Supernovas

Supernovas are the stocks that make insane moves, thousands of percent gains in mere days.    We've just seen  some major super novas in the dry shipping industry with DRYS being the biggest.

These moves captures everyone's attention and people start talking about how if they had only bought when they first looked at it at $5.00 they would be rich.  They then chase.  Early Shorts start betting against the trade add fuel to the fire and they get squeezed out. All this creates massive volume in the stock.  The entire float will turn over in a matter of hours in many stocks.


Supernovas then create a ripple effect in other stocks in the same sector because buyers want to find the "Next [insert supernova ticker here"  and they bid everything potentially related up.

Here's a few super novas from the last few years.  

Some of these stocks were theme driven, LAKE was pushed by EBOLA and DGLY was body cameras. Others came out of the blue.

LESSONS

You didn't catch the bulk  move and you never will.  Nobody did.  For those that were in at the beginning of the move,  a 30 or 50% profit in a short period is too good to pass up and you should not pass up such a gain.

For every super nova, there are thousands of low float stocks that move up 30% only to reverse just as fast.  For every trader that caught a large portion of a  supernova move, hundreds have lost on every shake out.  They short when it goes "too high" only to see the stock keep going. Then more Johnny come lately come in and buy high and lose when the nova collapses. And every nova will collapses.    After the stock collapses, it creates a black hole as more traders rush in for the bounce the expert will come and the rug is pulled out from under them.

CONCLUSIONS

Supernovas are fools gold.  They capture the imagination but  they are unpredictable when they will form.  They go higher than any one expected and fall back down quicker and farther than anyone images.

 If the main nova is still running, the secondary novas may be traded but set realistic trading expectations, if you make 20-30% in a few hours be satisfied and protect those gains and do not be dismayed if the stock goes up 100% from that point.  It will come down just as quick.  If you are short, do not short the front side of the move.  Let the Supernova collapse and then start with the secondary novas. Those will come down as well but the secondary bounces will be far less volatile.

Good luck