Full disclosure: I missed this former supernova and short squeeze trade on ASTC … for a number of reasons.
In any given stock, there are factors at play that are much, much larger than me … like the growing trend of uneducated newbie short sellers.
And sometimes as a trader, you have to make judgement calls. So even though I missed this trade, I’m OK with it. Because I remember to focus on the big picture.
These short-sellers are the main reason for the massive increase in supernovas that have created fantastic opportunities for my long-biased students.
Let’s break down this trade and why I cut losses quickly…
Astrotech Corporation (ASTC) Short Squeeze
On November 14, I bought Astrotech Corporation (NASDAQ: ASTC) in the morning for two reasons: its press release and its history as a former runner.
I’m a fully transparent trader, so I’m not afraid to admit I lost money on this trade.
I started buying ASTC in the $1.60s, but I had to cut my losses quickly because it had a very weak bounce. After commissions, my loss was only $160. That’s a very recoverable amount of money. This is exactly why I always preach to cut losses quickly.
But even though I lost money, I was on the right track. ASTC’s big breakout happened around 11 a.m. EST — a little later than I anticipated. Its most significant breakout happened around 11:30 a.m.
Even if I bought it when I did in the $1.60s … best-case scenario … I would’ve sold this in the $1.80s because of the morning double top. Unfortunately, I ended up selling near the day low, but that happens. Instead of breaking out, this could’ve dumped hard. Better safe than sorry.
RIP ASTC Shorts
I’ve mentioned before that short-sellers are large catalysts for supernovas. That’s exactly what happened with ASTC. The early and aggressive short-sellers got squeezed on ASTC, which caused its big breakout.
I got a lot of messages from short-sellers who either aren’t my students or were former students. They say…
“Sykes, give it up! All penny stocks crash eventually.”
They may be right, but that’s not the point. It’s impossible to know how high short squeezes will spike before they eventually crash. Sadly, a lot of these wannabe short-sellers follow newbies who haven’t studied enough. These newbies make assumptions and lead their followers to ruin.
I got like 20–30, maybe even 40 messages on November 14 from people shorting ASTC in the $1.70s, $1.80s, $1.90s, and covering in the $2.20s, $2.30s, and $2.40s.
Shorting these morning spikes is dangerous, and often, you’re just too early. If that’s you, you’re dumb and you’re wrong. You don’t know how high the stock will go.
ASTC only ended up going to the $2.60s, so if you shorted where I was buying, you would’ve lost around $1.00 a share. What if ASTC would’ve gone to $3.60? If things got wacky, it could’ve gone to $4.60.
If you’re short selling, RIP. My prayers go out to you.
Don’t Short High-Volume Penny Stocks
ASTC traded nearly 30 million shares on November 14, and most of it was shorts getting squeezed.
If you really wanna short stocks, you gotta learn to be a little more patient. There was an opportunity to short in the afternoon.
I don’t know why so many short-sellers like to go in early. I guess that’s probably when there are shares available to short — that’s the problem with shorting these days. You grab the shares early, and you have to risk some pain.
Problem is, you don’t know how much pain you have to risk.
If you have a six-, seven-, or eight-figure account likes some big short-sellers do, then you can maybe keep adding to your position and eventually be in the green.
That’s why some people on Twitter like to say, “Look, shorting is so easy!”
Yet, the vast majority of new traders don’t have large accounts. They don’t have a lot of experience, and they can’t average up. So … they get crushed over and over again.
Using Proper Risk Management
I literally sold at the worst time on ASTC. But I had such a busy day, and I always stick to my #1 rule: cut losses quickly. So even though I was on the right track, I was in too early, and I paid the price. I can accept that.
I bought ASTC in the $1.60s and there was $1.00 a share of upside. As it turned out, there was only 10 cents of risk to the downside. That’s a damn good trade!
Even though I took the loss, there was roughly 10 times as much upside as downside. If you can get into stocks that have a 10–1 risk/reward … and you do it over and over again … you can become a profitable trader.
