Got into this stock recently at 4.5-6 range. 0.08 earnings, next quarter going to be better sequentially.
1.5 years cup with handle breakout. 22m volume on earnings breakout day. Currently already on 28% profit.
This is the classic and the only set up that I trade now that consistently makes me money.
Coda Octopus (NASDAQ:CODA): Q2 GAAP EPS of $0.18 beats by $0.05.
Revenue of $6.78M (+92.1% Y/Y) beats by $0.41M.
Huge Volume Breakout, Low Float of 3M, History of big moves.
“We have also completed the purchase of our new facility in Orlando, which includes offices, Research & Development labs, and manufacturing facilities. This will serve as our R&D and manufacturing hub for ongoing U.S. Defense development projects, such as the DAVD-HUD. We also continue to expand the human resources that we employ in our Orlando location”
I have entered at 12.1. All looks good for now
One of the guiding principles of my trading this year would be to keep my losses short.
No trade with loss of >10%
No trade risking >2.5% of my capital.
Position Sizing
When i wanted a bigger position in an episodic pivot, i would aggressively average in while moving up my stop, keeping my account risk less than 2.5%. This has worked out brilliantly when i discovered winners like GSB and PDEX, i had more than 60% of my account on these trades.
On the other hand, when trades do not work for me at the go, I tended to cut my losses more quickly. There were several times when i was too eager to enter a trade as i was sitting with cash most of the time waiting for an opportunity and I got impatient. Still, by keeping my losses short on these trades and having a smaller position size as i did not average in, i was able to limit my drawdown.
The image below shows my 3 most recent losing trades which I rushed into because they had a gap up. In reality, their fundamentals were only decent but not spectacular. Ignore the lack of headings, but the main point would be their small percentage losses.
This is a snippet of my google sheet which i have been using to calculate my stops and position size. In accordance with my rules. I have found this to be useful in my trading. One definitely has to know how much you are risking at every trade and this sheet helps to calculate it for me.
I am only right 50% of the time, but because my winners are approximately 5 times my losers, I could afford to have some losers in between. But on hindsight, these 4-5 such trades could have saved me some money as i shouldn’t have entered them at all.
Examples of losing trades that i should not have entered.
REI was not even a proper gap up. No base. below the 200dma and below all major moving averages.
Same for CRC. well below 200dma. earnings werent even that great.
My account is up 67% as of current while limiting my risk greatly this year. I am now more sure than ever that my strategy works, even in bad market conditions. I just need more patience to execute my strategy.
The bads.
There were a few great winners that i somehow sold too early. These stocks would easily have turned my portfolio into three-digit gains.
INS – I bought on the pullback to 50dma but sold 1 or 2 weeks later because I was impatient and it was going nowhere. I sold because i was so used to buying breakouts, where one is either shown a profit or loss immediately. I should have gave it some leeway to undercut the 50dma. The stock then proceeded to more than double without me.
BOOM- I have a selling rule to use the 10dma as a selling rule, ONLY if the stock has stayed above it for 7 weeks (gil morales and chris kacher rule). Yet i wanted to lock in a quick gain and sold it when it breached the 10dma. What I should have done was use the 20dma (if stock find supports there) or 50dma.
Conclusion
Made several mistakes in the first half of the year. INS cost me greatly, but still great results overall. I currently have two promising positions in LGL and CTHR which showed immediate profits (signs of a good trade).
Have been focusing on the same setups this year. A good sign would be the trade showing immediate follow through and profit. Sold GSB for nearly 50%.
Looking for 30% for LGL and CTHR.
I am back after a hiatus from trading..
I return here with a potential superstock to write.
SuperCom Ltd. provides identity, machine-to-machine, cyber security device, payment, and connectivity products and solutions to governments, and private and public organizations worldwide.
Earnings Winner
our net profit improved to $1.6 million or an earnings per share of $0.11, an improvement from non-GAAP net loss of $2.5 million, our earnings per share of negative $0.17 per – in Q3 of 2016.And net profit of $0.2 million or $0.02 per share in the prior quarter.
Stock is having a breakout quarter, year over year, and q/q sequentially.
For the third quarter of 2017, our revenue grew organically by 89% from Q3 of last year to a record $9.6 million and 28% from the prior quarter.
“For the first nine months of 2017, our revenue increased 69% to $25.5 million compared with the same period last year”
Guidance for the year is above 35M. Management tends to give guidance only if they are confident of hitting it. That means Q4 will probably hit over 10 M.
Given the margins expansion and cost reduction initiatives -> “We are continuing to see significant operational efficiencies gain traction as to continue integrating realizing synergies from our acquisitions. “, we are likely to see sequentially higher Q4.
” think that what we saw in the third level is going to be almost a final G&A level we believe and also sales and marketing we have done in the efficient process optimization of all the – we acquired and I think that going forward we’re going to see similar level for SG&A going forward”
With that, much of the new revenue, will very much fall to the bottom line and we will see a explosion in EPS growth if revenue can follow through.
moving on to the technicals, Breakout on earnings was a whooping 12 Million. The float of the stock is only around 10 millions. There is significant interest in the stock.
