Small cap is the flavor of the day - Long at 4.05I decided to do a small cap stock today. I don't use too many of these as ideas, though I do trade them on my own. I don't usually publish about them because they are inherently more risky than large cap, established stocks. And to be fair, RBBN has a spotty history from a chart perspective.
Go ahead and zoom on out all the way. See that? That's what danger looks like. This stock has lost 80% of its value in the last 10 years, and 50% in the last 4. However, in its defense, it is profitable on a reported earnings basis over the last 12 months, and has held its own for several years now, and that's why I'm not AS nervous as I might otherwise be publishing this.
Additionally, it's solidly above its 200MA and in both a 1 year and 2 month uptrend, so its recent strength is good. I haven't dug down all the way back to its debut, but I suspect I'd have at the very least had a challenge making money on this one over its entire existence. But I am not trading its entire existence today. 75% of the trades in this stock in the last year would have closed in under 2 weeks, so the short term picture is what I'm mostly looking at here, and over the last month or so this has been a very solid stock. Could that change tomorrow? Yup. But I don't have that crystal ball. All I can do is rely on the system that has of late produced excellent results here.
In the last 12 months, there have been 27 buy signals here. 25 closed profitably and 2 are still open and down 18% and 9%, respectively. INCLUDING the losers, however, the median daily return on those trades has been .48% (>10x the market avg) and the average daily return is 1.02% (> 23x the avg daily market return).
Trading is about balancing risks and rewards. This stock is riskier than most, but the rewards are a lot better, too. I don't put all my money into any one trade - that's a TERRIBLE idea. The vast majority of my open trades are relatively safe, large cap stocks. But risky has its place in a portfolio. I made 15% in 2 days recently on QUBT (I posted that trade here) and made almost 18% on NUTX in the last 2 days - just closed that trade today. As a % of my portfolio of trades, ones like that can be small positions, but make a meaningful impact. That's my hope for RBBN here.
Of the 25 winning trades in the last year, over half produced a gain of 4% or more. And the average holding periods of the winners was only 8 days, with 15 of the 25 closing in a week or less. That rapid return also reduces the risk in a stock like this one. Wnen you only stick around for a few days most of the time, it's harder (not impossible) to get caught holding the bag during a drop.
My close will be signal based, and not a particular price target, but the trades I referred to above on RBBN give a good outline. However, the 2 losers have been open since February, so be forewarned that IF you follow me on this one, you might need to buckle your chinstrap. It could get bumpy.
As always - this is intended as "edutainment" and my perspective on what I am or would be doing and why, not a recommendation for you to buy or sell. Act accordingly and invest at your own risk. DYOR and only make investments that make good financial sense for you in your current situation.
