This week's lesson.
And today I want to talk about $MBOT and how I made $136,000 on this live account. $MBOT started the afternoon with no real support and pullback; it just presented option after option, so I attempted to short at $4.20 and covered at $4.40.
I shorted again after the breakout and took a step back due to how crowded it was getting.
We know with crowded stocks how likely it is for them to go much higher, especially on micro float, and we can use $STAF as a very similar pattern. Looking at $MBOT further down the line, we see it run straight up to $19, and because of this, I want to see the stock consolidate and trap some backorders. People will chase this ticker solely because it has options, but we need to wait for the consolidation because the previous day didn’t show that support, and that’s why I shorted into the $17’s without being afraid to cover.
When you’re looking at a multi-day runner or a ticker that’s super overextended on micro float, there are two things to consider: volume and consolidations. Ask yourself, how much volume has been traded, and are there consolidations or not?
Consolidation traps backorders, and volume can explain how many backorders are in a specific area.
We use this information when finding the best entry, which can take several days.
Now, $MBOT had an offering in the pre-market, which typically means the stock is dead when looking at a low float; however, the initial drop bounced off the mass panic. When trading as the market opens, you need to be aware of this possibility because even though the bounce is a bearish factor, the stock may have a bullish pattern. Your mindset may be to short harder at first, but as this stock unfolds, it’s likely to reverse on you.
And it’s good to be cautious of that ability. We can see this reverse happen near the $10’s before making that jump to $20. When we see the consolidation start, many think it’s a break out when actually it’s a fake-out. Many found themselves trapping $18 when they thought $MBOT could push upwards of $100, but as the consolidation continues, the momentum cracked, and that’s exactly where you want to size in.
The thought process with this entry is that people are starting to panic when all of their averages are around $17…
…and the chain reaction of selling positions begins. After watching this consolidation happen for hours, you will trap loads of backorders because $MBOT is a micro float. After watching this consolidation happen for hours, you will trap loads of backorders because $MBOT is a micro float. I shorted $MBOT at $17 and risked near $18, putting my risk at $1.20 of the total $17, which isn’t even 10%.
Once we see this breakdown, you want to add and then draw your average down to roughly $15-$16. Now you can risk this massive consolidation and can move your average. Initially, I risked $18 and added risking $17 due to the breakdown, which will allow me to size a little bit more once I get confirmation and take my profits on the way down.