It's Up Too Much 

Today during his pre-market prep, Mr. Tim Bohen had one of his many viewers complain or comment that a stock on his watchlist was "up too much." 

He asked if anyone could tell him why anyone would think that a stock in a hot sector was up too much. 

Well, Mr. Bohen, I'm here to tell you. 

They Are Newbies

Mr. Bohen forgets what it was like to be a newbie. And thank God - or whomever - for his expertise, mastery, and generosity. 

Don't get me wrong! I'm a noob. I'm like advanced noob. Noob plus. White belt with a little mustard that looks like an orange stripe. 

And what Bohen seems to have forgotten from the noob perspective is that we don't know what the fuck a parabolic spike looks like. 

Oh, we think we do. We watch the videos and the webinars and the lessons. We've seen charts galore because we are studying diligently. But we haven't seen enough of them real time to have a concept of how they work. 

We haven't seen enough hot sectors to know that you can buy the 52 week breakout of any fucking one of them and make a dollar per share. Don't believe me? 

Look at $SOLO $FUV $FCEL $NNDM and $AYRO from 11/19/20. 

Short Sellers Dominate

I'm not saying short sellers always win or that they are reputable and honest people. 

But tracking gappers for any period of time will demonstrate that most of them don't succeed. Indeed, most gappers fail. 

It's challenging to find a reliable long strategy and even more challenging to play that strategy successfully over time. 

Shorting looks easy. It's not, but it looks like it. 

You buy some shares of a stock. You hold all day. It hits resistance and drops to your entry in a minute and a half.

You buy the breakout. It squeezes up fifteen cents and dumps 8 dollars.

Long biased newbies are fucking shell-shocked. I know I am. 

So are short biased newbies, but you don't hear much about that. 

Penny Stocks Are Garbage

Everyone hears it all the time. 

Penny stocks are trash. What a piece of junk. Worthless. Manipulated. Turd. 

Choose your pejorative. These things are hated. 

Fundamentally, some of them are real companies. But even most of the real ones aren't expected to succeed. 

I personally don't even look at fundamentals anymore. I just assume the company is in debt and not generating profit. BAAB. Barely afloat at best. 

So, yeah. When $SOLO hits $7, I'm thinking that it's definitely not worth that much. 

Speaking of the Mustard Stain on My White Belt

$SOLO went from being a microcap to a small cap in a matter of hours. 

It's not even on my scanner anymore! I only knew about it because it's what I think of when I think of EV's. (I don't think of $NIO since like the $11 break.)

The market cap for $SOLO at the time of this writing is almost 900 million. 

They have no revenue, negative return on assets and equity, they are $1.25 million in debt, and they have no cash on hand! 

So, yeah. Fundamentally speaking, it's probably not a good investment. It's "up too high." 

I'm not paying $9 for a worthless company, they think. 

At least, the ones who are studying think that. 

The Risk to Reward Becomes Terrible

If you're smart enough to follow the rules, you could have taken advantage of SOLO's (or any EV play's) monster run today. 

You had the multiday breakout. Multi-month breakout. Multi-year breakout. 

You had the dip and rips. You had the VWAP hold high of day break at 52 week highs right into the 2pm window. 

You had the bounces off support at key levels. 

If you're like me and you're tracking volume, you had the SOLO signal at 2PM that told you that it had already traded more than average forecast volume and shorts were in for a helluva ride. 

BUT

I understand. I understand because I follow these things and think about them. 

I hate playing stocks over 5 bucks. $1.50 to $4 is my sweet spot. 

The ranges are different. I can buy a stock for 2 bucks and know that if it pulls suddenly, it probably won't drop 50 cents in five ticks. 

But when a $2 stock is trading for $8, it gets scary. You see bigger swings. 

The other day, I lost $10 in a minute with a 25 share position. 

If I was trading with any kind of respectable position size... sheesh. Forty bucks?  That's Applebee's money. Four hundred bucks? That's two months worth of StocksToTrade. 

When these penny stocks get too big for the britches, the moves get too big for my comfort. 

Granted, the moves go both ways.

How Many Times Do We Hear This Phrase?

Overextended.

The last time SOLO was at $8, it dumped down to $5.50 the next day. 

Scary stuff. 

A trained eye could tell you that this time it was safe(ish) because it trended back up to the breakout level and consolidated near there before making its move. 

An experienced trader could tell you that it was moving with a hot sector. They would say, "Look at $TSLA. Look at $NIO. $KNDI. $LI." 

But we white belts forget to take things in perspective. 

It up big. Fall far.

We forget to look at sectors and instead we look at major market indexes. 

SPY red. NASDAQ red. Market Scary.

So There You Have it, Mr. Bohen 

We're so fucking dumb that we don't know how dumb we are. 

I hope this served a few purposes. I hope it reminded you, Bohen, what it was like to be a noob. 

And I hope that it helped you, dear reader, to see the flaws in thinking that it's "up to high." 

And I hope it helped me reify my own lessons, so I won't be such a bitch the next time I see a hot sector.