Chasing High Flyer Stocks | Podcast Episode #97

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex ever-changing, world of Finance, learn what it means to trade, profitably and consistently managing risk, avoiding the pitfalls of trading. And most importantly, to let those winners run wild, you can succeed at the stock market, and I’m ready to show you how, hey, everybody, this is Ryan Mallory with Swing Trading the Stock Market.

0:32
And this week, I’m going to talk about chasing the high-flying stocks. And now you might be thinking, hey, that kind of sounds like last week’s episode kind of sort of, maybe last week was about chasing euphorias in general this week. I’m talking about chasing the High Flyers and most notably, a lot of the ones that are going bankrupt.

0:49
I mean, the biggest movers this week has been Macy’s, Chesapeake Energy, JCPenney’s, Hertz. And you got a few others too like Nikola, some REIT called MIT. I don’t even know anything about it and then you’ve got American Airlines.

1:06
Here’s the thing though it’s exciting. People want to get into those trades. I see everybody else. They get into the FOMO where they fear missing out on these just incredible gains because they see them like doubling and tripling day after day and you want some of the action.

1:21
So you jump into it and you’re just supposed to expect that it’s going to keep going up. You’re buying higher hoping to sell higher, you’re hoping that there’s at least one person out there that’s still willing to buy those shares from you when you finally decide to sell them assuming that they keep going up, but then there’s a reality to it too and we saw that in a number of them today.

1:40
So the big question here is really do you chase the high-flying stocks? Do you jump in there with the crowd and I would say unequivocally no do not chase those things. I haven’t chased any of those. Like I said you’ve got Macy’s, Chesapeake, JCPenney’s, Hertz. Either they’re in bankruptcy or they’re probably on the verge of bankruptcy then you get Nikola that’s rallying because they feel like it’s the next Tesla. Well I saw that it was at a couple years or two ago with NIO which I believe was like a Chinese automaker that was trying to do the same thing as Tesla. It’s not done anything. I don’t think ultimately Nikola will do anything either.

2:17
Yeah, it’s kind of cool. They got maybe a slightly different product line but either they get bought out or Tesla just figured out a way to make them irrelevant but the problem is you have a lot of new traders that are chasing these stocks I mean you’re not seeing the Warren Buffett’s or some of your more famous traders out there, chasing them, I certainly only, I’m not chasing them, I want nothing to do with them, does he even have appeal to me?

2:40
Especially the idea of holding them overnight and you saw that with Chesapeake Energy, this thing back in the middle of May was trading at like eight dollars a share. This thing has perpetually traded lower. I mean, so many people are new to this trading game right now they have no idea that Chesapeake Energy has been over like, what a decade now at least when this thing’s reverse split.

3:05
So many times at one point it was trading at fifteen thousand dollars a share and it goes all the way down to $8 that’s going back all the way to the recession. It never recovered literally had a reverse split of 1 to 200 just back in April but people started buying into this thing and then on Thursday showed a little bit of life and just people started piling in on it.

3:27
And then on Friday, that thing went gangbusters, it goes from like, 14 all the way up to 23 gaps. Open on Monday and goes from the lower 40s all the way up to almost $80 a share, but there is it. Did they talk? They do a bankruptcy press release after hours.

3:45
And it literally opens up at $20 and or under $20 and that was after they halted the stock to begin with it took forever for them to even open, it had like a bazillion halts today as well and then as soon as they opened it up, what happened, the people who have no experience trading, they started buying the dip on this thing again.

4:03
They said oh man, I loved it at 80 I’m going to definitely love it at 19. So they get into it, they start buying it up, they send it all the way up to almost $35 a share, only for it to close the day at 23.75 down, 66 percent on the day. And after hours, it’s trading down. I don’t know, like another 10%, but people are chasing these things and then you got NKLA Nikola Corp.

4:22
And this thing has not been like an overnight sensation but pretty close back in the beginning of May, it was trading you know around fourteen dollars a share and just starts ticking higher doubled in like four days pulled back and then it’s just shot through the roof ever since going from the $14 that I just mentioned in early May all the way up to over 90 dollars a share at one point it pulled back today, a little bit off of those highs still up 8.8% but after hours trading down to seventy three dollars. So, it’s almost down 10% after hours as well. Volume just pouring in like crazy, 71 million shares, bigger market cap than Ford right now.

5:01
How nuts is that? Bigger market cap than Ford, and this company, they don’t know when the hell they’re going to have sales. Then you take Hertz on the 26th of May they file bankruptcy. They’re literally emptying out storefronts, they’re putting cars on the market. Like, it’s bad for Hertz right now.

5:18
Goes all the way down to 40 cents a share where you think it was trading at yesterday at one point over six dollars, that thousand percent return from the 26, pulls back a little bit today, 24% trading lower after hours again. So yeah I mean there’s volatility here because we I just said they were trading over at six dollars.

5:36
At one point today they closed at four dollars and 18 cents. That’s like a 33% pull back off the highs that is major and then everybody’s crazy about American Airlines like why now why are you all of a sudden crazy on it? It actually had a breakout this past Thursday broke above the May 27th highs actually gapped a little bit above it and then just took off.

5:55
It goes from like $12 a share all the way as high as twenty three dollars a share. Pulls back to 18 dollars this year. So what do you got there? You got, you know, a 20%, pull back there as well. What’s it going to do tomorrow? I don’t know. But the problem with all of these, the one thing that they all have in common is that you can’t control the risk.

