Archive for the ‘Stock Trading’ Category

Okay, so I know I just got done on this whole I don’t trade stocks any more spiel, but I was in the loop on an awesome trade that came to my attention recently from a company called Jayhawk Enterprises (JYHW).

First off, a bit of background information about Jayhawk: they are a crude oil and natural gas drilling company with approximately 80,000 gross acres of oil wells and natural gas refineries in Kansas and 15,000 in North Dakota. They have been relatively under the radar for a couple of years trading at around 20 cents per share since they went public. But last month, Jayhawk made the following announcement about a new acquisition of oil rich property that has sent share prices soaring and is forecasted to be the primary catalyst driving share prices to new levels over the next couple of months. Here’s the news feed courtesy of Reuters:

“Jayhawk Energy, Inc. announced the closing of Jayhawk’s $1.5 million debenture financing with a number of institutional investors. The debenture financing will allow Jayhawk to proceed with its development program in its Crosby, Ratcliffe formation, oil pool located in Northwestern North Dakota, which Jayhawk acquired in 2008 from JED Oil (USA).”

This announcement was made on December 14 of last year, and you can see that share prices had an immediate explosive response to this news:

That is an insanely high momentum trend forming! You can see it’s not just forming higher swing highs and higher swing lows, but the distance between each jump is getting higher as the stock explodes upward, which means that this trend is likely only just getting started. Now I don’t typically mess around with cheap stocks, but this one is majorly undervalued and has the potential to increase 50-100 percent over the next several months, so I give it a solid buy rating and recommend it to people looking to earn some great returns on value investing.

I love trading and I love investing. I think it’s one of the most exciting business ventures you can undertake. But there’s something that genuinely bothers me about trading stocks and why I tend to avoid them completely. In fact, there are a LOT of things that bother me about trading stocks, and I’m sick of it. I’m honestly starting to avoid them.

It’s not that I don’t see opportunity and profit potential in the equity markets. There’s millions to be made every year whether the market goes up, down or sideways. The fact of the matter is, stocks just aren’t as effective of a trading tool as exchange traded funds, so I’m hardly going to trade them at all any more.

Exchange traded funds are a hell of a lot better, and safer. I don’t need to undertake unnecessary systemic risk every time I get into a trade. Every time the P/E ratio, debt to equity ratio or earnings reports and dividends on a stock go south, regardless of the trend formation, the stock crashes. Here’s an example:

You’re looking at an example of what equity traders refer to as catastrophic gapping on GTX Incorporated, a pharmaceutical company. Normally, a stock trades at or around the closing price of the previous day. Sometimes, however, that just doesn’t fucking happen. We call it gapping, and when your stock gaps to the point where you lose 20 percent or more of your equity in the trade, we call that catastrophic gapping.

Catastrophic gapping is just one example of the systemic risk inherent in trading stocks. It’s caused by an overnight news release after trading hours that completely changes the outlook for the company. It really, really sucks on ice because you can’t do anything about it. Your stop loss wouldn’t even trigger if you had one, because by the time your platform calculated the trigger, your stock would already have crumbled well below your stop loss price. You’d have no choice but to sell GTXI at a staggering 45 percent loss regardless of how your stop had been positioned.

This sort of thing doesn’t happen very often, but it’s just plain stupid to expose yourself to it in the first place if you ask me. This particular example occurred because GTX Incorporated failed to get FDA approval on a drug to reduce bone loss on men with prostate cancer. The news release was overnight and literally flattened the stability of the stock before anyone had a chance to get out.

With exchange traded funds, you are buying a prediversified basket of stocks, so if one of them happens to crash, you will not suffer a significant loss in the fund. That amount of security alone is enough to trade funds over stocks any day. It also helps that because of lower systemic risk and more diversification, you are looking at fewer false breakouts in trend reading, an awesome incentive for technical traders.

Hey everyone, and welcome to the Taming the Markets blog. My name’s Eric and I’m a part time trader. This blog represents a journey through the haze of the markets to develop trading skills and create wealth and prosperity, without the need for a boss or a job. My goal in life is to avoid those things at all costs, without exception.

It’s a pretty scary environment out there today. What’s most disturbing to me in the financial markets isn’t that people are trading poorly or investing without education, it’s that the 90’s have created a generation of slow to change money managers and investors who never seem to see a ceiling over their heads. It’s an expensive mentality that leaves you sitting blind when the markets take a turn for the worse. I think Sir John Templeton said it a lot better than I could:

“The four most expensive words in the English language are ‘this time it’s different’.”

In 2008 we all sat by the TV and watched as thousands of working families 401k’s were turned into 201k’s and pension plans were turned into social security. It inevitably led us into the recession economy of 2009 where no one had any chance to find a job or get a decent line of credit. The market ran away from the ones vested in it, and when the bubble finally burst, people panicked and watched their life savings and investments melt down overnight.

I’m like a lot of you in that I’m tired of handing my prosperity and financial security over to someone else. I can’t stand the thought of losing the amount of money millions of americans lost after this most recent crash, and to fight back, I’ve become committed to educating myself and others around me about the financial markets. This blog is the beginnning of my journey out of that very same rat race. I will not allow myself to become a victim of the inevitability of change.

“It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.”

-Charles Darwin

So if you’re like me and so many traders in the world, if you can’t stand the thought of starting over again or are burnt out on the creeping dread of financial slavery, if you need a place to vent or some advice to help get you motivated, then make yourself right at home and let’s weather the storm, together.