I feel it necessary to lay down some ground rules on "momo" trades. . . at least with regard to what I mean, when I post about them. . .and what my intentions are with regard to selling them.
On CBBC, I posted last Wednesday, the 12th at 3:22pm when the stock was at 4 3/4. I pointed out that there was momentum beginning in the stock/sector and that it was capable of a very big move, dependent upon the coverage it would receive. [All speculation was dependent upon it catching coverage by either Briefing.com or CNBC or some other propellent to momentum.]
Message 14034623
This was the time to be buying CBBC. . . at $4 3/4 to $5. . . when interest was coming in, but the price had barely started to move. In a stock with a float under 1 million, waiting for further signs of a big move, could mean chasing a rocket. . . and as the pentagon has recently discovered, that is a near impossibility.
By Monday minutes before the close the stock was hit with a burst of buying, pushing it to 7 3/4. . . and over 8 in after hours. At this point, in a momentum play, the prudent thing to do is to sell a portion on the big move. Reason is. . .there is no guarantee that the following day would be a good market day and/or that the momentum would continue. . . or that the stock would not receive some bad news.
As it turned out, the stock didn't receive news. . but the market did turn South in a hurry. . .which deflated any momentum or mania that may have started the day before. Now in a MOMO play, the momentum is heavily dependent on the quick moving daytrader crowd. So when the day looked weak, they began to sell. . . in pre-market. . . and soon after the opening bell.
I was actually surprised the stock held up as well as it did. There was little reason for it not to fall most of the way back towards $4. That is typical. The thing is. . that MOMO plays are the most risky of all. . akin to futures trading. If you are going to get in, you must be quick and buy the low. . and at the first sign of a decreasing momentum, be the first to the exit door.
If you are unable to find your way back out. . or unwilling to accept a small gain or a small loss. . .you probably should not be playing Momentum trades. . . better to stick with Swing trades or Position Trades.
The whole idea of CBBC was as a Timing Play. This is when we buy when nobody is looking. . .or when the tiniest of volume or interest comes into a low float stock. . . then we sit and wait for momentum to hit. . . and as soon as it does, we sell into it.
As I've posted, when I saw momentum easing up on CBBC, I sold out. . . only keeping a small amount in case of another burst. . . this is so that I can still be part of any further moves and buying back in would not be a "start" of a new position. . but merely "adding" to an existing one. . . which I would do in smaller and smaller increments.
I hope this helps clear up what is meant by MOMO on this thread. . . and what to expect from them.
Rande Is |
