Last week had extreme moves in nearly everything. Fortunately, we were positioned and ready in advance. Reviewing them will hopefully help you, and me, get the most out of these and future opportunities.
NG started things off with a big gap higher on Monday that made no sense. I hope some of you grabbed the opportunity after reading “The wacky world of natural gas!” on Saturday. So often, the original move is complete BS, and is an opportunity to buy at a big discount. Is it market manipulation? It sure seems like it and it’s certainly possible. I mean, if you want to short natural gas, you want to send the price higher first so that you get a better price for your short.
Even if you firmly believe something will make a big move in one direction or another, it still makes sense to watch price action on the day and trade a large position accordingly. I think NG could fall to $5 or lower, yet it roared up from $6 to $7.22 on Monday, starting the move at 10:30am on Friday, which you could have easily traded. That simple action avoided a 33% drop in KOLD and gave you a single day return of 40% with BOIL over the weekend. Then you grabbed +47% with KOLD in 2 days, switched again for a 20% swing the next 2 days, and are now sitting on a 17% cushion from buying KOLD on Friday. Sure, those are ideal numbers, but getting a piece of it is still excellent, and with some practice your market timing can get quite good.
Next up in the wacky department was Bitcoin, starting a tumble Monday evening.
It made a fake rally Tuesday morning and at the Wednesday afternoon low, it was down -24.6%. Ouch!!
Next up was gold, suddenly taking off on Tuesday at 10am for no particular reason.
It then continued the party on Thursday right after the CPI report.
On a daily basis, gold could be ready to fall back, or it could finally make a major move higher.
We’ve been waiting on gold since July when I wrote, “KRR - Get Ready to Back Up the Truck”. As with NG, it’s best to continue to trade for gains while waiting.
Once the tide turns, and it may have, then you don’t want to sell any to lock in gains and wait/hope for a chance to re-buy lower. As you can see from earlier in the year, KRR made an extended run and the operations have continually improved since then. Plus, you’ve potentially doubled your money since buying in July, so let it ride. Knowing that gold gets repeatedly slammed down, set an alert for around 3.85 and be ready to sell (or buy).
The CPI reports have caused major down moves in the markets recently, but the October 13 report had a huge gap lower and massive rally on the day. That ‘bullish reversal’ was a potential market low. And it was another example of smashing the price down so they can buy at a discount. Market manipulation? Whatever, there’s no way of knowing for sure so simply take advantage of it as I wrote October 16, “Cash is King, not dead money!” This past week the market fell the day before and gapped higher Thursday morning after the report.
Oct.13 may have been the low for SOXL at 6.21, which I’ve been trading and on Oct.16 wrote, “.. eventually these stocks will hit bottom and start a long climb back up. When is the big question.”. It closed Friday at 13.22. Another ‘opportunity of a lifetime’, doubling your money in a month, or a mere 77% in 7 trading days if you missed the first opportunity. Clearly, such opportunities are nearly a weekly occurrence.
The markets are still in ‘too far, too fast’ territory, and I’m less confident that they have started an extended move higher, like gold and gold miners, and NG to the down side. So, continue to take gains on your long positions, building cash and be ready to jump on the next opportunity, which could be to the short side with SOXS or SQQQ.
A lot of individual stocks also made some ridiculously wacky moves last week.
MGNI was a big surprise as it’s been making lower lows all year. It announced earnings after hours on Wednesday, “Magnite Non-GAAP EPS of $0.18 beats by $0.03,revenue of $127.7M beats by $3.57M”. And that tiny beat apparently justified a massive jump, coinciding with the CPI madness everywhere: +100.7% in 2 days from low for the year.
On the flip side, “Veru crashes 65% as trading resumes after AdCom snub for COVID-19 therapy.”
Trading was halted all day on Nov.9, the date which shareholders have been anxiously waiting for. I sold nearly my entire position on Monday at $15+ after buying more on Friday under $11. I held some in case it popped again to $24 where I sold before. It’s actually very disappointing because the drug is clearly saving lives of severely ill patients. I bought off the open on Thursday and could have sold for a quick 26.0% at the high of 7.70, but I’m willing to continue holding it for a potential extended run back up.
Clearly, one shouldn’t make a large bet on individual stocks, especially when ETFs holding a basket of stocks, thus reducing the risk of 1 day surprises, can provide impressive gains without the risk. I have no predictions for next week and will try to take action when necessary, based on lessons learned.