When is averaging down a good idea?

To my faithful horde of followers, yes  all three of you, I have neglected this blog of late while watching my beloved Blue Jays advance in the playoffs.  Alas now that they've been eliminated by a better (and I must say classier) team in the Cleveland Indians, I will once again get back to sharing my thoughts and ideas on a more regular basis.  

One last note on baseball, I am still a big fan of the Blue Jays, but my regard for one Jose Bautista has fallen considerably.  His remark about the young Cleveland starter Merritt, who pitched 4+ brilliant innings to start game 5....Bautista's comment was totally lacking in class.  Jose said the young lefty would be shaking in his boots at the prospect of facing Toronto's vaunted line up. Cleveland took the high road after taking the ALCS, they didn't rejoice in making Joey Bats eat his words, instead they wisely said they don't pay attention to that kind of stuff.  

That's what winners do, they let their actions do the talking and its why I'll be rooting for the Tribe.

But now onto the topic at hand, about averaging down and whether or not its a good idea.  As with so many things in life, it depends.  For anyone who might be unfamiliar with the concept of averaging down, sometimes called "dollar cost averaging", its really pretty simple.  Say you buy 1,000 shares of a stock trading for $15, costing you $15,000 total.  That same stock then falls all the way to $10. So you invest another $15,000 at $10, but now you buy 1,500 shares.  Now you own 2,500 total shares and your average cost is $12.50....if the stock makes it back to that $15 price you first bought in at, then you're making money...at least on paper.  

The devil though, as often happens, is in the details.

If you're going to average down on a stock I would suggest you better be very confident in the prospects for the PPS to recover.  Is it a profitable company?  Are you receiving dividends?  That's not to say that averaging down a speculative investment isn't a good idea, its something I've done successfully in the past myself, but it is something that requires staying on top of things in my opinion.

Firstly, did you buy the stock at a time of heightened excitement, with lots of news and heavier than usual volumes trading?  If that is the case, then averaging down might not be a good idea.  If a stock is falling in spite of bullish news and increased trading volume, it could be an indication that while the retail herd may be excited and buying, that there are other players who are obviously selling the shares being bought.  And those sellers might just have a better gauge on the future direction than the retail herd.

From where I sit there is no "one size fits all" solution to determine when averaging down makes sense, no ABC checklist to follow.  But as a general rule I do think its best to try and gauge how the market is affecting the psychology of retail players.  I am a contrarian at heart, and that means running in the opposite direction away from the retail herd.  If volumes are high and the news seems good, but the PPS of a stock is heading south, then I will ignore the advice of those who advocate averaging down.  

Now, to bring this back to baseball and tie it in.  I am a fan of the game of baseball, I loved playing the game and I love watching it.  But I'm mostly a fan of the Blue Jays, its the team I grew up with.  I know the players and their histories, with other teams not nearly as much.  But while I'm a big Jays fan I'm not blind to the negatives, like that crack Bautista made about Merritt, the young Cleveland pitcher.  

Some people will fall in love with a company and its stock, and anyone who disagrees is an enemy. The same as with sports teams. But keeping perspective will allow you to keep a discerning eye when a company you love does something that perhaps you shouldn't like.  Maybe its paying to get noticed by hiring stock promoters, or maybe its putting out fluffy PRs which are filled with hyperbole and future looking promise but nothing of material importance in the here and now.

Enjoy the World Series folks, and whether its Cleveland or Chicago it will be nice to see a futility streak end.  

Hemp Infused Beverages - An intriguing idea for Cannabis players (RMHB)

Alright, full disclaimer right up front.  I took out a long position on RMHB on Monday October 10th 2016, so the opinions I am about to express are obviously biased, I eat my own cooking in other words.  

RMHB is a penny stock trading for less than one single American nickel.  I view stocks at this level to be the ultimate risk reward plays.  Get in early and there is potential for explosive gains, come late to the party after a huge jump and you might have a long wait, and quite possibly losses if you buy in at a peak that's brought on by irrational exuberance.

But at less than 4 cents as of Tuesday's close I don't think RMHB is anywhere near the point of "huge gains", but I can definitely see the potential for that to happen.

So what's the story here.

Rocky Mountain High Brands came on to my radar in the usual way, via some chatter on a message board at the site Investors-Hangout where I participate with the username "growacet".  I am an admitted social media junkie, and truth be told something of an attention whore.  I often see penny stocks being talked about bullishly on stock boards, and usually I'll check the chart and find they've already jumped 500 or 1,000 percent.  When that happens I move on, but RMHB is trading near its 52 week low.  

