Sunday, 4 November 2018

How I Find Day Trades

Disclaimer:

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People have asked me numerous times how do I find day trades. This article will describe that process as concisely as possible. I might update with more information with time.

I have created a Twitter account @evdaytrader which I will be using to put out my day trading picks and watches.

In addition to reading the extensive disclaimer above, I cannot stress this enough. Day trading is often a losing proposition. You will lose money at some point in time if you choose to follow my trades or do your own thing. I will announce when I buy but not always my sells because buying is easy but selling is hard and I often do it in many little pieces as I will demonstrate below.

I can tell you in no uncertain terms that my win-loss record on day trades is clearly more than 50% losses. But when I win, I win large. The strategy I'm about to describe helped me find RNX at $0.16 on the first trading day after it announced its bonanza gold find. It helped me find YECO a couple of weeks ago for an easy triple by lunch time and OPHC several months ago for another triple before the end of the day. It is also the same strategy that got me chasing numerous duds that I had to sell at a loss. So it is far from perfect and people must be aware of that. The strategy here will be a low-percentage, high-return game. I do not put a lot of money into these trades unless I determine that a certain position is worth a long term hold after doing more research on the company in question.

I am by no means an expert on day trading. I don't make a living from this. But I think I have enough market expertise to have something worthwhile to share on the subject.

Why am I doing this? Three reasons:

1. People keep on asking me through private messages on Facebook for tips, particularly after I celebrate a winning day trade. This article and my new Twitter handle will hopefully calm most of that.

2. I think this will help me become a better trader, by instilling some discipline. If I am not confident enough to tell people about a certain day trade or multi-day news-based speculative play, I probably shouldn't be buying it.

3. It could increase my publicity, which is always a good thing. On that note...

Be wary of the chat room effect and popular day trading services

I am not in penny stock chat rooms and have no interest in them. I'll tell you a little secret about how they work and can claim to be a success. If a chat room owner buys in a thinly traded penny stock and then tells the 50 or 100 dedicated members of that chat room the play, what do you think is going to happen? Those 50 to 100 people are going to dramatically impact the demand-supply imbalance of the stock and it will shoot up. Then the owners of the room can make up some bullshit about having interpreted the charts and gain even more followers, creating a snowball effect. This is essentially no more than a Ponzi scheme, where the traders on top, the stock picker and the early movers, get a chance to sell at a profit to the traders at the bottom of the pyramid.

It's up to you if you want to play the game of following other people, including myself, into their plays. It is your money. Just be aware of the risks. 

Finding day trade candidates in Canada

First, I will talk about how I find my day trade candidates in Canada. The market is much smaller than the U.S., which makes the process quite simple. As soon as the market opens, I head to the market movers section on TMX Money. I look for the top volume stocks on the TSX and TSX Venture. Any stocks with a significant percentage change, particularly increases, I look for any news.


The CSE also has a daily movers page at https://thecse.com/en/trading/market-activity. This one is still 15 minutes delayed as of the date of this writing and I tend to forget about it anyways since most of the CSE is cannabis stocks that react to industry-wide movements.

I use to scour the newswires for interesting news releases pre-market and consulted IIROC's halts and resumption page at http://www.iiroc.ca/news/Pages/Halts-Resumptions.aspx for stocks that may have been halted for news. I have really reduced that activity for two reasons:

1. TMX Money has recently changed its system where the market movers data was once 15 minutes delayed to real-time quotes. That means this data is now available right at 9:30-9:31 when it use to be available at 9:45-9:46.

2. I don't really find it to be an advantage to be the absolute first mover on news. Stocks often gap up at open then pull back on good news, more often than not in my experience, making it likely that a purchase at 9:35 or 9:45 or 10:00 will be at a lower price than it was at 9:30. The ones that REALLY move on REALLY GOOD news, even if you have to chase at a higher price than at 9:30, chances are you are going to be in a winner anyways.

The combination of these two factors means that scouring news releases in Canada for a gem is a lot of work for very little or even negative benefit. It's better for me to focus all of my pre-market efforts on the U.S. market.

