From the time I took a loss on LAKE, as well as a large NDRM loss early in 2015, I've been very good about avoiding the frontside of large runners. I was letting stocks spike, exhaust themselves, and THEN I would strike. This spring, VLTC was one of the most ridiculous short squeezes we've seen in quite a while, and I managed not to twist myself badly on that one at all! I was incredibly proud of myself.
Then, in the last couple of weeks, my habits began to change again for the worse. I had an early short on VGGL that I chose to get stubborn with, but my stubbornness was rewarded as I came away with a nice gain instead of the loss I deserved (I was down $40k at one point.) I can't remember the other example, but I know that I was stubborn on another and was rewarded with a nice win. Point being, I fell back into bad habits, and those bad habits were reinforced, unfortunately.
The other factor that set the stage for my recent loss was boredom. I've been on a very nice run the last six weeks, finally feeling back in my groove. This week started out SLOW. I spent most of each day staring at the screen looking for plays, and I could find nothing major that I liked. So, naturally, I became impatient. I tried to manufacture my own plays. This is where my problems started on PBMD.
PBMD was quickly through $5 before I knew what had happened, and my unrealized loss was ballooning. After topping out at $5.48 and having a hard pullback under $5.00, I decided to try one more time into the rebound. I added large once again, risking off of the $5.50 area. Once again, PBMD ripped to new highs. At this point, I was mentally done. I cut everything into the strength, quite poorly, as I didn't even get out at $5.50. My covers were closer to the $5.80 area.
When all was said and done, I had a $188,000 loss on PBMD. I managed to recover a little bit of those losses before close, but below, you can see the end-of-day damage:
I actually had quite a few nice short entries into pops over $6.00 the last few hours of the day, but I fell into a homerun mentality and wouldn't pay myself into dips! I had a chance to minimize the damage, but I failed.
To recap, here are the mistakes I made:
- Shorted on Day 1 of a runner into close
- Decided to average up and fight rather than cut the loss after large gap up
- Ignored massive volume
- Made assumptions about how high it could or couldn't go
- Refused to cut entire losses on adds that didn't work
- Went for the "Homerun" and revenge on late day trades