This is a three part story. Here is part one.
This is a couple of months into my “serious trading career”, and I won’t lie to you, I had some solid wins. Somehow with my level of ignorance and foolish confidence I had managed to put together a string of solid trades.
One which included buying Alibaba (BABA) during it’s IPO day. I bought shares of Alibaba after having had a few drinks on a golf course… Not smart, I know. I did however end up selling it a few months later for a nice profit. At this time, I was not using any chart indicators or any research. Alibaba was being talked about as one of the biggest IPO’s of the time on CNBC and I thought a company with this much hype around it is bound to sky rocket! And it did.
So with things going well, and confidence high, I was ready for the next trade! It was going to be big! and it was! Enter Cannabix Technologies.
A group of us were walking back home one day and a close classmate of mine mentioned this company that was making marijuana breathalyzer. I was intrigued. He gave me a bit of information about the company, such as how they are a Canadaian-based company, and have been focusing on making a marijuana breathalyzer law enforcement and the workplace. I did not trust penny stocks. I still do not. Neither should you. But a company that’s making a making a marijuana breathalyzer?! Imagine that! I looked at other public companies that were making alcohol breathalyzers and realized that the potential for this could be immense.
I spent the next couple of weeks looking over the company. Looking at different message boards. Believe it or not, I actually approached this one with some thought and research. I finally decided, that I wanted to jump in. I felt that they were close enough that I would have to maybe hold for a year or so to see huge gains. The stock kept building a position from low teens all the way up to mid-twenties. Then the unthinkable happened. The stock managed to jump about 300% in matter of few weeks.
Here is what went down. During the initial few days of the run, we kept loading up. Eventually between all of use we had a significant number of shares. Over time I had accumulated a significant number of shares in this company, – 200,000 shares to be exact. On Feb 10th, 2015, the stock went from a SP of ~$0.32 to ~$0.52, a 60% jump in one day, that was about $40,000 in my account. What a day! I had made more than double my yearly salary in Grad school, in matter of few hours!
I remember sitting in tutorial with my classmates, and we saw the company share price just go higher and higher and higher. I had never seen anything like this before. I couldn’t believe it. I had made my tuition in matter of a few hours!
The feeling that all three of us shared that day, I wish for all new investors. You learn as time goes on to leave emotions and feelings out of the stock market. It is a must! But the feeling that you have won the lottery is a feeling that I wish for all people. But, one must remember, that most people who win the lottery, end up broke. The reason? Because they did not accumulate that wealth, they usually don’t have any financial background and tend to make poor investment choices.
An experienced me would sell and take the profits mid-day on Feb 10th. But the old me, did not. I held on. I had no indication to sell. The stock was rising to new highs everyday. But that was a mistake. In the next post I’ll explain what happened the next few weeks and months.
Take profits when you have them, especially when you’re dealing with penny stocks. This was a case of a simply pump and dump. I was too naive to know that at the time. That is a lesson that I learned that day.