There are four basic forms in which upwards movement can take place:

1. The stock is moving on good news.
2. The stock is moving on fluff news.
3. The stock is moving (or continuing a move) on several day old news.
4. The stock is moving for no publicly disseminated reason.

The easiest way to rank these four in terms of quality down to trap would be #1, #3, #4 and #2. Fluff news is actually worse than no news because fluff news probably means a desperate call for liquidity to sell into, either by an investor or in the form of dilution. I have a look at financial filings on SEDAR to get an idea of what the balance sheet of a certain company looks like. Sometimes I do it before I get in a trade, sometimes I do it after a small initial purchase than decide if I want to load up more or sell the stock based on what I see.

Another consideration is a stock's float. A very small float stock will move a lot faster than a large one, and also justifies a larger move on good news because the market cap is smaller. A $0.10 stock with 10 million shares outstanding should move considerably more than a $0.10 stock with 100 million shares outstanding on the news of signing a $1 million contract based on fundamentals.

A quick warning about chasing stocks on no news.  IIROC often halts these types of stocks and forces them to put out a "no material news" release out, which can kill the momentum in a stock that is moving up. This is a risk you will have to take if you want to trade stocks like that.

Another important factor is financing. If you are chasing a Venture stock, the vast majority of the time that company will either have recently completed a financing or be in need of a financing. It will be a part of the game. That's why I hate chasing stocks up on good news after a multi-day run. They are almost always a hot potato waiting to dilute. I need to make clear that dilution is not always bad news if you are looking to invest. If you are looking to trade, it almost always is because it involves a short term pullback and possible loss of momentum. The worst types of stocks to chase are the ones where a locked up private placement is about to free trade (generally one that closed nearly four months ago). To find these, just look at the news feed history of the stock. The best ones are the ones which sit in the sweet spot between financing - the last one occurred a long time ago, but the company still has a lot of cash for the time being. Especially stocks where the financing was on very favourable terms (maybe even through debt) or at a price above the current market price.

Now once in a while you will get a gem opportunity where the stock has had very good news, no recent financing and no need to finance in the future. This kind of stock might be one I'd keep for a while and choose to turn it into an investment. A great recent example of that was RNX. Most day trades won't turn into longer term trades/investments like RNX did. I'll share my sell strategy in the last section.

This is the process that I follow for potential trades soon after opening bell. But I consult the top volume/top movers lists on the Canadian exchanges several times in a day as well as IIROC's halts/resumption list for any potential late day movers or news.

As much as it shames me to say this, I actually consult Stockhouse for assistance in determining a day trade. As most penny stocks are money-losing propositions in the long-term, there will be no shortage of bagholders who complain about each stock on each bullboard. If the stock I have identified is a new name to me, reading up on old posts can actually be a good source of contrary information. Obviously you have to take anything posted with a grain of salt, especially "management sucks, blah blah blah" kind of whining.

Stockhouse can also be a help in determining pumps and dumps created by spammers or otherwise nefarious accounts. One person or a small group can put $10,000 to $20,000 into a 2 cent stock and move it up to 3 cents on 500,000 or more volume at opening bell and all of a sudden it is hitting the top volume board. Then they flood the stock's bullboard with their accounts about how great the stock is. Use your judgement when trying to determine if recent posts on a bullboard are done by legitimate investors talking about the early stages of a big runner or flippers looking to sell you stock for a penny gain. My favourite type of posts to take seriously are the ones that alert me to a mid-day news release, because my guard is down after doing the heavy research proceeding and immediately following opening bell.

Finding day trade candidates in the United States

It is relatively easy to find the full universe of trade targets on the TSX on a given day. For the most part, TSX Venture companies are on an even keel when it comes to a certain level of crap. Most of them have had or will need financing. Most are losing money. Most have mediocre balance sheets. Most do have some kind of legitimate business with legitimate future prospects.