Sometimes you’ll lose the 5 or 10 cents, but sometimes you’ll make 50–70 cents …. or even $1 a share. Over time, these singles add up.
Too many people only judge a trade on how they did on it personally. Instead, I want you to watch how the stock performs after you exit. There’s always room for improvement. Maybe you didn’t even trade it or you didn’t make any money. That’s not the time to ignore a great trade. Study it, learn from it, and prepare for the next one.
Why Is ASTC a Good Setup?
ASTC is the kind of chart I want you to start thinking about.
I gave a Trading Challenge webinar on November 14 about the ASTC setup, but I think it’s essential for everyone to understand.
Forget about the short squeeze for a second, forget about the absolutely terrible 100-day chart. And the awful 200-day chart for that matter.
But if you go out to two years, ASCT spiked from the $2s to the $5s in two days. It also had a one-day spike from the $1s all the way to the $8s. It came down and spiked a third time from the $3s to the $6s. Then a fourth time, from the $3s to the $5s. That’s why it’s essential to look at multiple time frames.
Throughout 2019, it’s had a tough year and been in a continuous downtrend. However, the stock has four clear examples of large one-day spikes. So this is classified as a former supernova.
Unfortunately, it didn’t hold this latest spike well. Clearly, the chart’s indicating something’s up … maybe the company is going bankrupt or needs financing badly. So it’s not a huge surprise the spike didn’t last. But a lot of short-sellers who shorted too early and the people who didn’t believe in its spikeability ignored what happened in 2017 and 2018.
If you actually go back and look at the press releases from the previous days it spiked, the press releases are very similar to the press release that caused its latest spike on November 14.
The first spike in 2017 was for ASTC testing the product, the next spike was for European approval, then for U.S. approval and then for more testing of the product. All the press releases were related to one product, but the question remained if the product could actually be used in airports.
Today, we finally got the answer. The product is being used in, of all places, my home, the Miami airport.
Always Check if a Stock Is a Former Runner
A lot of people ask, “How did you know ASTC was going to be such a large winner? So many penny stocks have morning spikes and just fail…”
Again, four times in the past two years, ASTC had similar news producing a massive spike. And yes, by the next day, it did fail. But, knowing that there are so many over-aggressive short-sellers these days, you can buy stocks with predictable long setups and get massive spikes on short squeezes.
When a stock like ASTC spikes … please lock in your profits.
I’m very proud of a lot of my students. Many students got long ASTC, and some of them got in too early like me. But some of them made 10, 20, 30, 50, 70, or even 90 cents a share. I don’t think anyone made a full $1 per share … that would’ve been perfect timing. But they took the meat of the move and locked in gains.
If you make that kind of money, 10%–40% on a play like ASTC, it’s not random. It’s not gambling, nor is it luck. It’s predictability.
How to Prepare for the Next ASTC Play
I encourage you to go back and read all the press releases that spiked ASTC in 2017 and 2018. The more you read this information, the faster you can understand which press releases can move a stock.
With ASTC, the price action was very similar to the previous runs … The only difference was that it didn’t spike right when I bought it. It spiked 30–45 minutes later, but trading isn’t an exact science.
But unlike a lot of newbies who get discouraged because they lose money only for the stock to do precisely what they wanted, I’m encouraged.
I’m encouraged ASCT spiked $1 a share. I generally prefer OTC stocks because they have cleaner charts, but ASTC was a reliable long trade. And I plan to take similar trades again when they present themselves.
Recent Tweets, Comments, and Trades From Students
Here’s a look at some of my students’ recent comments in the chat rooms and on Twitter…
Fall is in full effect and the market is hot! There are plays nearly every day now that the summer lull is over…
There won’t always be great plays, but when there are, make sure you’re part of the 10% that’s prepared. To help you with the fundamentals, check out “The Complete Penny Stock Course” book, written by my awesome student Jamil Ben Alluch. This book summarizes my best lessons.
