I've been having a phenomenal run these past weeks and a large reason for that was due to my beloved bev.to. I bought this one in September at .52 and this morning I sold it all at about an average of 3.35. Why did I do this? There were a few reasons. Part of it has to do with selling into strength on good news which is typically a good thing to do with micro caps especially when it renders the stock overbought on high volume because most of the time a pullback will ensue. The other part has to do with fading the euphoria I was feeling about the good run I was having. Anytime I would have such euphoria in the past I would tend to suffer a short term setback shortly afterwards. Finally, I felt it was time to let go of the stock because when I was really honest with myself, I didn't really know the company specific fundamentals enough to have the conviction to "press" my position after such a run up. This stock is largely influenced on its own story as opposed to macro factors (high idiosyncratic risk). The name of this blog is bull, bears and pigs and I don't want to be the latter. Although bev.to could still go up from here, based upon the reasons above it was time to end this love affair....at least for now.
Anytime I look to buy a stock first and foremost the chart has to be appealing. This is what the chart bev.to looked like when I bought in.
When I first saw this chart I said to myself "what a thing of beauty". If you can find stocks that exhibit this sort of gentle pattern of higher highs and higher lows you could practically buy it blindly during the consolidation phase after a ST peak which is what I did. I preformed my DD after buying and then added more later on.
As I said before, the first thing I look for in a stock are great charts. Forget balance sheets and income statements, those are secondary. The market tells all. Financial statements only tell you about the past which the market doesn't give a shit about. A stock with crummy financials but with a chart pattern similar to the above is likely sending the message that the financials are about to get a whole lot better in the near future. Can the market get it wrong? Can it just be a head fake? Of course....this is not a game of certainties but of probabilities.
Right now I'm sitting on quite a bit of cash searching for the next bev.to.
Congratulation on the trade! That was one hell of a trade. I could've made some money onto it too but I never gotten in when it pulled back to the 2.50s... oh wells there is always next time.
ReplyDeleteBut just from the way you are saying, can I just ask you in terms of position size, do you actually most of your money into one stock such as BEV when you have a big conviction behind it?
I am looking at this stock ZQK which has a really nice chart. Unfortunately, it already had a nice run recently but my take is that these stocks usually can go even higher given what we have seen in recent times.
Thanks for the props. I will NEVER under any circumstances put most of my money in 1 stock. That breaks the golden rule of trading. The most capital I will ever risk on a volatile microcap stock like bennett is 15%.
ReplyDeleteCheck out the post I made here for how I operate
http://bulls-bears-pigs.blogspot.com/2010/01/do-you-have-structure.html
ZQK has gone too parabolic for a good entry. Sure it can go higher but the downside risk is just as great if not more due to profit takers that might come in after such a spike. Also, notice the recent volume spike when it hit $4.50. When dealing with small caps, such a volume spike is often a sign that the stock has been pumped....next usually comes the dump or at the very least a pullback and consolidation. Look for example what happened in June. Keep in mind I know nothing about this company...I'm just speaking from a chart reader's point of view.