When it comes to trading small caps in the U.S. - and I am talking about the NASDAQ, I barely even touch OTC - there is a WIDE range of quality. There are the toxic-financed companies like HMNY or NVCN which are GUARANTEED to lose you money if you hold onto them for more than a few days that scrape the absolute bottom of the barrel. Then there are stocks with seemingly good operations and good balance sheets that trade well below book value, sometimes even below CASH value. But those stocks are usually foreign and management teams don't give a damn about North American shareholders so they are forever value traps. Simply following top movers or unusual volume in the U.S. can get you trapped into a loser easily if you're not careful.

The one thing you definitely want to avoid are stocks with toxic financing. This usually comes in the form of "institutional investors" (I use that term loosely because these houses behave more like vultures and loan sharks) owning convertible debt or preferred shares with undefined conversion prices. Before or shortly after you get into a trade (so you know what you're getting into), consult the SEC website for recent filings. The search page is at the following link https://www.sec.gov/edgar/searchedgar/companysearch.html

What you are most interested in looking for are "424B3" filings. You see in this example below, one was filed October 24, the most recent filing for this stock I was looking at as a potential day trade. I ended up avoiding it thanks to the content I read in the prospectus, and it's a good thing I did because it dropped by 50% within two days of looking at it.


A quick way to find toxic financing without reading pages and pages of a prospectus is to do a find on terms like "VWAP"/"volume weighted average price" or "cashless". It'll clue you in to conversion price terms like "80% of the VWAP over the last 20 trading days", meaning a vulture financier can short sell a stock with impunity and cover with shares with a conversion price below market. In fact it is in their best interest to short it as low as possible because the VWAP will be lower and so will be their conversion price. They are just looking for volume to short into so they can move a lot of stock and cash in their arbitrage set up as quickly as possible. Cashless meaning the cashless exercise of warrants where the financiers can convert warrants without fronting the cash and dump the stock onto the market. These are NOT investors. These are firms merely looking to cash in on arbitrage and don't care about the stock, the stock price, or the business of the company. It cracks me up seeing retail traders get excited because a "big" name institution bought into one of these toxic financing deals.

Avoid chasing these types of stocks after a pre-market spike. They almost always end the day lower than their high as the spike is nothing more than the market makers attempt to lure in lots of retail traders to create buy volume to dump into through the prior two mentioned means. It doesn't ALWAYS work like this. I have stricken toxic-financed stocks from my potential day trading list only to see them up another 100% later in the day. But understand that if you are going to play this game, the odds are greatly stacked against you. Just look at 5 or 3 or 1 year charts of HMNY, NVCN, DRYS, GBSN, RGSE, TOPS and a whole slew of other stocks that have had to take on toxic financing in their past.


TOPS - a $7 BILLION per share stock price, split adjusted, back in 2004; $2 stock price now

There are two stock screeners I use for determining potential day trades in the United States. GlobeInvestor at http://www.globeinvestor.com/v5/content/filters lets me sort by top gainers and losers on the NASDAQ and NYSE, 15 minute delayed quotes, starting at 9:45. I consult certain Stocktwits accounts and Seeking Alpha's news feed to see top pre-market movers in preparation of a 9:30 buy in. Looking for stocks that are up in the pre-market at 8:30 or 9:00 allows me the time to read up on the news (if any) that is driving the movement as well as see if there are any recent bad financing deals that will hamper the stock.

But by far my favourite stock screener is Finviz. This is the one that helped me find OPHC months ago. At the time of trading YECO, I also knew that it was a very low float stock from a previous trade that I did on it (didn't work out), also found on Finviz.

Why do I like Finviz so much? It has just about every data point you could want on a stock and it allows you to sort by them all. My favourite is the search by ownership tab which allows me to sort by shares outstanding and float:

https://finviz.com/screener.ashx?v=131&ft=3&o=sharesoutstanding


This tab not only lets me search by shares outstanding (and the stocks with ~1 million shares outstanding can really move like YECO and OPHC), but at the same time I can see their float, percentage that insiders and institutions own, and short ratio to determine the potential for short squeezes. When consulting this list overnight, I can see the previous day's price, volume and % change, and filter out any interesting potential big runners for the next day. I can also watch this list throughout the trading day for any stocks that are picking up on price and volume before they really explode.

