Most people know about the cryptocurrency bubble that happened at the end of 2017, where bitcoin ran from $3000 to almost $20,000 within 6 months But did you know many day traders also played the same hype with penny stocks? Seeing that bitcoin is making a nice recovery to 8000 now, I think this is the perfect time to recap the crypto hype we had in some of the penny stock runs
So if bitcoin does break new highs in the next coming months, you will be able to take advantage of the same hype by day trading and swing trading these blockchain stocks And also I will be sharing a personal and terrifying story of me shorting one of these hyped up penny stocks that led to a HUGE LOSS So you definitely don’t want to miss this Before we start make sure to drop me a like on this video, subscribe and ring that notification bell to get notified first when I post new day trading videos every week So let’s take a look at my personal favorite crypto penny stock, $RIOT
Funny story, before the whole bitcoin hype This company was actually a company developing veterinary products called Bioptix Supposedly they made a “pivot” in their business strategy in in October 2017, and shifted their focus on investing in blockchain technologies, bitcoin and ethereum mining Hence the name change to Riot blockchain After the name change, we saw the share prices hike from $8 to $45 in December
$RIOT stock has a market cap of $42 million It is a small cap with 15 million shares float So it’s not a low float stock like $MARA, which we will talk about in just a second But $RIOT is part of the whole blockchain sector, and follows the Bitcoin price action As you can see on this daily chart
RIOT has since then be declining in prices Selling off from $40 all the way down to about $270s now Just play the price action on this one I definitely would not invest in this company, same thing as the other two stocks that I’ll talk about in a little bit
A tip for you, my valued subscribers Riot blockchain, has some dirt cheap options contracts You know what I’m saying? The easiest way to play this stock back then in the middle of the crypto bubble, is to overnight some $RIOT stock when Bitcoin makes a new high I’m not saying to buy or sell that stock right now I’m just saying to keep this stock on watch if the whole crypto hype comes back again and if bitcoin prices pass $10,000 and heads toward one million
And just check the short interest on this thing 26% of the shares float is held short If bitcoin comes back again, this stock is gonna run to the moon Let’s take a look at the daily chart for $RIOT Actually for these really beaten down charts I like to look at the weekly trend instead
That’s another tip for you When i chart these highly dilutive companies that’s just been selling off I use the weekly chart to draw out the major levels Same thing if I am looking to swing trade for more than a few days So $RIOT weekly chart is below this 50 ema
To me it needs to be able to hold above the 50 ema and also the $450 resistance level for me to lean in bullish Aslo it’s above the 50 ema that most of the people holding the short position will look to cover Remember the stock is 26% short So these are the levels $RIOT has to break above and hold in order to squeeze
Just look at how much room this thing has to to the upside Wooo The real short squeeze will happen if the stock breaks and holds above this $650’s level Of course the stock’s price action will follow the crypto price action sentiment
Let’s move to stock #2, another crypto penny stock that runs with the crypto hype, is $MARA Marathon Patent group Now just like our last penny stock RIOT Only a small part of $MARA business is focused on crypto mining The whole reason $MARA stock was put under this crypto space basket, was because they have a small patent in cryptocurrency mining
They are not heavily invested in blockchain technology at all That's what all these penny stock companies did Change their name and buy a crypto mining rig Boom, blockchain technology I mean if I have one alt coin mining rig under my bed, technically im invested in blockchain technologies too right? But what makes $MARA attractive to me to trade, is that the stock has a low float of only 6 million shares
The float of the stock is the amount of shares outstanding available for the public market, therefore stocks with a low float can be easily moved up or down with momentum I have a video on how to trade low float stocks if you’re interested $Mara stock has a short interest of 10% Not as much as $RIOT stock But it’s still noteworthy
Remember, low float stocks added with a high short interest is a receipt for a short squeeze to the upside I know because i got short squeezed big time by one of these crypto penny stocks I’ll tell you the story in just a second Because recapping a devastating loss is like, getting a text from a bad ex You just want to put off reading it for as long as possible, but deep down you know eventually you need to face the reality
Urgh Now let’s do some technical analysis on $MARA Again we are looking at the weekly chart here Another beaten down stock just like $RIOT Again it’s below the 50 ema It has to break and consolidate above it in order to be bullish
Lots of room to run to the upside for this one Especially when it has such a low float After 50 ema $MARA needs to break and hold above this $550 area to run towards the $10’s possibly This one also needs to be traded alongside the BTCUSD chart
