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PEIX Trade Update + Re-Entry Criteria

After exceeding T1 & reversing just shy of T2, PEIX has pulled back to test the key 3.80ish support level, offering an objective add-on or new short entry. T2 remains the final target at this time with a stop on a daily close below 3.00 if targeting T2.

Here are some additional comments that I made in reply to an inquiry on PEIX to member @gaucho in the trading room earlier today:

Yes, I believe PEIX currently does or will very soon offer a new entry or add-on at or (my preference) somewhat above that key 3.80 support level, possible at or near current levels. After reaching & exceeding the first target, PEIX has come full circle & is essentially back to the official entry price and still well above where it was trading when first highlighted. Bullish divergences setting up on the 30-minute chart as well to help confirm an entry soon.
PEIX closed at 3.92 yesterday & could continue down another 4% or so to the 3.76 area or reverse at anytime. I’ll post an update with charts on the front page today but if this helps, one strategy with this volatile, aggressive trade would be to start scaling in now, adding to the position in something like 1/4 increments (lots) over the next week or two, adding down to but not below the 3.80 level, with stops calculated bases on your average cost & your preferred price target(s) using an R/R of 3:1 or better. Should the stock reverse & start moving higher with some decent technical evidence to confirm the reversal before you have purchased your planned allotment, then you could either continue scaling in on strength or add the final amount at once, if the charts strongly indicate a near-term trend reversal from bearish to bullish.
The other option would be to wait for the stock to get closer to the 3.80 level and take a full position (BETA-ADJUSTED FOR THE HIGH RISK & RETURN POTENTIAL!) with stops calculated on your preferred price target. Should the stock shows decent evidence of a bullish reversal before then, you could also take a position at that time. G-luck & thanks for pointing out the fact that the comments were closed out.

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5 Comments

  1. ben711 April 6, 2016 11:32 am at 11:32 am

    new long entry?

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  2. pangblood April 6, 2016 2:47 pm at 2:47 pm

    I will be scaling into this, in terms of position sizing, would it be acceptable to take a 30% final portfolio position in this trade?

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    • rsotc April 6, 2016 4:15 pm at 4:15 pm

      pangblood- I am not licensed to provide anyone with any specific investment advice as I long ago left that business behind in order to focus on trading full time. I can share my thoughts on what I would or wouldn’t do, either in a real or hypothetical situation & I will say this. I think that a single position size of 25-30% (i.e.- 70-75% less than a typical position in something such as SPY) sounds appropriate for PEIX but to be very clear, not 30% of my entire portfolio. A low-priced, volatile stock like PEIX probably would be comprise no more than 3% of my trading account or any longer-term investment accounts that I own it in.

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  3. Gaucho May 5, 2016 11:28 am at 11:28 am

    Hi Randy, yesterday 1Q Report, results below expected.
    Today PEIX down but It didn’t go below support ($3.80) or at least a few pennies $3.74
    Now there is a restriction to short it and it has recovered above $4.
    Any comments?
    Regards

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    • rsotc May 5, 2016 1:38 pm at 1:38 pm

      @gaucho PEIX looks good. Bounced very hard off that 3.80 support level which helps to validate that level as an important support level so a long position with a stop somewhat below 3.80, ideally on a daily close, certainly has potential for a long-term trade as the longer-term bullish case is still intact.
      I do still have my concerns about a broad-based selloff that could bring most equities down with it or at least provide some headwinds on a PEIX long position. With that being said, the technical case to be long PEIX is there & with the proper stops to manage losses if it doesn’t pan out (as well as adjusting down one’s position size to account for the above average volatility in PEIX), a long here or on another dip back down to just above the 3.80 level seems objective.

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