$195 Million OVERNIGHT Fortune on a China Stock transcript

in my episode last week I exposed the Chinese pump and dump scheme that ran chsn all the way from about $5 a share to over $44 a share in one day only for the stock to dump all the way back down I exposed it right here on YouTube and guess what that stock has now been suspended by regulators and no trading is allowed while they're investigating it so that's good but you know what happened today we saw a move and I've been trading for a long time we saw something I've never seen before let's set the stage all right we've got a stock pre-market that starts squeezing up now as a momentum Trader I love it so the first thing I'm asking myself is what's the Catalyst what is the news event that's bringing the volume into the stock and I can't find it now it's not totally uncommon that we'll see a stock that makes big move without news and typically that type of technical breakout is called a short squeeze so the next thing I check is what's the short interest of this stock let's jump onto the screen share so the first thing I see is that the short interest is only 1.6% and to help you get oriented this is the stock that we're looking at right now it's currently up 168% on the day right now it's a little bit off of its high which is $6.29 yesterday it closed at just over $2 a share so this is a huge move overnight but there's nothing to support the move so when we look at the short interest we can see it's 1.66% it's negligible there's nothing significant that's not going to be enough short interest to create a short squeeze and so then this is what I do and and for those of you guys perhaps who are tuning into this episode for the first time this is a good one to watch because this is this kind of highlights how crazy the market can be and how important it is as an active Trader to trade the chart and to not get caught up in the fundamentals because there are times where the fundamentals can become very disconnected from the price action it's very possible that this company has no business being valued as high as it is right now and if if we're going to talk about the valuation this is currently being valued at about $250 million as a company and I believe last year their net profit was something like $2 million which is I mean it's not nothing but a $250 million valuation on a company doing $2 million a year and their sector is they're selling um they're selling wine and caviar things like that I mean it's it's a great business but it's not an app you know it's not a pharmaceutical company it's it's a you know it's it's a good business but but let's be realistic $2 million a year net profit $250 million valuation 100x I don't think so I mean that's just my gut but again you have to focus if you're an active Trader on trading the technicals and so the technicals of this stock when it starts to squeeze up I'm looking at it and I'm thinking all right it's hitting my stock scanners right here so it's hitting my running up scan which means the stock is moving up right now it was hitting my high of day momentum scanner which me meant the stock was making a new high of day and it was moving up my top Gainer scanner it's now in the first place making it the leading percentage gainer in the entire US market right now so when I see it squeezing up the first thing I do is I click on the ticker right here and that's going to update my charts and it's going to update my news feed now I look at the news feed and I can't see any Catalyst now there's some headlines that came out a little bit later but I don't see any news so the next thing I do is I click on the ticker and I pull up our quote window here where you're trading and I scroll down and this is what I'm looking for what's their address and I see Hong Kong HK so I'm thinking okay this is another Chinese stock now if you watch my episode last week on exposing the pump and dump scheme on chsn you will know that there are a lot of shady things that happen with some of these Chinese stocks I don't know if that's happening if any of that's going on with this one or if this is just a crazy move that we saw today we'll probably find out in the future so as of right now we'll just assume that it's a really crazy move all right so I see this Chinese company and that alone tells me this has the potential to be exponentially more volatile than perhaps its us counterpart in the wine and caviar business just the very fact that it's a Chinese stock now it's like okay this might actually do something crazy so I get Zoom zoomed in on the chart here and this is where I'm doing my technical analysis and I see initially we have this Spike right here up to about three and what was really interesting was it popped up to three right here and it holds that level just for a moment and so I pull up my level two window which is right here I pull up my level two and I'm looking at the bid and what I see on the bid so I look at the bid and what I see on the bid so this is the bid and this is the ask all of a sudden at $3 I see a four 40,000 share bit and we always abbreviate and drop the two zeros so it shows us 400 there's a 40,000 share buyer there at three and on the ask it's 315 and there's only like a 1,000 share seller so all of a sudden now I'm like oh okay there's a huge buyer on this at $3 I don't know where they came from and what's kind of crazy is that at that moment how much volume did this stock have so at that moment we had already had um well let's see about 3,000 4 five 6,000 about 50,000 shares of volume in total so all of a sudden you have an order sitting on the bid that is the is the total of all the volume that's traded so far today that's very very bullish if that order stays there now what we know is that some of these people who are trying to move these stocks higher will put out a spoof order a spoof order is when you put out an order to create the illusion of strength because when I see a big order on the bid I'm thinking someone else wants to buy this this is strong and what I usually think is if it's a 40,000 share buyer