So what did I find so interesting about Rocky Mountain High Brands?  A picture is worth a thousand words, and a picture posted with a message sent my wheels spinning.

Energy and health drinks infused with Hemp?  WoW!!!  I'd never even considered that as being possible.  Time to do some research.  Is drinking something infused with hemp seed extract healthy? Turns out it is, which is hardly surprising given all the articles coming out about the health benefits of Cannabis.  Here's an article on such things as Omega 3 and Omega 6 benefits from Hemp Seed Extract:

https://authoritynutrition.com/6-health-benefits-of-hemp-seeds/

I'm not going to go in depth on explaining the relationship between Cannabis, Hemp and Marijuana, those sufficiently intrigued can do further research if they want.  Suffice to say they're all from the same family, however do note that the active ingredient in Marijuana that creates the "high" is called THC, and it is not present in this drink.  

Still reading?  Okay....regular readers of this pathetic and miserable little blog (all 3 of you) know my style.  I'm not gonna start pounding the table screaming GET IN NOW THIS IS GONNA EXPLODE!!! That's not my style, all stocks are risky and penny stocks are the riskiest.  They also have the potential to make the biggest % gains of course, its the old risk reward dynamic.  

Regulars also know I'm not big on fundamentals, I consider them as being already "baked into" the PPS.  And obviously with a stock trading for less than 5 cents, you're not going to see a robust balance sheet and a history of big profits.  Hemp infused drinks are something new however, so there isn't a 20 year history here.  

The chances for a $0.03 cent stock hitting $1.00 are slim, but they're better than the odds of a $3.00 stock going to $100.00...I've seen many OTC penny stocks go from pennies to dollars, I can only recall one stock trading in and around $3 going to $100+ without having to adjust for forward splits. 

The company's latest PR came out on October 11th 2016.  The most significant development from my perspective is RMHB moving off the Pink Sheeted Gray Market and onto the OTCQB.  I consider this hugely significant because there's no filing requirements on the pinks, while the OTCQB requires that SEC filings like 10Q's and 10K's be up to date.  There are traders and investors who won't touch the Pink Sheets and I'm one of them.  In Canada I draw the line at the Venture Exchange and in the US with the OTCQB.  I won't touch Pink or CSE stocks.  

http://finance.yahoo.com/news/rocky-mountain-high-brands-moves-130000972.html

Note that the company has a stated intention of moving off the OTC altogether and onto the AMEX exchange.  Yes I know its no longer called that but I'm old and will always refer to it as the AMEX. If you're reading this and thinking of RMHB as a possible long term play then I would advise you to expect a Reverse Split.  In my opinion if they're going to up-list the shares to a senior exchange, a share consolidation is an almost certainty to meet more stringent bid price requirements.  

I've identified a number of stocks on here over the past four months that have made some big jumps in a short period of time and I very much like the chances for RMHB to do the same.  If it does I will remind everyone of my favourite little bromide:  Nobody ever went broke taking profits.  

I'll leave you with the chart.  If the PPS gets over the 200 DMA I don't see it hitting resistance until the .06 to .07 cent area.  Assuming that happens then a 50/200 DMA Golden Cross would be in the cards and could signal a potential blue sky breakout.

Comments are welcome so long as they're respectful and without profanity, even bearish opinions are okay.  A market requires both buyers and sellers after all.  

Cheers and good luck.

Vuzix - Does history matter?

You'll often hear bulls advocating that a company's past performance has no relevance, citing the oft repeated line that "its all about the future".  And usually they'll be talking about a company that is in a hot sector, or one that is expected to be hot.  And typically the reason they recommend ignoring past performance is because the company they're bullish on has a bad history.  And this is doubly true when you're talking about OTC penny stocks.

But wait, Vuzix which trades under the symbol VUZI, it isn't an OTC penny stock, it trades on the Nasdaq and shares are currently trading for around $8 per.  This is true....but.

VUZI "was" an OTC penny stock until January of 2015 when it uplisted to the Nasdaq exchange. How does a penny stock get off the OTC market and onto the Nasdaq?  An investment by Intel helped the company meet the capitalization requirements of the exchange, and a 1:75 reverse split announced in February of 2013 helped them attain the minimum bid price requirement.  

VUZI ended 2012 trading around $0.05 cents per share.  On February 6th 2013, after the 1:75 share consolidation the PPS closed at $6.38 or about .08 adjusted for the consolidation.  

As of November 19th 2012 Vuzix had over 265 million shares issued and outstanding according to the company's SEC filings.  After the 1:75 share consolidation that number was reduced to a little over 3.5 million as reported in the firm's March 2013 10K.  