The one caveat to this list is that Finviz is not always up to date with shares outstanding data. So you'll have to pay attention to any recent financing manually from the SEC site. This happens a lot with stocks that recently undergo a reverse split. They'll appear near the top of the list after a reverse split, then the financing increases their share count and they drop back down the list. HMNY is a good example of that.

For the stocks that don't make the first few pages of this Finviz list, the stocks with greater than 5 million shares, I am at the mercy of the top movers list (GlobeInvestor during market hours, Stocktwits and Seeking Alpha feeds during the pre-market) for them to fall on my radar. They are often much more of a crapshoot. But being informed by taking a look at SEC filings can help a trader to push the odds into their favour.

My sell strategy

Buying is easy, selling is hard. Remember what I said about this being a low percentage game? Well very rarely does a day trade pick of mine immediately crater. That means at some point in time I was in the green on it. The most frustrating part of trading is selling a stock for a loss that I was up on earlier in the day. But it happens. And I do not use stop losses, and never will.

My goal is to make it big, but I never know how big that can get. 50% move? 100% move? 500% move? When a low-float stock starts running, you just never know. So the best way I have found in handling the situation is doing something like this:



As you see I bought YECO on October 17 for $1.95. Once that started to take off I put in numerous sell orders of very small amounts between $3 and $6. What is not shown here is that I continued that all the way to $8-$9. YECO ended up hitting $17 the next day before cratering and stabilizing around the $5-$7 mark now. It's better to sell too early than too late. But it is also better to sell only little bit too, too, too, too early like I did at $3. YECO could have easily reached $4 then crashed from there back to $2. Had I put in no sell orders I would have felt like a complete idiot. Using this strategy allows me to take some profits while not taking too much off the table too early.

There are often times when day trades turn into an investment. PKK originated as a day trade for me way back in March 2014 and I have held the stock since. How do I determine when I hold the stock? Like I said on a stock like RNX, if I determine there is no need to finance, I can ride it until it hits my internal target price. That target price is often a moving one based on news. A company can also turn into an investment if I like their business plan or after speaking with management I trust them, like I have with PKK.

So this is my day trading strategy in a nutshell. Follow my day trading Twitter account @evdaytrader for my picks each day.

Friday, 27 July 2018

PKK: Time For Some Insider Buying

The Canadian small cap market has badly struggled this summer, and Peak Positioning Technologies (PKK) has been no different. However, while a lot of companies have dropped on little or no news, PKK started ASFC and loaned out all of its capital - probably the greatest accomplishment the company has had to-date. Yet there are millions of shares up for sale at every half-penny increment starting at 3.5 cents and the share price is down to 3 cents. The stock has had to deal with some large seller(s) who mainly sell through TD for months.

If the business is going so well as Peak management says it is, now would be an ideal time for some insider buying. Insiders, as well as the investors from Jiu Dong participated in the debenture financing with a convertible feature at 5 cents. Over 3 million shares can be picked up at the ask of 3.5 cents. I think now would be a perfect time for insiders to show some confidence in the imminent success of PKK and buy up some shares on the open market.

A confident buy from insiders could be exactly what this stock needs to get out of its rut.

Friday, 23 February 2018

The Changing Face of Peeks

Yesterday, Peeks Social (PEEK) announced the launch of  real-time payouts with its own Visa debit card. The market reacted very positively at first, but today the stock price has once again pulled back. Peeks seemingly forever takes one step forward and two steps back, no matter how material of a news release the company puts out. Why did this happen?

We are seeing the changing face of Peeks. Recall that one of the major reasons to buy into this stock back in 2016 was the idea of a ubiquitous social commerce platform. Peeks was going to manage the entire payments process through its own wallet, both tippers and the people receiving the tips. This has had its problems as users have complained about delays in getting paid. With the launch of the Visa debit card, it looks like that the company has given up on this idea.