if I wanted to I could buy 5,000 shares right now and if I don't want to hold anymore I can just sell to that person buying with a 40,000 share order they become a form of support however a spoof is when they put the order to create the illusion but they have no int of their order actually getting filled and if the price starts to come down that order vanishes it's gone and now if you try to sell that person's not there to sell to and the price is going to drop so when I saw that big order to be honest I was a little skeptical because I was like you know it's kind of a huge order is someone really so bullish on this stock right now even though it has no news that they're buying 40,000 shares and again it doesn't have high short interest so it's not a short getting squeezed out so it doesn't really make sense to me so for that reason I didn't take a trade on this micro pullback right here even though typically I would in this case because that big order it just threw me off so it ends up going up to about 340 and 360 it does another micro pullback here and it pushes up to four but on this second pullback we still were dealing with larger spreads and I just was like I don't know I think I'm just going to wait a second on this I just was getting a little bit of a funny feeling now having been trading you know in the markets for as long as I have I try to trust my gut my that a level of educated intuition that I have and so in this case it was telling me to just hold off so it hits four and then dumps all the way back down to three and it goes down to about 280 so that big buyer at four at a 40,000 share buyer the order was gone so now I'm like okay the order's gone yep that's a little sketchy not sure not sure I'm going to be able to trust this so then we end up moving sideways here and through this area we're kind of bouncing between you know about 3 well about 285 and 310 it started jumping up it started dipping back down it just felt it just didn't feel quite right and so it pops up here to 360 but I didn't take that trade I was like I don't know you know I'm just I'm not feeling it I'm looking at the volume we had higher volume on some of these selling candles you know higher volume on this selling candle again so it felt like this was just a little sketchy I was just like I don't know I can't trust it but as it starts to come up here a little bit higher I I recognize that look this thing is holding up I drew this line connecting these two lows this created this ascending support line and it's holding this level it's holding our moving averages it's holding the volume weighted average price so I decided to take a position right around here I got in as it starts to curl and right here it curls through I wanted to see it break this level and then my next Target was this level here and as we break that 350 we end up pulling back but then squeezing up to four and we get a really nice move here up to a high of what was that about 440 and right now it's up 183% as it sits right underneath the high of day of 629 so it's still holding up really well okay so then it pulls back for a moment micro pullback it pushes a little higher and through this area here I had some nice trades now you can see I'm sitting up $548 and 11 cents on the day and my last trade was at 928 so I didn't take any trades after the open I only traded this during the premarket session once I crossed my daily goal which is 5,000 I said today because it's Friday the end of the week I was like you know what I'm going to take it off the table and lock it up and be done so discipline is really important for me and I just kind of knew that something odd is going on with this stock so anyways it goes up to about 460 I got some nice trades on this move here it pulls back dips back down a little bit and through this area you know it's kind of choppy and and the thing that was really weird was it felt to me like there was a huge amount of selling I took a couple trades on this with 10,000 shares and I got filled buying in an instant with no slippage that told me there's a lot of people selling but when I would turn around to sell it was harder to sell so it was easy to buy hard to sell that means there's a lot of other people that are happy to sell it but not as many people that are happy to buy it so that gave me a little bit of reason to be cautious it drops back down all the way to the volume weight average price and at this point I said it's out of play and you want to know why I said that I said that because on the one minute chart I use a technical indicator called the macd the moving average convergence Divergence indicator it's right down here on this bottom Pane and this for me is a really helpful indicator to remind me to focus on trading the front side of the move and then once that macd crosses over it indicates the moving averages are condensing they're coming back to together so it moving average convergence Divergence indicator so they're converging here and when they're converging the stocks usually going sideways and that's just going to be a harder place to trade it and make money so I said I'm going to be done trading it for right now let's just see what happens I said let's wait for a f minute setup and then all of a sudden look at this look at that Holy Smokes this thing drops from 450 all the way down to 270 and then rips back to 515 and makes a new high of day it it that's something that I have not seen before this was a absolutely insane ridiculous move so what caused that dump look at this so it's sideways and then all of a sudden look at that and this on a lot of volume these are you know the millions of shares trading here so it drops from 440 all the way down to 270 and then it screams all the way back up to a new high at 518 it went up about 100 % in 40 seconds from a low of 280 up to over $5 so what happened was right there at 9:00 a.m. at the top of the hour breaking news came out now remember this stock had no news so all of a sudden news comes out and it's not good the news is they've announced the pricing of a $10.8 million public