Was Vuzix's history of issuing shares about to come to an end?  

In October of 2013 they announced receiving funding from DARPA and the shipment of optical systems to the U.S. military.  

http://ir.vuzix.com/press-releases/detail/724/vuzix-develops-and-ships-next-generation-holographic

That's one thing that appears to be pretty much a constant with Vuzix, (that along with dilution of course), a seemingly unending supply of exciting and bullish sounding news that continues right to the present day.

Of course it seems the DARPA funding wasn't sufficient as the company revealed in its November 2013 10Q filing that outstanding shares had grown to over 9.5 million, more than doubling where they were after the recent reverse split.  

And so it continued.  By April 9th 2014 the number of shares had climbed to 10.2 million.  By November 2014 over 11.1 million, and over 15.8 million by March of 2015.  As of August 15 2016, as per the most recent 10Q filing the number was up to over 17.3 million.  We'll see if the dilution continues in the filings to come.

Since effecting the 1:75 reverse split, with every 75 shares of VUZI becoming 1 share post consolidation, VUZI has gone from about 3.5 million shares to over 17.3 million, almost a 500% increase.  Adjusting for the reverse split that equals roughly 1,035,000,000 pre consolidation shares....over 1 billion.

After almost 20 years, coming up on their 3rd decade of existence as a company....some seem to be expecting this leopard to change its spots.  Not me though, that's why I took out a position on the short side when VUZI was trading north of $9 at the start of September.

However I fully expect there to be promotional outfits touting an investment in Vuzix, and social media pumpers galore using any port in a storm to encourage buying and holding tight.  And I further expect them to all be saying that the past doesn't matter, but then its always thus with penny stocks...and while the 1:75 reverse split may have helped them get off the OTC I for one won't be shocked to see them back on the pink sheets in the future.  

(RVX.TO) Golden Cross - Will history repeat?

For those unfamiliar the term Golden Cross, (GC) refers to a technical event involving the 50 Day Moving Average, (DMA) crossing over the 200 DMA.  Here's what it says at Nasdaq.com:

"In the trading world, a Golden Cross occurs when the 50 day moving average rises above its 200 day average. This is typically a telltale sign of bullish sentiment for a stock...".

That is certainly what happened the last time RVX had a GC with the PPS exploding from less than $1 at the start of March 2015 to up around $1.80 by the middle of that same month.  Whether you're looking for short term momentum or long term appreciation, gains in excess of 80% are hard to ignore.  Here's a chart showing RVX's trading at that time.

Now of course RVX is not trading for less than $1 CDN.  The current Golden Cross happened with RVX trading at $2.05 CDN.  If it were to go on and make similar 80% gains in the coming weeks that would put the PPS up around $3.60 CDN.

Here's the current chart showing the Golden Cross which just occured:

Are there any anticipated catalysts that could reasonably be expected to lead to these type of gains? I believe there are.  Firstly the company is scheduled to do two investor presentations, one next week in NYC at the Yale Club and the second a week later in London.  There was a PR about it on Tuesday:

http://finance.yahoo.com/news/resverlogix-host-research-development-featuring-110000544.html

And beyond that the company's CEO has stated that the company will be announcing a second licensing/partnership deal "soon".  The first such deal was announced last year and was likely responsible at  least in part for the climbing share price in early 2015.  

American readers take note, Resverlogix trades on Canada's big board TSX and is fully reporting,  In the United States it trades on the OTCQX market.  Not all OTC stocks are created equal, the OTCQX includes many fully reporting companies that are listed on foreign exchanges.  

Full disclosure, I am a shareholder in RVX so my opinions should be considered as heavily biased, in fact I added to my position today (Tuesday Oct 3, 2016) and hold what I consider to be a substantial (for me) position.

Cheers and good luck

Price prediction for RVX.TO - $3.00+ by year's end...

Please understand that I am offering up an opinion here on a stock that I have, (what I consider to be) a significant position in.  I eat my own cooking in other words, but with that being said it is obvious that my opinions are extremely biased.  

I typically don't offer up predictions for a stock price, so much can happen.  I prefer referring to market capitalization because dilution can come into play, especially with speculative companies like Resverlogix.  The reason I'm putting a price target prediction out now on RVX.TO is because of the technical picture, and I actually think $3 by the end of 2016 may prove to be incredibly conservative, and I sincerely hope it is. 

RVX.TO is setting up for a golden cross.  Strictly speaking a golden cross happens whenever a faster moving average moves over a slower moving one.  The 200 DMA moves slower than the 100, the 100 moves slower than the 50 and the 50 moves slower than the 20.  So a golden cross can involve the 20 DMA moving over the 50, 100 or 200 DMAs.  