The next blockchain stock we’re going to talk about is $XNET XNET stock has a special place in my heart because… I almost lost my pants getting short squeezed by this stock But let's look at $XNET This his company is based out of China And supposedly are heavily invested in blockchain technologies blah blah blah
Never heard that one before Back to $XNET The stock is trading around $2 today selling off from the high of $25 in late 2017 Let’s look at this weekly chart Again, highly dilutive stock still under the 50 ema
It needs to break above and hold this $550 mark to start squeezing Once it reclaims that level, it has a lot of room to run to the upside along with the bitcoin momentum I know you guys are dying to hear my story of being short squeezed on $XNET so let’s wait any no longer let’s go back to the daily chart on $XNET
On november 29 this giant red candle I was shorting this stock This thing dumped all day long They were being sued by investors and being investigated by the SEC so those were all bad news fundamentally
And technically speaking, this chart has been over extended It ran up from single digit at $8 to $27 in like two weeks So yes it was due for a huge sell off So I was shorting this on this red day Look this amazing sell off from $19 all the way down to $13 at the end of the day
I was green, but here’s the thing, I was upset because I didn't size in as big as I wanted to I only had about ⅛ size And I didn't catch this entire move So the next day, I gave in to FOMO Fear of missing out
And one of the deadliest sins of day trading Instead of covering all my original short position on this gap down overnight to $11, I added to full size at the market open And you can see on this chart and the amount of buying volume that followed All the shorts were covering, large buyers were steppinging in the buying volume bars were clearly more than selling from the day before
This strong bounce caught me off guard And instead of covering my full size short like a disciplined trader should do I held it And i added near the end of the day near highs around $14 And i wish the story just ended here
I wish I could tell you I was smart enough to cover the following day when $XNET broke the previous day’s highs again and ran up to $16 But of course, this bag holder here wasn’t that smart I continued holding my short through eighteen dollars the next day I swear I aged five years in like two days And you can see, $XNET started selling off after $18 the next few days
I was so relieved and happy It finally sold off to $12 on December 8 One whole week after I started in my short I don’t remember my exact short average now It was probably in the mid $12
50’s somewhere around there So at this point I was green about forty fifty cents finally I had dug my way out of this bag hold But what do you think happened next? I still didn’t cover I kept on holding because I was thinking in my head, I knew I was right, this trade is finally going to go my way now This is a junk stock it’s sketchy and its definitely going to crash down to $5 dollars now
And of course the exact opposite is true $XNET ran to $15 the next day and this dumb *** finally covered I just couldn’t take anymore I hadn’t slept for more than a week, I didn’t go out, I was sized in way too big, I was mentally and emotionally drained So when I finally covered on December 11, I had lost about $3/ share
It didn’t blow my account but I had lost about three weeks worth of profit I was devastated To me, that was a lot of money Maybe one day if my channel hits 100,000 subscribers I’ll release the actual trade and position sizing But it really still pains me to think about this bag hold short squeeze
Here are my mistakes I did and I believe these are all common mistakes many traders go through everyday The biggest one is FOMO Then oversized position I added to a loser instead of a winner I bag held and gave in to hold and hope
And most importantly, I didn’t adhere to my risk management I didn’t cut the loss and just move on when it was so clear the chart is going against me This just goes back to my emphasis on risk management It doesn’t matter if you win 9 out of 10 times, if that 1 time you lose, you lose two or three weeks of profit Which is exactly what happened on my $XNET short
Most people out there love to talk about their big wins but I think there isn’t enough information out there on potential losses and how you should manage your risks Trading isn’t about making profits, it should be about how to keep it It doesn’t matter if you make $1000 today but you lose $1200 or $1500 the next day When you properly manage your risks and keep your losses small, the profits will add up quickly It really should have been emphasized in any day trading education
But most people just love to talk about big profits, super cars, and trade and travel anywhere in the world But I get it, risk management isn’t a topic that SELLS, you know, it’s not sexy to talk about and can be pretty dry to be honest I’ve gotten some requests from subscribers for a video on risk management But again, I’ll only do it if my audience actually wants to see it So comment “risk management” down below if you want to see a video on day trading risk reward and risk management
Man looking at that huge loss again is like receiving a text from a bad ex months or years later I need a beer Make sure to drop me a like for sharing this gut wrenching story of my big loss
But just like any failed relationships, there are always things to learn from it if you guys have any stories on bag holding your losing trades, feel free to share down below so we can all learn from each other and help each other out This is the humbled trader, thank you guys for watching as always And I'll see you next time