offering okay so this is a this is called a secondary offering they're selling more shares onto the open market so we look at it and we see the price of this offering is at40 a share oh my goodness so 40 cents a share is the price of the offering 40 cents and they sold 27 million shares and they raised about $10 million so $10 million in in Gross proceeds uh or net proceeds raised for um for the company so now we got to take a step back and look at this for a second because this is insane usually when you have a company that does a secondary offering the price will drop and usually it drops to around the price of the offering so the way these offerings work is when the company first IPOs when they first sell shares on the open market let's say they sell 10 million shares they sell 10 million shares on the open market for $5 a share they raise $50 million they take that $50 million it goes into the company they use that money to grow the company hopefully scale it and as they start putting out good earnings reflecting that they've done a good job the stock price will go up from five to six to 7 to 8 to 9 to 10 and then all those shareholders are benefiting as the price goes up but with a lot of small cap companies well the road to success is Bumpy and they struggle at first and so if the stock price goes down to three to two to one well you know the company's not performing super well and they might get to a place where they're like in order for us to turn things around we actually need to raise more money so to raise more money they sell more shares on the market but they can't sell them at the IPO price right that's too high so they end up selling them at a discounted price and in this case this is kind of wild to me so this stock was trading at $2 yesterday yesterday was trading at about $2 a share so if they wanted to raise $10 million in theory they could have sold directly on the open market at approximately $2 a share why wouldn't they have done that well the reason they wouldn't have done that is because in order to raise $10 million how many shares would they have to sell at $2 a share5 million shares so is there the volume to support that well unfortunately there's not yesterday it only traded 400,000 shares of volume the day before was 700,000 the day before that 500,000 so it's trading an average of a couple hundred thousand shares a day so typically when these companies do do a secondary offering and they do a direct offering where they sell shares on the open market they don't want to be the primary seller of stock because if they're just dumping shares all day long the stock price is going to plummet so in the case of GameStop for instance when they sold what was it 45 million shares on the open market they did it at a ratio of about 15% so their selling volume was about 15% of the total volume so the market was able to absorb that selling without it crushing the stock price so it's sort of delicate balance they don't want to crush the stock price but they do want to sell shares so in this case with twg what I suspect is that they they recognize pretty quickly that to raise $10 million it would just take too long based on the current daily volume so they instead sought advice from a uh Investment Bank to help them find a potential investor out there that was willing to cut them a check for 10 million bucks but if if you came to me let's say or someone else and said hey I want $10 million well that investor has to of course be sold on the deal they have to feel like it's a really like this stock is going to go somewhere they've got huge potential d d du so naturally they're going to look at the earnings of the company now if we look at this stock here we've got a couple different filings that we can look at so I use this um website bam SEC it kind of helps navigate the filings so and you know this is this gets into doing fundamental analysis which most day Traders aren't going to need to do because we're focusing so much on technicals but knowing how to read your financial statements and how to read a balance sheet is helpful and and it is interesting so as we scroll down on this you know we've got all these all this info about their the way the company's operating da d d da so let's see so here we go so these are the results of operation and this is the year that ended December of 2023 so um cost the total revenue was $16 million the cost of sales was 11 million and the gross profit was 5 5.3 million but then they had some other expenses so their profit loss before tax was $3 million which to be honest is impressive we see a lot of these biotech companies these pharmaceutical companies of course this isn't one of them but we see a lot of them that are running with they're just running in the in the negative they just they don't make any money because they're doing research into development and they're hoping that they develop something that people want to buy but during the R&D phase they are they're just being funded completely by shareholders and buy offerings so this is the gross profit of caviar the gross profit of wine D so they're mostly doing the caviar anyway so so we see here that you know this is a company that's producing profit but like I said it's $2 million so its current trading price well it's trading price before this move it was trading at $2 a share so $2 a share and the total number of shares available um looks like about 9 million shares but let's just say let's round up to 10 so a $20 million valuation uh on a company doing $2 million a year of gross of net profit it's a 10x you know um multiple it's a little high I mean I honestly think for caviar and wine but nonetheless you know the that's how the Market's pricing it okay well today right that 10 * 6 is a 60 million company so now we're closer to a $60 million valuation which their revenue certainly doesn't support but wait a second the number of shares has just gone up it went from 10 million shares approximately plus 27 so now we're at about 37 million shares so 37 million shares times times $6 a share so now all of a sudden you're