But the goldenest (if that's a word) of golden crosses occurs when the 50 DMA crosses over the 200, especially if the 200 DMA is also moving higher when the cross happens.  And that's what setting up for RVX.TO right now (and for RVXCF as well).  The 50 DMA for RVX.TO is currently at $1.32 and moving higher and the 200 is at $1.39 and has also started to climb slightly.

The last time RVX.TO saw a 50/200 Golden Cross was in March of 2015, and all you have to do is look at the chart to see how the PPS reacted just before and after than technical event.

The difference this time is in the starting point.  Back in early 2015 when that Golden Cross was setting up in late January and early February the PPS was less than a single dollar Canadian.  Now the PPS is around $1.70 after recently trading over $2.  Take note that back in 2015 when RVX ran from less than a dollar to up around $3 that it wasn't a straight line.  There were periods where the PPS retraced significantly before resuming the upward climb, just as RVX.TO has seen the past three trading sessions.

The golden cross in 2015 happened prior to the company announcing a licensing and equity agreement with China based Shenzhen Hepalink Pharmaceutical.  Resverlogix's CEO reaffirmed that the company will be announcing a second such deal on September 13th just passed.  It is my opinion that expectation surrounding this second deal, that it is driving the current move we've seen with RVX.TO climbing off the $1.20 - $1.30 trading range it had been in for the past several months.  

Last year's climb to $3 was followed by a slow steady decline.  Is there reason to expect, that if it does, once again, get back $3 and perhaps even higher, that it will be followed by another long period of decline?  While I think that is certainly possible, I also think things are much different as we head into the end of 2016 and the start of 2017.  The biggest difference is in terms of the phase III BETonMACE trial seeking to prove that Apabetalone will reduce the incidence of Major Adverse Cardiac Events (MACE) in patients suffering from Diabetes Mellitus.  

Back in March of 2015 the BETonMACE trial was still over 6 months from starting, now heading into October of 2016 that trial has been running almost one full year.  And the company just recently received a positive recommendation from the independent Data Safety Monitoring Board for the continuation of the trial.  

There are no potential rewards without the potential for big risks.  Biotechs are almost akin to firecrackers.  They can give off a spectacular bang, such as when a buyout is announced, or they can fizzle, such as when a trial is halted.  

The comment field as always is open, but it is moderated so please keep it polite. 

ATB's take on the U.S. Presidential Debate

If my legion of loyal fans (enough to fill all the seats around a table at a local coffee shop, with maybe one or two empty chairs) are curious as to my take on Donald versus Hillary...I won't make you wait.  I think Donald Trump won on points.

If you're curious about Joe Retail's politics, well here they are.  I'm a Canadian (as most already know) and I define myself as centre left (in Canada we spell center, centre).  I consider myself a fiscal conservative but socially progressive.  In my home and native land I have voted both left and right, I am not partisan nor am I dogmatic.

So why do I think Trump won?  

Simple, I think there are an awful lot of Americans (and the same is true up here in The North) who have watched their standard of living decline over the past few decades, and I believe Donald Trump spoke to that constituency better than Hillary Clinton.  Early on when Donald rattled off the names of swing states like Ohio, Indiana and Pennsylvania...blue collar and hard working, and spoke about the jobs they've seen heading to countries like Mexico and China, I think he scored big.

Hillary did land some nice blows on Donald however, especially on the issue of taxes and the fact that he pays very little or nothing. ''Because I'm smart'' was his retort.  But I do think a lot of Americans see crumbling infrastructure, underfunded schools and veterans not getting the support they need and other areas of under funding, and they have to wonder why a guy who is so rich isn't chipping in his fair share like hard working wage earners are.

But overall and in the final analysis I think Trump's message and branding of Hillary Clinton as a ''hack'', and the architect of so many of the United State's problems...I think it was effective.  It wasn't a knockout, that rarely happens in debates.  Those who supported Hillary before the debate, I doubt he brought many (or any) to his side.  But likewise I don't think those who supported Donald before the debate were swayed to switch camps either.

Now to bring this back to the markets....I do think Trump is right about the overall markets and interest rates.  I do think the Fed has to move very cautiously on rate increases because raising the cost of borrowing too much or too fast could have a disastrous impact on both the equity markets and the overall economy as a whole.

November is going to be interesting, but ultimately I expect Clinton to win.  Donald Trump is an outsider and just as the DNC rigged their nomination to ensure a Clinton candidacy I think the same will happen in November to ensure she is occupying the White House when Barack Obama leaves.  I forget who said it but the line goes something like this....its not who casts the votes that matters, but who counts them.

