Be extra Cautious: Inari [0166], Fibon [0149], Ghlsys [0021]

I’m bearish at the moment. Why? Because most people are bullish after their big gains on penny stocks in the last 2 weeks. The higher the stock price escalate, the more optimistic they are. The ordinary folks are getting more confidence about their stock picking ability (without realizing that their returns were actually beta return and not alpha return) and are giving “tips” around. Bets are getting larger and a lot of them are increasing their exposure to leverage, hoping to extract higher returns from the seemingly good market. And if you notice, the top 20-30 most active volume list of shares is dominated by penny stocks (Keep in mind that pennies are always the last to move). These are obviously signs of a coming downturn.

Now, here are 2 simple ways of telling whether the uptrend of the stocks that you are currently holding are expected to reverse or consolidate soon: (1) If volume does not pick up as the share price moves higher (In other words, there’s a divergence in price and volume) AND (2) If you are making money WAY faster than the professionals and you are started thinking that making money from trading/ investment is easy when just a few months ago you were worried that your investment could turn sour, the uptrend IS EXPECTED TO END SOON. I would normally be extra cautious when I could earn about 50% (as measured from low to high/ from the point when the volume is at its peak to high) on one single counter in less than 3 months. Let’s look at a few examples below.

inari
Inari [0166] – Divergence in price and volume; 85.4% gain in 11 weeks (from low to high); 
47.4% in just 6 weeks (from the point when the volume is at its peak to high)

fibon
Fibon [0149] – Divergence in price and volume; 121% gain in 2 months (from low to high); 
73.4% in just 7 weeks (from the point when the volume is at its peak to high).

ghlsys

Ghlsys [0021] – Divergence in price and volume; 173.1% gain in about 3 months (from low to high); 
72.6% in just 1 month (from the point when the volume is at its peak to high).

Not only that the probability of reversing for these shares are at the high side now, the upside potential is very limited too. Do I need to say more?

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