talking about a 200 plus million valuation that that that's kind of crazy so what usually happens when you have this type of offering is now you've got 37 million shares available to trade and so you figure well but really the company hasn't changed in profitability yet so if it was previously valued at 20 million you know about $20 million let's just say roughly then this should be probably going back to about 75 cents a share that's sort of the way a lot of people think about it unless of course they are able to take the $10 million that they just got and really amplify the company but one of the things they say in their filings is that something like 92% of their profit or their sales comes from I think uh five customers or something like that so they have a few big big clients um which create some business risk anyway so and look at this now we've hit a high of we peaked at 213% on the day yikes okay so so what typically happens when a company does an offering like this and they announc it's at 40 cents a share is the stock is dead it just starts going down more and more and more and you also have to recognize that going from a 8 n million share float to a 37 million share float is massively duding all of the existing shareholders right if you currently own this stock before that you just got diluted by a huge ratio so it's really not a great thing for that to happen now in all fairness this company did have a um F1 which was an initial registration of new Securities so all shareholders were on notice that this was this was coming however in spite of this being out there um and let's see what this one was for um yeah it's been out there for for a few weeks in spite of it being out there um the price hasn't really been dropping that much in fact if if anything the price has moved up a little bit uh now I don't know exactly why that would be but anyways the price has been moving up so so if what normally happens is the price tanks it makes sense that we saw this drop so when I saw this drop I thought whoa it's an offering and it's at 40 cents a share this thing is done and so probably you know what a lot of people did they just started shorting it short short short short short so when you go into your platform you'll notice that this is not interestingly this is not on short sale restriction which means if you want to short it you can you can short right on the bid now you have to locate shares you have to find the shares so I have to locate window here and let's see if they have any available oops so they have shares available at light speed and they're pretty cheap it's not very expensive to buy borrow shares um this one's the cheapest right here less than a penny per share so you could you could borrow 10,000 shares for 20 bucks that's super cheap all right so it's not cheap it's not expensive to borrow it's not hard to borrow and it's not on short sale restriction so all of a sudden a lot of people see this and they're immediately hammering it short they're like this is a short this thing is going to drop they did the offering at 40 Cent a share and then all of a sudden it's printing It Go I mean this is what's crazy is it's 266 and then it's 3320 and usually this first pop here people short it and it drops even more it's like it's a bare flag usually it drops it pops up and then it goes lower and so all of a sudden when it's going to 340 it rips suddenly $360 $4 420 448 and now the people who shorted here and here are like uhoh I don't know what's happening this makes no sense at all and this thing rips up to 518 now remember it's pre-market so there are no stop orders and there are no Market orders and there are no halts circuit breaker halts that is but this uh squeezed up basically 100% in about 40 seconds it drops back down to 383 it pops back up to 450 and then notice this blue ascending resistance Line This is the line that I drew from premarket so once we got back over it right here I took this trade right in here for the squeeze through the new high of day so I got that last trade and that put me up uh to $548 on the day which is nothing crazy but you know a decent little day the thing I'll say is that this whole move here it felt like there was just a huge amount of selling and so now I have a little bit of a question and and I don't know the answer to it but this is the question that I'm going to ask so somebody now owns 27 million shares of this stock at 40 cents a share they're currently up over $100 million so 27 million shares when this thing hit a150 they were already up 27 million 250 right 27 million so now it's 50 54 million right so 350 now you're at like 75 mli million 80 million 450 you're at 110 million 550 you're at 130 million 650 you're at nearly $60 million whoa $160 million seemingly overnight on a caviar company okay that is insane that is crazy money now what we don't know is what we what I can't tell um just by looking at the filings is who the was um of these of these shares but what I can see is that in the um the F1 here they say that they're using um Sunshine Securities LLC as their placement agent so let's see where where their name is um so I just was looking at this sun Sunshine um oh maybe it was on this one this is on the the financial sorry so it's on the the F1 so Sunshine so we agreed to pay AC Sunshine Securities they're making for they're they as the as the placement agent is making a 4% Commission on the gross proceeds raised in the offering so they'll make about $400,000 or whatever it is on the um the $10 million that they raised so whenever I see that I always check the company so I look up this underwriter and the way you could do that in under bam SEC is you go under screening all documents search and then you just type in their name and and then I just see what other companies have they been involved in just kind of out of curiosity and I'm familiar with all these names I'm familiar with pretty much all of them let's look at some of their charts so so we'll move this here um so the first one was um inhd so inhd and if we want to we could pull up um just click