Peace out.

Sunday thoughts - Who exactly is 'smart money'?

Its Sunday, and unlike last week I made it to Church today.  The readings were from Timothy and Luke.  The first being the passage about the love of money being the root of all evil and the second was about Lazarus lying at the foot of a rich man's door with dogs licking his open sores...yes, there wasn't just one Lazarus in the Bible.  Lazarus goes to heaven and the rich man is sent to Hades, crying out to the God of Abraham but he gets no consolation, he had the good life when he was alive.

Hardly the backdrop for a blog about the stock market, where most (and probably all, myself included) invest and trade with the goal of getting rich, or richer as the case may be.  

Our Pastor's sermon was about doing good, its not money that is evil but the love of money.  The rich man who left poor Lazarus outside his door to feed off the crumbs of his table, he could have shown him some kindness, invited him in...and now that the rich man is dead its too late.  The message was ''do good'' don't wait, don't make an excuse.

Ahhh to be rich, to have the money at one's disposal for whatever one wishes.  The markets almost worship wealth, and some investors will choose to put money into a stock because they're following a billionaire.  If social media is any indication many ZIOP investors stormed into that equity based on the involvement of billionaire R.J. Kirk, I myself took a flyer on another biotech based on Mr. Kirk's involvement, TBIO.  

Sometimes following a billionaire doesn't work out.  Investors who based the decision to buy Sandridge Energy based on the activist position of Leon Cooperman know that all too well, myself included among them.  Resverlogix, a stock I've written about here several times has the backing of billionaire Kenneth Dart, as does another biotech PPHM.

It would seem that having a big player as a backer is no assurance of success, even billionaires get it wrong from time to time.  So should we perhaps not include deep pocketed players in our definition of  ''smart money''?  I will suggest that no....we should not.  ''Smart Money'' players don't have to be billionaires or even millionaires by my definition.

So what is my definition then of a ''Smart Money'' player?

I will offer up what I consider a prime example, and although it is fictitious and from a movie I do believe instances like this occur.  

Younger readers might not be familiar with the movie 'Trading Places' starting Eddie Murphy and Dan Ackroyd which was made in 1983.  I won't bore you with a plot summary, rather I will include a scene available on YouTube.  

In this scene two old gentlemen, the Duke brothers, believe they have in their possession an early copy of a report on the orange harvest.  Their report tells them that the orange crop has been severely damaged by a harsh winter.  Looking to capitalize on this information they instruct their trader to start buying right at the opening bell and to keep on buying.  ''Don't worry if the prices starts climbing, just keep buying''.

What the Dukes don't know is that their copy of the report is doctored, and that the harsh winter didn't damage the orange crop.  Billy Rae and Lewis (Murphy and Ackroyd) are the reason the Dukes have a doctored report and instead of the Dukes getting rich they are financially destroyed.

So what's the point?  The manner in which the Dukes act is the way I think ''smart money'' acts, with bold confidence.  And just like the two traders who see the Dukes open their window on the trading floor and watch them eyeing their trader in the OJC trading pit....I think it can be possible to discern this ''smart money'' buying activity.  Not from the trading floor, (which has now been replaced by automated trading) but rather from the chart.

Take note however, the Dukes didn't issue a PR announcing to the world they were going to boldly buy up OJC futures, that would not be smart.  In today's world, if you were 100% confident that you had the inside track would you announce it to the world, spreading messages all over the internet and sending out emails?  No....I don't think so either.  If you did everyone would be buying with hardly any selling and your chances at profits would disappear.

I know in the movie the crop report the Dukes have is wrong....but that's Hollywood.  The guy they paid for it had it stolen and was then dressed up as a gorilla.  As the Dukes are going bankrupt their spy is being sent to Africa to be introduced into the wild gorilla population.

I've belabored this point long enough.  The smart money (no matter whether they're uber wealthy or not) buys with extreme confidence, and that confidence shows up in price and volume movements in a chart.  But note that if those price volume movements come in tandem with lots of Promotion, News and Hype....well then its almost certainly not smart money players but the dumb herd moving in.

Now to tie this in with my Pastor's sermon today....If you make some money in the markets, pay it forward, do some good, we're only here for a short time.  Money is not the root of all evil, the love of money is.  Money can do a lot to ease pain and suffering that exist in our own back yards.

Disclosure, I have long positions in TBIO, RVX and PPHM.  With ZIOP I have placed my bet on the short side.

Good luck