There are several positives to this development:
  • This should finally end any delays in getting paid. In fact, this card looks like one of the best and quickest ways for influencers to get paid on these kind of social commerce/media platforms.
  • Peeks can get rid of Paypal now, and they absolutely should.
  • The card itself is a way to advertise. I expect the user base to grow faster now that this very legitimate, well-known and trusted way to get paid is available. 
These benefits, along with the simple name of Visa attached to the PR is likely what caused the stock to do so well yesterday. Now why is it pulling back today? Because this news doesn't come with no strings attached:
  • We have no details on the agreement. How much of a cut is Visa getting? I don't expect it to be much (in the low single digits), but could be higher based on the next point.
  • With Peeks being on the borderline of a porn app, Visa adds another layer of complexity where it could potentially wag its finger at Peeks for its content, a la the iOS issue seen in early 2017. I don't expect this to be a huge risk since there are other porn sites out there that accept credit cards, but I can imagine that their rates would be higher than average.
Overall I am bullish on this news, more bullish on PEEK at 30 cents today than I was earlier this week. It solves existing and near-term problems and should positively impact user base growth right now. But I also think this limits long term upside. PEEK will forever rely on a third party payment processor now. There is no going back from this once the card is out there. I expect the penetration rate for the card among influencers to be nearly 100%. Tippers, assuming they only make deposits into the Peeks wallet (even if they earn income, that goes to tips), will likely stick with their existing method of payment.

UPDATE:

Mark Itwaru reached out to provide a rebuttal when I stated that "PEEK will forever rely on a third party payment processor now". His response was that Peeks can easily disintermediate from any third party processor and there may be plans to do so in the future. This is good news that the company has that intention and I believe that from a technical standpoint it can be done.

However, to clarify my point, I think there will be potential customer service issues down the road should Peeks decide to do that. The company would have to navigate that change carefully should the Peeks Social Visa debit card become as popular as I think it will.

Tuesday, 20 February 2018

My Notes on the IDK AGM

I was at the ThreeD Capital (IDK) AGM earlier today. There was only a handful of people in attendance, including CEO Sheldon Inwentash and CFO Gerry Feldman. Mohammad Abuleil, CEO of Fintech Select (FTEC) was also in attendance. It looks like he was there for a meeting with Inwentash after the shareholder meeting. Though he may also be a shareholder in IDK. I did not ask.