6:13
I had a friend. Oh my gosh, he got in the Chesapeake at like 18 dollars a share. I don’t know when he sold it out, but I think he got out yesterday before the news hit after hours and had a complete capitulation today. But he had been holding it since last week. What if he just held it for one more day?

6:30
I mean, you’re playing with fire guys, if this is how you’re going to trade, by swinging for the fences, by going into these nutty stocks that are all going bankrupt. If you’re going to live by that, you’re going to die by that. Every time, you can’t win like this, you have to be able to control the risk. If a stock can go up 100% one day and then it pulls back 60-70% the next day is that really a good thing to be trading?

7:05
It’s going to be crap. It’s not going to be doing anything. You want to believe that there is this pie-in-the-sky dream that you can get so rich. And there’s so much of that going on even in the broader market right now. The large majority of retail traders, they jumped into this market at the lows.

7:21
They threw a lot of money at it out. Collectively, I’m not saying individually. I’m saying, collectively a lot of this was stimulus checks on employment. Checks people, just trading with the money out of their savings account people. A lot of money into it in the market rewarded them for but for how long is it going to reward them for? Because rarely does somebody who experiences success without the necessary discipline that is required by it.

7:43
In the stock market are not going to have some grain revelation said, hey, you know what, made all this money trading off the lows, not using stop losses, not worried about risk or anything, but I think it’s probably a good idea for me to start paying attention to the risk side of the trade now because what they think is they think they figured out the market and then all of a sudden the market’s going to continue to award them, they’ve got it, figured out, they know how it works.

8:03
They’re trusting their gut. And that’s another. That’s one thing I really hate people who say, oh, I just follow my gut, I can trust my gut. Now the gut is what gets you in trouble. You don’t trust your gut, the gut will mess you up, man. You have to respect the market.

8:19
You have to respect the market. You have to recognize the risk that still exists, look the VIX is still over 20 man, by all accounts. That’s a, that’s an elevated risk reading. I get that it’s come off of almost 90 but still it’s elevated. We’re not back into the 11 and 12s here. So I know what’s going to happen tomorrow, there’s going to be another stock that a lot of people are dogpiling into and and some of y’all be tempted to just join right in with them.

8:40
I’d urge you not to do it, don’t do that, don’t follow the crowd. Being a successful trader has never come for me having to follow the crowd, it hasn’t, and it shouldn’t for you either. Don’t follow the crowd. You see a stock trading 50, 60% higher, guys, you don’t have to jump into it, you’re not missing out on anything.

8:57
Many of those people they’re going to get slaughtered because if they get lucky on one, they think they can get lucky on two. If they get lucky on two, they think they can get lucky on three. And what do they do? They keep building up their positions. Each time they get bigger and bigger bets they get more and more aggressive. They start dreaming and romanticizing about this life that’s within arm’s reach that they can have.

9:16
If they can just keep trading like they are follow their gut. Go after the big plays what happens? It gets destroyed. When you take the airlines right, incredible run I didn’t touch any of them. It took a lot of harassment about it too. It was like oh my gosh. Should have got in into them.

9:32
Look, I didn’t have to. I didn’t need to. It wasn’t necessary. I’m totally fine not trading in those airliners. You want to know why? Because you can’t control the risk. AAL. It goes from a high of almost twenty three dollars yesterday. Let’s say you got in at 21.

9:47
Let’s say you think you saw a reason that it was going to go from 21 up to 25 or 26 dollars. Okay. Is that a good risk/reward? No, because there’s so much downside risk to it. Right now it’s trading at 18. So you can’t really play like that. So going forward you want to make sure that when you’re trading it’s not about chasing the profits it’s about managing the risk.

10:06
And I know every one of my podcasts I talk about managing the risk and I probably sound redundant, but if I can get one thing through your head through all of this and I say it every time, it’s not about making profits, it’s about managing the risk. Manage the risk and the profits will take care of themselves, and I want to just keep on reiterating that.

10:25
Because now more than ever, you have to be managing the risk. Market could keep going up higher and higher and higher. Heck maybe the NASDAQ goes to 11,000 within the next week or two, not saying that it can’t. But there’s going to be a time where the market does pull back or the market does return to normalcy and if you keep showing such a complete disregard thinking that the market’s always just going to keep rewarding bad behavior and that the market’s just going to keep letting you double or triple your trades.

10:49
I’m going to be honest with you, you’re going to lose it all. I’ve seen it happen too much, guys. This is literally a repeat of 1999 all over again, people thinking that they can’t do no wrong in the market. People quitting their jobs to become day traders. There’s lots of those out there right now, guys. A lot of people becoming day traders because they think that they know how the market works.

11:07
Nobody knows how the market works. I don’t know how the market works. Obviously, if Warren Buffett knew how the market works, guess what? He’d be doing, he would have invested in the airline stocks and sold them a little bit later, but we don’t know how the market works. We can only react to how the market works and manage risk accordingly. It’s going to do it.

11:23
If you guys have any questions, feel free to reach out to me. ryan@shareplanner.com. Thank you. And God bless. Thanks for listening to my podcast. Swing Trading the Stock Market. I like to encourage you to join me in the SharePlanner Trading Block, where I navigate the stock market each day with traders from around the world. With your membership, you will get a 7-day trial and access to my trading room including alerts via text, email and WhatsApp.

11:45
So go ahead, sign up by going to shareplanner.com/tradingblock, that’s www.shareplanner.com/trading-block. And follow me on SharePlanner’s Twitter, Instagram, and Facebook, where I provide unique market and trading information every day. If you have any questions, please feel free to email me at ryan@shareplanner.com.

12:05
All the best to you and I look forward to trading with you soon.