On March 27 I mentioned a trading idea I had in the 3D printing industry and how I thought several stocks were setting up for a nice big bottom reversal breakout, one of my bread and butter setups I go over in great detail here. Well, Thursday we got that big breakout day and I banked big time in DDD. Anyone that had this on their watchlist should have profited alongside me. If you weren’t watching it consider this a lesson because this really is an easy money setup and money in the market doesn’t always come this easy, so you have to take as much as you can when these awesome opportunities are presented to you..
The big catalyst on Thursday was the fact that an analyst at Bank of America finally upgraded the stock. Most analysts have been bearish on these stocks for a couple of years and they are usually late to the party with regards to flipping sides. DDD was up 10.12% on Thursday to close at $18.28 and SSYS (which I did not trade) was up 5.92% to finish at $$29.35. While I strongly feel analyst upgrades are not to be trusted long term the fact is idiots, suckers, and fools that can’t think for themselves listen to analyst opinions, and therefore in the short term, there can sometimes be huge opportunities to take advantage of the volume that these lemmings create.
Remember the market isn’t black and white and as you can see from the huge shooting star candle which is also covered here, you have to take the profits quickly and not get greedy because upgrades are typically a way for large players to exit their trades at the expense of the uninformed general public. If somebody is upgrading the stock there is a good chance it is because they want to create some buying pressure which they can then use to sell positions with a nice profit.
When you start to think like a contrarian trader it becomes a lot more clear how money is made from the market. The fact is the chart doesn’t lie. When the patterns are there and the probability is stacked in your favor you have to be ready to take on more risk. While it may be hard in the beginning to have faith in a system, the reality is as you get more notches under your belt, and your confidence in the methodology you are using increases, your success will greatly start to increase.
This is truly what profitable trading is all about. It is about having this understanding of what should happen in the short term, and how you strategically position yourself to benefit from this small built-in edge. Sometimes your gains will be small and other times they will be huge! You never know what the outcome of a situation will be, but I can assure you that over time you will make a significant amount of money if you repeat the same process over and over again.
Now truth be told, DDD is not a true penny stock, but there are two reasons I am covering it. First of all, it is a volatile stock and moves a lot like a penny stock. I like volatility because it allows me to enter a stock and have the trade pan out quickly. When you enter and the stock does not go anywhere it really starts to seem like you ware watching paint dry and this is bad because it results in new traders typically making poor decisions.
I bought the stock starting on March 29 at $15.31. This was a swing trade for me and I took a 1000 share position which is very small, which left me a lot of room to add as needed. As of April 13, I was up $1,920 on the stock and I hadn’t added any shares. This past Thursday I bought an additional 5000 shares of DDD at 9:27 AM EST at $18.32 just before the market was opening. The reason was quite simple. I had been swinging the stock for 12 days (which is a bit long for me) and there was a catalyst in the stock that I had been waiting for for a few weeks. That morning the stock had gapped up 7.2% and although I normally would take the stock off immediately for a profit, from prior experience and from looking at my system, I knew DDD could move a bit more.
Of course, I didn’t know the stock was going to move exactly 10% but my system showed me what the potential was, and from there I merely just followed my trading plan. The stock quickly took off and by 10 AM I was already up quite nicely. I scaled out in 1/4’s with my final sale coming in at $19.58 not too far from the top.
Now if I was a position trader perhaps I would have had a bit more of a long-term view on the stock but the fact is when you have thousands of dollars in profits dangling in front of you you are a fool if you don’t snap it. Greed will destroy you as a trader. I can guarantee that… Maybe the stock goes higher as it recovers over the next few months but I am not an investor. I am a trader and I would much rather extract consistent profits in the shorter term rather than waiting months or years.
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