Here are my bullet points to the meeting. Keep in mind this is just my interpretation and from memory a few hours after attending. So I might be slightly off on some details though I believe I got the gist of everything that was discussed:
  • This was a very informal AGM, completely different from what I am use to. Usually a formal vote of the motions laid out in the circular is done but Inwentash decided to skip all that because he said resolutions all passed with ~99% votes in favour of all motions. He preferred to go straight into a question and answer period. Throughout the meeting he was very confident (borderline arrogant) and casual. He did make mention that he would do things a little differently than at Pinetree, which I interpreted it as an admission that some mistakes were made there, a good sign in my opinion. 
  • His investment strategy will be focused around fewer companies for IDK, as opposed to Pinetree where a wider net was cast due to the hit-and-miss nature of exploration.
  • He is very passionate about his Blockchain and AI investments in IDK, and came off as less passionate about the mining projects, saying that he has geologists to take care of those.
  • In the roundtable of questions, the shareholder to my right asked Inwentash about his recent sell of IDK stock, beating me to the punch. Inwentash refused to comment on trading, though I believe he sold for tax planning purposes. He reiterated that he was very confident about IDK.
  • I asked him about the out-of-date NAV up on the website (as of September 30). When can we expect an update and can we start seeing a monthly report on NAV? Gerry Feldman led this conversation, though they were both on the same page that monthly NAV reporting is the goal. There are specific accounting challenges to this, namely, how to account for the ICO investments made. This is new grounds in the field of financial reporting. Feldman mentioned that he is working with Ernst & Young on this, and they don't have an answer yet. My interpretation is that this will be quite a task, and it could be months before we see monthly NAV reporting. 
  • December NAV will likely come in tandem with December financials, IDK's Q2. Deadline for that is the end of February.
  • Future NAV reporting will likely come in the form of one top line number, possibly with a chart to show % of portfolio in ICOs, public companies, mining versus tech etc. No definitive framework was discussed, but it will probably be less detailed than Pinetree's old data.
  • My interpretation is that the NAV as of September, and even my more recent estimates, are wildly incomplete. I tried estimating it myself based on publicly available data like IDK's recent private placement investments made in APP and FDM, among others, but the company has never publicly disclosed its ICO investments, which I am led to believe are substantial. We will just have to wait for the NAV update to get a clearer picture of exactly how much IDK is worth. I am more interested in March quarter-end than December quarter-end, since I think a lot of activity took place in January. With the market cap at around $20 million, there is the possibility that IDK is trading at a discount to NAV now, though that is just my wild guess.
  • IDK almost got into crypto-mining, but decided against closing some deals in that sector. The focus is on ICOs though crypto-mining operations remain a possibility. I get the feeling that Inwentash doesn't like mining as much, stating that businesses that are making 90% margins can't last forever and something will have to change, particularly with the power usage being dedicated to this kind of thing around the world. 
  • Inwentash made a qualitative statement about day traders, negative market forces and people who may dislike him, particularly because of the ending at Pinetree. He does not worry about people focused on short term moves, or any doubters against him. He is interested in the long-term moves building up the company. He appeared to be sincere with a bit of a chip on his shoulder when he said this. 
  • Inwentash was quite passionate in explaining his AI technology for mining, which he believes will greatly aid with drilling decisions made by explorers who use the technology. He plans to charge companies upfront for use of the technology, plus a royalty. There weren't any specifics mentioned with how this will work or why he is so confident. He did make mention that when they wiped a map clean in Quebec and applied their AI technology to it, they found 85% of the mines in the province with it. (I don't know what he meant by mine - the strict definition of a currently operating mine, or those that include past mines and ones being built as well, as well as untapped deposits).
  • My interpretation of the AI is that it might be an uphill battle to gain market acceptance and clients. Since it is new technology and I don't know if there is any third party data out there to prove that it works. My guess would be that they will use the technology on mining companies in which IDK holds a stake, as well as other Inwentash-related companies to collect anecdotal evidence. If the technology works, I think it could snowball as prospective clients will save millions in exploratory drilling costs before proving out a resource to go into the infrastructure building phase. 

Sheldon Inwentash: A gold bull's perspective on blockchain

Inwentash ended the meeting with a rant on blockchain from his perspective as a man who has been in the gold sector for over 25 years. It was fascinating listening to him apply principles and opinions learned from that industry to blockchain. First, he very strongly believes that blockchain will create "financial anarchy" and is not going away. It allows for financial transactions to occur in a trustless environment, eliminating the need for a financial intermediary. Central banks cannot control the flow of cryptocurrency, which is why so many authorities out there speak out against it. (This is the kind of "conspiracy" speak I often here from gold bugs as well, though I tend to agree with at least part of this thought process. Really, who knows if the bankers are actively seeking to destroy cryptocurrency because it is a threat to their positions of power, or if in their little T-Bill world, the volatility of these things gives them nightmares and they can't help but spread the joy to everyone else).

He said that the balance sheet of the United States and many other sovereign nations is basically bankrupt and the only way to pay off that massive debt is to devalue their fiat currencies to a fraction of what they are worth today. What would be the other side to that devaluation equation? All of the world's gold can't even fill up an Olympic-sized swimming pool, so he offered up cryptocurrencies as a potential benefactor as well to gold. He likes them because there cannot be any debt written against cryptocurrency like with fiat, and the limited supply.