Stock was also in a nice low volume base, which sets the foundation for the current advance.
SPCB has been abit choppy since the gap up, but ultimately still showing signs of demand. I bought on the day of gap up at the open. And added my position today as volume dried down to 40k in the recent two days.
Other things i like include
Insider ownership of 22%
Undervalued
Relatively low float
Assuming SPCB earns 0.11EPS (low estimate) for the next 3 quarters, that would gives us 0.44 EPS for the the year.
If it can hit PE of around 20, that would be a $8.8 price target for this stock. Almost double from the current price.
Out at 7.2. Peak price for CETX was 8.4.
Still, no regrets, made a decent gain in short period of time.
Trading isn’t about trying to pick tops or bottom.
CETX, up around 52% now. Really explosive price action due to combination of high volume and low float. Precisely what superstocks are about.
Amidst my bullishness, there are some red flags about CETX.
That said, i still believe this is a great stock. i am happy with my current gain but i want to free up capital for the upcoming earnings season. Currently Waiting for the 10DMA to catch up to act as a stop. Might even use the 5DMA as a selling point depends on how the stock acts around it.
I got into this stock just about a week ago. AND IT IS HUGE. Up 26% in a week.
What i saw prior to entry
Fundamentals
Company reported a 0.23 EPS vs 0.07 EPS on a YOY basis, beating estimates (0.15) by 0.08 or 53%. Tripling of EPS is HUGE.
Sustainable increase in earnings growth from acquisitions
“This past year we were able to complete two strategic acquisitions that allowed our revenues to increase 65%. Out net income also increased 76% mainly due to the increased income from the acquired operations. “
Low Annualized PE run rate < 10.
This is a stock with great growth that is cheap at the same time. An intersection of deep value and momentum as Jesse would say.
65 Day Consolidation. This stock was not rallying up to earnings. And Thus when Earning surprise came in, it was probably not priced in. It also had mostly low volume during this consolidation, being out of the public eye.
I wanted to take advanage of the post earnings announcement drift phenomenon. I entered at 5.3, And had Stops at 5.
I went in big. This had all the makings of a great stock, 
From the weekly chart, we can see subtle hints of accumulation.
Base not as tight as i would like it as a whole, but this is a low market cap stock after all.
Now the Stock is at 6.75 currently. I am holding it for afew more weeks and will sell when it breaches the 10dma.
I was invested in other stocks and i missed this absolute gem. I shall use this as a case study of a true superstock.
WLDN
Revenue Increase – Total contract revenue for the second quarter of 2016, increased 16.3% to $58.9 million, from $36.8 million for the second quarter of 2015.
Catalyst – “Genesys Engineering, the firm we acquired in March 2016, contributed $15.5 million in contract revenue for the second quarter of 2016”
EARNINGS WINNER Net income for the second quarter of 2016 was $3.2 million or $0.37 per diluted share compared to net income of $1.6 million or $0.20 per diluted share for the second quarter of 2015. Now a doubling of earnings is quite significant, also such a simple headline attracts investors.
Sustainability – “We expect the positive trends to continue. As I mentioned earlier, we had some significant programs that we will be ramping up in the beginning of 2017 which should enable us to continue delivering strong year-over-year growth in revenue and earnings.”
“There is increasing evidence to suggest that overall spending on microgrids will increase significantly in the coming years and we are well positioned to capitalize on this emerging market opportunity.”
Easy earnings comparison and Earnings Momentum
As you can see the latest earnings had been a breakout quarter out of the range in the past 2 years.
Insider buying
No Options
Technicals
Tight Base on Low Volume.
This low volume boring activity weeds out short term traders and is essential in the future move this stock makes. The low volume is a result of neglect by the market. However when a game changing catalyst, such as earnings in this case arises, it surprises the market and creates a very explosive move. This is a phenomenon that happens and repeats itself. New leaders emerge after months or even years of neglect.
This stock also had a low float of 7.79M. It takes lesser buying power to move the stock higher. Jesse stine says that “The best performing stocks generally have floats under 10 million shares. In my experience, the biggest movers had floats of 4 to 8 million.”.
Volume Expansion
All good superstocks have volume expansion. This increase in volume is a direct reflection of a substantial increase in stock accumulation by deeppocketed smart money institutional investors. Average volume before breakout was around 10k. Breakout volume was 269k, 27 times more than the average volume. It should be abundantly clear from the volume pattern that the investment community is showing much more interest in the stock.
Entry would have been right at the open, or pre market at 11.10
Since the stock adhered to 10dma more than a month, i would likely sell on a close below the 10dma at around 17, A really easy 55% gain in a really short period of time. These sort of low float earners are magical in compounding ur account.
Position traders can hold for a longer gain by using a breach of the 50dma, but i have a smaller account and prefer to swing trade in and out of stocks.
Potential Superstocks
BEAT
SPAR
YRD
CYBE
Will write more on what i feel about them when i have the time. Especially since most of them are going to announce earnings soon.
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