From the Trading Challenge Chat Room
11:01 AM RouxBourbon → MichaelGoode: regarding 11am as a time that matters, the spike is $ASTC. Do you think that was people or a person exiting because of that time approaching?
11:00 AM Huddie: $Astc impressive
11:30 AM redwagonrider: congrats to anyone who bought $ASTC consolidation above resistance. paying off here!!!
11:51 AM redwagonrider: $ASTC mentor trade analysis would have told me that a break above morning high of $1.87 that continues to hold and prove itself has the potential to continue to spike. Gotta stay disciplined
12:35 PM greenking49: $astc watching to see shorts getting squeezed later potentially
1:20 PM markcroock: $ASTC has not been a multi day runner in recent history no recent to believe it will change this time around
2:17 PM arturoil710: $ASTC the long was this morning when early shorts were getting squeezed
More Comments From the TimAlerts Chat Room
9:37 AM Anigai: Testing a new stratagy today for things like $ASTC & $JPEX
Whenever testing a new theory or strategy, don’t trade it right away! This is why I always tell my students to paper trade using StocksToTrade.
9:46 AM Jaykian720: $ASTC nice news but it’s only part of their testing program, i.e. Miami are deploying many different companies’ systems
9:50 AM Anigai: $ASTC Glad I chose a watchday. Perfect lesson from Tim as well. 2% better today so far i reckon
10:17 AM EAdapon: $ASTC looking good now. formed ascending triangles below 1.65
11:36 AM Lpena1214: $ASTC looking good but chasing midday spikes never ends well for me
More Comments from the TimAlerts and Trading Challenge ASTC Video Lesson
8:31 AM ibrahimaagne19: wow it pays to be prepared thanks for the example Tim!
8:37 AM asfricksrs: Thanks Tim, great recap of your trade w/pearls of knowledge/wisdom .. thanks for keeping it Real.
8:40 AM TonyG1: tks Tim Good Lesson! Capturing the meat of the move man! Thats what I aim for with each and every trade. No need for greed in this game!
8:41 AM Anigai: Very grateful for this video lesson Tim. I’m somewhat sure I seen $ASTC before you which shows I’m making the right moves in my education, really starting to feel like I’m making progress now even if I decided to only watch $ASTC and not trade. I promise to take the meat of the move.
11:07 AM greenking49: Great lesson here on ASTC!
Last, Some Great Tweets From My Students:
First Day of live trading, had 3 trades completed on $ASTC with only 1 day a success the other 2 were bad trades but took home.50cent more then I started with
*Small trades but BIG lesson*
Thankyou @timothysykes for all you have taught me..? pic.twitter.com/TMOwRgtlrJ
— Ivan Sweeney (@Ivan_Sweeney) November 14, 2019
didnt stick to my plan all the way, but i am still getting better and learning everyday! still a FGD, stress-free trade and i cant complain about 15%! in 500 shares @ 1.925 sold half @ 2.11 and the other half @ 2.33 on $ASTC @timothysykes i feel bad for people who doubt you ?
— Sedrick Childress (@r0ckstartrader) November 14, 2019
My almost perfect trade on #ASTC. A great trade after 4 back to back losses. Couldn’t have been a better morale booster. Thank You @timothysykes. I spent the last couple of weeks going through your videos on YouTube again and again. Went in at $2 (100 shares) and exit at $2.35.
— Vishal Rao Venkatesh (@venkateshvishal) November 14, 2019
[Please note these results are not typical. These traders have exceptional knowledge and skills that they’ve developed with time and dedication. Most traders lose money. Trading is risky. Do your due diligence and never risk more than you can afford.]
What do you think of former runners and short squeezes? Comment below, I love to hear from all my readers!
The post Former Supernova and Short Squeeze: Key Lessons From ASTC appeared first on Timothy Sykes.