He mentioned that he has been looking into blockchain and bitcoin since 2014 and wanted to buy some bitcoin back then, but couldn't figure out a way. He said even now it's a pain because you have to submit a copy of your passport among other things just to open an account. I haven't tried opening a crypto-trading account but I understand those similar pain points from opening FX accounts and sportbooks in the past. Inwentash then pointed at Mohammad Abuleil and mentioned that is why he likes what he is trying to do to bring bitcoin to the market. It wasn't clear if he meant FTEC or another project that Abuleil may be working on, since Inwentash never mentioned FTEC by name. Still, this is a very good sign as that has been a major part of my investment thesis on FTEC.

I mostly agree with what Inwentash said about blockchain. One point of contention I have is that he didn't mention the asset side of the balance sheet. While many sovereign nations are loaded up to the gills in debt, they also have access to land, natural resources and the tax base and economic output of their people as sources of paying off debt. While cryptocurrencies don't have debt, the assets/functionalities they are tied to are usually virtual ones, ones that do not carry nearly as much value as a large plot of land or the ability to set tax policy might today. That may change in the future as the world gets more computerized and virtual, though some virtual assets and services may turn out to be worth a lot while others turn out to be worthless. So an investor has to be careful with which altcoin they decided to invest/speculate in.

Thursday, 18 January 2018

SX

I have created a Facebook group traders can join so we can discuss Inwentash investments:

Sheldon Inwentash Investment Tracking Group

https://www.facebook.com/groups/590063501338735/ 
From $0.35 to over $2.00 to $0.35 in DAYS. I have never seen anything like this. Yeah PEEK did that but at least that was over a period of over a year and based on various issues that the market didn't like over time. How the hell can something like this happen? Almost as bad as NNA except without actual news to justify the move. Glad I was never a part of that one, recommending it anywhere outside of its relationship to IDK.

Also glad that I sold a lot of IDK and APP shares high and mentioned that in my blog. A chance to buy back cheaper now which I took advantage today and I guess I will be doing tomorrow. Might even buy into SX since it looks like a very decent opportunity. Those Zeu guys will want to cash in their $1.00 warrants at some point in time.

A lesson can be learned from this situation. This is not a good start for Sheldon Inwentash if he is trying to reclaim his lost rep from the Pinetree debacle. Volatility can be a trader's friend and we know what we are getting into on the Venture/CSE, but if he wants his fund taken seriously it's going to need a little more stability than this. I have a very, very hard time believing that this crater in the Inwentash basket isn't due to some serious dumping by one or more individuals or entities that are known to him, even if that's completely out of his control. He needs to pay more mind to who he associates with in that case.

Can't blame the market either. US stocks like OSTK, RIOT, KODK and bitcoin and HIVE were all trading pretty well today and since bitcoin dipped under $10,000 yesterday. This is a distinctly Inwentash phenomenon.

Thursday, 11 January 2018

An Update on Sheldon Inwentash's Investment in Global Cannabis Apps

Sheldon Inwentash has been selling his stake in Global Cannabis Apps (FUAPF) (APP.C). Before we get into why he might be doing this, let's set the record straight on how much he has been selling and what he still owns, along with his fund ThreeD Capital (IDK.C).

Look at the activity flagged on CanadianInsider.com:


On December 27th he sold 150,000 shares. On January 2, 1,000,000 shares. On January 3, 800,000 shares. On January 4, 900,000 shares. That is a total of 2,850,000 shares. Brownstone Energy is the old name of ThreeD Capital. It sold 1,000,000 shares.

Let's have a look at the SEDI filing. There is no direct link to this report, but you can look it up yourself by going to the search link and looking up Global Cannabis:

If we refer to press releases on November 16 and November 29, we get the following total position disclosed, these private placements:

"Of this total, ThreeD held an aggregate of 4,000,000 of the Post-Closing Shares and 3,000,000 of the Post-Closing Convertible Securities (representing approximately 7.0% of the issued and outstanding common shares of the Company, or approximately 11.6% assuming exercise of such Post-Closing Convertible Securities only), and the Joint Actor held an aggregate of 1,850,000 of the Post-Closing Shares and 250,000 of the Post-Closing Convertible Securities, representing approximately 3.2% of the issued and outstanding common shares of the Company (or approximately 3.6% on a partially diluted basis, assuming exercise of such Post-Convertible Securities only)."

