Traders are suddenly now high on Tilray

How important is accurate timing in your trades/investments? Many analysts can point to the correct overall direction of travel, but how many have you found that can consistently offer precise entries where the trade is in profit right from the off?  Or even offer precise exit strategies?

Why is that so important?  Simply because I do not want to be sitting with a position that is going nowhere (and possibly losing money); that is tying up precious capital that could be used elsewhere more usefully.  Most of us have a limited range of markets to follow and there are bound to be other markets that offer promising set-ups we could exploit – if we had the capital.

As a wonderful case in point this week for my Pro Shares service, I have been quietly following the ‘pot stock’ Tilray whose shares have been languishing for many months. It is a major Canadian marijuana producer and when several US states began the tortuous process of legalising the product, investor interest in the sector was awakened with a bang.  Previously, many investors could not see the business potential – and heavily shorted the stock.

Of course as usual, the initial bullish reaction was way overdone and the shares peaked just after its IPO in June 2018 (at $17/share) at the astonishing $300 high in September 2018.  At that time, political and medical opposition to legalisation was powerful as the remedial benefits of cannabis were resisted by the establishment, especially in the US (the monster market).

But as several US states bravely bucked that trend and allowed its use, pressure was building on the Feds in Washington to soften its stance on the drug.  Finally, after several years of pressure and mounting evidence that medicinal cannabis can play a big part in the treatment of several disorders, bills are appearing in Congress to open the way.  Of course, opening up the huge US market would be a major game-changer the pot stocks.

But with little signs of movement on that front until last week, the bear trend has attracted a huge 14% short interest.  And as regular readers know, when/if a short squeeze develops, the shares can spike up very rapidly when the mood turns.

That means with that prospect, it is best to buy just before any positive ‘news’ hits the headlines.

Here is the lifetime chart showing the desperate bear trend that produced a major new low at just under $5 on 15 March:

There was a brief flurry of encouragement early last year (but that quickly faded as Congress dropped the ball) and shares sank back to the March 14 low – just two weeks ago.  That’s a savage bear trend – from $300 to under $5 – and that reflected the lack of company profits.

But on Wednesday of last week, I believed the time was ripe for making the trade as a Buy Low/Sell High investment as the shares were moving up from the new low – here is the 4-hr chart showing my entry for Pro Shares members

And just after we bought, the shares caught a bid as it was announced several bills were re-appearing in Congress – so has the tide turned in favour of legalisation?

Of course, this could be another flash in the pan as the establishment could stomp on progress, but so long as the initial signs have suddenly turned more encouraging and given the huge potential for gains with the huge short interest, we may see a move higher similar to that a year ago when the shares zoomed up from $9 to the $67 high.

The point I want to make is that my trade was taken with low further downside potential, with huge upside short squeeze potential, and a likely imminent surge based on the chart patterns.  Those are the kinds of trades I do like!

The great benefit of getting in early in a short squeeze is simple.  We bought at $6 and the shares have moved up 50%.  Latecomers who buy at $9 would need to see a move to $13.50 to see the same 50% appreciation.  And if the shares climbed to $20, these late buyers would need to see a move to $30 to  get their 50% gain.  Obviously, the higher the shares climb, the riskier it becomes to achieve 50% (or more) gains as sharp setbacks become increasingly likely to put your protective stops in danger.

I maintain that it is actually a lower risk strategy than waiting for higher prices to ‘confirm’ the move, as so many do – and with your smaller stop, you can buy more shares than at higher levels.  Hmm.

Are markets really as mad as a March hare?

I am seeing many MSM articles where traders are expressing total puzzlement about today’s market action.  Despite these warning signs, stocks remain upbeat. Here are a few headlines:

Stocks, Oil and Gold surge on the week as yield curve carnage screams ‘Recession’

UMich sentiment slumps further in March; inflation expectations at 41-year high

US pending home sales plunge for 4th straight month

… and this seemingly perverse action is reflected in this headline

There is no real place to hide if you are a portfolio manager

… as conventional analysts, who believe the erroneous theory that it is the news and the economic data that directs market moves, are completely stumped to explain the strength in shares in the face of the mountain of negatives.

And here is one to top it all:

What madness – Stumped trader admits he is “struggling to figure out the ‘tell’ in what seems like very confusing, messy and even unusual markets…”

So how can we make money when markets are moving around like a March hare?  Incidentally, if you get a chance this Spring to catch a pair of hares in a field on one of your country walks, they skip and jump around with violent jerks as if in the St Vitus Dance.

Certainly not by following the ‘news’ (unless using it as contrary indicators), but more readily by using a well-developed technical analytical method.  No guarantees, but that puts the odds of success more to your side.

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My Pro Shares service highlights individual US and UK shares, such as Tilray, that I believe have the potential for immediate gains.  Members not only receive my Trade Alerts when I spot such a opportunity for either investment or for spread betting, but also advice on when to take profits.  Join us here.

If trading stock indexes, currencies, gold/silver and commodities including the super hot crude oil/NatGas complex, then become a member of my VIP Traders Club here.

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Is Cocoa about to heat up?

As one of my essential five-a-day stimulants, I rate Cocoa as near the top. Cocoa is one of the largest tropical ag products and is traded in London and New York.  Serious traders should keep it on their radar as it offers speculators such as ourselves a way in to the often huge price moves this commodity is noted for.  But moves are often beset by large corrections and so extreme caution is needed.

Here is the 10-year mthly chart

I have a lovely wedge pattern that will eventually resolve into either a break out higher or lower.  With the long term trend up, odds are for a higher move. 

Here is the short term picture

From the wave 1 high the market has traced out a clear five wave 1-2-3-4-5 corrective pattern that should resolve in a strong upward push.  Any break up past the upper trendline would confirm and that should happen in a matter of days.  And if so, that would be another accurately-timed trade to match that of Tilray.

The other main tropical ags – Coffee and Sugar – have seen major advances already so is it Cocoa’s turn now?