This week's lesson.
Today I want to go over some trades and mistakes I’ve made while also talking about how to navigate stocks that are near $1.
$AETI is one of those tickers, and we see several bounce shorts in its historical chart that are all fluctuating between $1.26 and $1.96.
Because $AETI has a low market cap, it’s best to be on guard when the float starts to rotate and makes it difficult to short. Typically, when you have a parabolic stock with substantial volume, you want to size in once there’s consolidation. So, in this case, I shorted near $1.50 and covered at $1.60.
Hoping that it would fade back throughout the day, but instead, became choppy before dumping. $AETI is one of those unique scenarios because it’s so close to $1 and must remain above that to meet NASDAQ requirements; otherwise, we see reverse splits hoping to push the stock up. When working with stocks like this, I cover right above the $1 mark.
I cover right above that $1 mark because it's risky when a company is trying so hard to stay above that position.
Now, $GENE is a gap-up short that is also holding close to $1 throughout the day.
After a Friday morning squeeze that wasn’t expected, you see a gap-down come Monday because no one wanted to hold overnight and therefore created a massive support at $1 when they sold their positions. The problem with this is that there’s not much of a risk-reward, so why bother.