Here is a chart that summarizes the variance in position between what was disclosed on November 29 and what SEDI shows us today.



What are the facts we can gather from this?
  •  Inwentash sold all of his shares
  • IDK sold all of its shares not in lockup
  • The CanadianInsider report marks 2.85 million shares sold from Inwentash. Either he picked up a million more along the way and sold them, or the report is double counting the Brownstone sells which I would say is very likely given the duplicate volume and price of the transactions.
So lets go with IDK and Inwentash selling a combined 2.85 million shares, everything not in lockup. Inwentash has 250,000 warrants remaining but that is probably some kind of advisory fee bonus which would likely be in lock up too. Now why would they do this?

First, it's natural to take profits when you are in early and have a large position. I have done it on a part of my position and recommend that others should take some profits off the table so it would be hypocritical for me to blame him for doing the same. Second, look at the days he sold. On January 2, the stock went up 66% and hit a new 52-week high. On January 3, it rose 26% and hit its high of $0.99. Only on January 4 did it drop, 16% to $0.76. There is a good chance that he got filled on limit orders on January 2 and 3, in a similar way that I recommend people should sell - with numerous limit orders at different price levels. January 4 was the only transaction that could be considered a dump. We don't know his motivation for selling, but we do know that IDK has had a lot of activity going on with other stocks. His sell, rather than being a bearish outlook on APP, could just be him freeing up capital to fund other investments. He very well could think that APP will double from its current price but if he thinks other stocks will triple, that would suggest more capital should be allocated to those ones. If he had taken the cash and rode off into the sunset, that would be more alarming. But the way he has been talking (discussed before in my previous blogs) and how active IDK has been in the market, suggests to me it is merely capital allocation.

Now obviously, no matter how I spin this, it's not great news that he sold every share that he could. That is why I always recommend to sell into strength and buy on dips. I think I will have a dip buying opportunity over the next few days until APP can release some news and/or get on Fox Business TV. Now we see that Inwentash, an experienced trader, follows the same principle of selling into strength as I do. We'll see if he also buys on weakness like I plan to do.

Sunday, 7 January 2018

The People Who Trash Sheldon Inwentash Don't Understand This Market

With the rise of Sheldon Inwentash's new capital pool, ThreeD Capital Inc. (IDK.C) last week, I have seen his name come up a lot more often, and not always in a complementary way. I get it. I have written about the Pinetree saga a couple of months ago when first investing in IDK and relating his involvement with one of my top picks, FTEC. Let's keep in mind that although he was responsible for Pinetree's downfall, he was also equally responsible for its rise, making early investors a lot of money.

There is nothing wrong with being skeptical with an investment. But the people who relentlessly trash Inwentash for his involvement with Pinetree don't seem to understand that this is a millennial market. There are 25 year olds who have made more money on weed stocks in their first 1-2 years of investing than 55 year olds who have been trading the TSX and Venture for thirty years. This is a "what have you done for me lately" market. And what IDK has done for these young investors lately is double last week. So to the 55 year olds reading this, you can either avoid the play and act like a grouch online, or you can play the momentum and make some cash.

As far as the 25 year olds are concerned, I've met a few with beginner's luck who don't realize that they have beginner's luck and are acting like they are the next Warren Buffett. The market will eventually eat them alive if they don't learn some lessons before then. But until then, momentum stocks with buzzwords like weed and blockchain will be hot well before they have to come up with some kind of achievable business model. There is no point in fighting it by saying Inwentash blew up Pinetree a few years ago when his fund is making people money today.

There is a chance that IDK will blow up just like Pinetree. There is an equal that Inwentash learned some lessons from that hardship which he will now apply to IDK which will make it last. But either way I think early investors will make out like bandits just like they did up to 2007 with Pinetree.