulated by promoters on L2 every time the price would drop below a certain level; 130k+ bid orders would pop momentarily only to disappear as quickly as they appeared once the price uptrended again.

The Trade

For this trade I did not follow my basic strategy as I had a higher level or certainty that it would drop; I was willing to take a bigger position and not go based on the ATR (this would have been around 2500 shares). My short fill was executed quicker, although my exit  was not initially filled and was forced to hold overnight. I had to play around pre-market and right at the open to get out of my full position (3 trades in total at different prices to ensure my exit).

My trade settings:

P = 4500 Shares
$P = $958

Trade Type: Short 
Entry price:
$0.2101 LMT
Exit price: $0.24844 LMT
Absolute Stop: $0.2450 (previous resistance level)
Loss: $178.99 (including commissions + borrow fees)

Self Check

Over the last couple of weeks I have been doing a lot of personal work in terms of managing my anxiety when trading. I could clearly see a difference in my state of mind when I entered the trade based on my own convictions (and some confirmation in my conviction from Michael Goode, which increased my confidence in the process). It is also probably due to slow moving nature of this OTC stock; I had time to get accept the idea of loss and not have to try to manage it at a moment’s notice. Overall, even though it ended up becoming a loss, I gained a bit of confidence when having to take a position, something that has previously kept me from properly reacting.

Additionally, having a sound strategy for managing my risk has also helped me getting a hold of my emotional state. Most importantly, I stuck to my rules and as soon as I felt uncomfortable, I (unsuccessfully) attempted to exit my position.

Conclusion

Overall, in spite of the undesirable financial result of this trade, it has been a great learning experience when it comes to dealing with Pump & Dumps. It really puts into perspective the difficulties of dealing with OTC stocks, the difficulty of trying to interpret the will of promoters and the collective will of the traders playing the same position at any given time. Taking losses is part of the game, and I don’t think taking this position was a mistake, regardless of the outcome.

It is also worth noting that a lot of the more experienced traders “box” their positions in this kind of cases as the available shares to short are quickly taken much earlier than the start of the dump following the pump. Unfortunately, with the size of my account I can only have a single brokerage account (especially in Canada where all other brokers are just bad).

Note: Boxing refers to holding both a short and a long position with 2 different brokers, which allows the short seller to “reserve” the shares, and once the price is ready to crack and the dump occurs, the long position is sold and the short position starts generating profits from the downtrend.