Phase III

It seems much of the extreme trading has been around the little biotechs lately.   Traders are just obsessed with phase 3 results.   Or are they?   In our opinion, do traders really care about the actual potential of a drug that may or may not be approved?   In the time when a stock goes up 300%+, is it even relevant to calculate the realistic valuation of such a stock?    The simple and short answer is, No.    We traders merely use an excuse to enter a play and trade a stock.   This is much like chasing fashion trend, whatever is hot out there, we are gonna dig it and try it on ourselves.    Let it be solars, let it be phase 3, let it be earnings or other stories of importance, it's nothing but an excuse for traders to compete against each other to take advantage of a misplaced supply and demand.    These days,  phase 3 results get people excited.   Stocks can be traded to an astronomical level intraday and this is a phenomenon we can not ignore.   Of course, we still have to apply discipline and good trading tactics in order to approach these plays properly.

The play we are referring to today is AVNR.     We looked at the cause early on today and it's obvious that it had potential.    The rest of the time we just spend looking at the action.   100%-200%, who cares.  If a stock is up 100%, it is easier for it to go 25% higher with momo than if you start with a stock at 1% gain and try to get 25% with no momo.  When dealing with a play like this one that gaps up initially in the morning, it's just too dangerous for us to jump in big right away unless we get a good price in pre-market.   If we hadn't, then there's simply too much risk entering a position right at the beginning of the day with a sizeable portion.  Or... Simply start with a small starter to keep track of, nothing that would sting you if it turns against you.   How we approach it is that we usually wait till early afternoon to see if it has a chance to take out the intraday high.   Once it did, it's almost a given to follow through with a trade for a quick flip.  A quick flip, not a quick scalp.  We are talking squeezing 10-20% out of a flip.   If the momentum is strong, we can flip it a few times provided the 5 min. chart stays on an uptrend.    Toward the end, we'd look for signs if the stock can close near the high or not.   Usually when a stock closes near the high on this kind of extreme volume, it follows through even higher the next day.   Is this guaranteed?  No!  The probability is just high in this case.   So since trading is all about getting the right probability, we bought enough toward the end to look for a good follow through tomorrow. 

Other than AVNR, there's really not much excitement out there, a bunch of possible breakouts that end up failing.  If there is no momo, forget about it today.  It's B.S!.  Solars are resting and most of other plays are just consolidating as well.    As traders, we are treating our job very much like a competitive game where the ultimate goal is to win and profit.    We try to be flexible and pay attention to what plays are working out there and get our foot in those games as early as we can.   The bottom line, the more frequent you win, the more profit you pocket from this game and less stressful it is.   After a long while, this game just gets more and more fun and much easier to play.

Phase II, III, whatever Phase it is ...there is a chance to make fast money if done right.  We've had two nice trades out of 3 on these this week.  PGLA was a dud at the open,  DYAX was a potential 5.70's low to a high of 6.90 at the open and today was AVNR, even if at alert a possible 4.70's to 5.50's.  For traders those are big wins of 15-20% in minutes if not an hour at the most.  Easiest thing is to start small if you want to get in early and cut it if doesn't click with the crowd.  If it carries any momo you add, sometimes like today you add and add...

Every trade is different in this space and you need to find an approach to them.  None of them react the same.  DYAX ran for 20 minutes for 20%, PGLA didn't run at all after premkt 50% run,  AVNR ran all day.  This is why we say they are speculative dollars at work, but if handled with a discipline can be very fruitful.