on another window so let's see where this one's located uh um I'm wondering if this is so this one's in Texas this one's not a Chinese company uh at least it doesn't appear to be on the surface although the name uh sounds not Texan um I'd have to go into this um I'd have to look at this company a little bit more detail so we can do that in a second um but it doesn't really matter let's just go back to a couple of these others so CT ctnt that's a Chinese company so ctnt boom boom and let's just look at the chart on this one for a second back up that chart so how does inhd look not great I'd say so not great um ctnt ctnt this one um had this big spike uh in May and then came all the way back down it's at 29 21 cents right now MSS this is one that was involved in a um a pump and dump so they had that dump there the WhatsApp scammers that's from uh the episode from last week twg we already know that one axi oops aixi and you know so it's I look at these companies I I know a lot of these are Chinese and I know a lot of these have had these um these massive dumps GS IW I mean gosh GSI um you know that one for sure LCN VSS T TC JH I mean pretty much all of these so so now you're like okay this is a you know uh Investment Bank that mostly works with these types of companies they're you know they're doing these companies are maybe doing the best they can but um you know not doing super well so in any case what I'm curious about is the person who's up $160 million overnight on this caviar company and and so now how much volume do we have on this today we currently as of right now have 77 million shares of volume so could that person have sold all 27 million shares today at this point may maybe you know I I don't think so because I think if they had been selling to that extent that would be a third of the volume I think that the price would not be up 220% I think that you may have some intraday traders who are getting squeezed to the short side um I'm not sure I've looked to see if there's any WhatsApp um scammer groups that are you know putting out alerts on this stock I haven't seen that I think what's going on here is you've got intraday active traders who are just capitalizing on some of the momentum but we don't know if that um person that got the 27 million shares has sold and we we probably will well so I guess we should get a form four because that such a large position unless um you know it was divided among a number of different investors uh in which case if none of them are more than a 10% uh beneficial owner I suppose it wouldn't uh they might not uh but in any case there's now a new high of 231 per. so you know you might say Ross you know why aren't you trading this more and my my gut feeling on this was it just did didn't feel safe and I was happy to trade it early in the move I happy to trade that rally back up but then after that I just felt like you know this has a lot of risk in it there's someone out there with 27 million shares we don't know when they're going to start selling when they do start selling if all of a sudden it halts down and it opens a lot lower I could get trapped and so it's important to know as a Trader when to walk away you know when to just say I've done enough I maybe I didn't squeeze as much profit out of the market as I could have today but I've walked away with a little more in my pocket than I had at the beginning of the trading session and I want to be grateful for that because it's as soon as you're not grateful for that that you start being Reckless taking unnecessary risk and making big mistakes I think short sellers are probably getting smoked on this because it doesn't make sense they're going to argue this is a company doing $2 million a year of Revenue how is it up this much right now so now just as as we speak it's now up 273 287 per as it hits a high of $8 but if I show you the level two uh you could see 80 million shares of volume I mean this thing is is really incredible so that is what we have right now going on in the chart is a little bit of a Divergence where you've got declining volume but the price is still going higher uh that can happen but usually um usually we'll get to a point where we top out and as we're starting to see a topping tail form here which is sort of the upper part of that candle that can be an early indicator that you know some people are taking short positions against that high of 8 830 although gosh you've got to be so careful on this so I think that it wouldn't surprise me if Regulators ask you know how it came to be that 40 cents was chosen as the price cuz that's that was a 75% discount over the current trading price it wouldn't surprise me if Regulators try to figure out you know where that initial Spike came from uh you know just that very initial move was that a WhatsApp scammer group that sent out an alert or you know what was it where did that volume come from was this a stock that someone just had on their radar for no I mean come on it's not a coincidence that this happens and then the offering gets announced like an hour later you know what I mean like that and I'm not saying the company's involved I I just think that something there is a little shady and I would think that Regulators might want to take a look now as we said ch n was the pump and dump that happened last week I did my episode exposing this pump and dump Regulators did end up halting the stock so it's been halted no trading is allowed while they're investigating you know presumably what's going on and you know who is the ultimate um people who really benefited from this now volatility is something that I'm happy to trade I I love volatility no doubt twg is presenting a good amount of volatility but the thing that I prefer if I'm going to be honest is trading volatility when I understand the Catalyst and I feel like I can measure my risk in in a healthy way and when I'm trading something that I'm concerned about the risk of someone dumping a ton of shares like someone who just got shares through warrants or through um you know an offering PL a private placement of some type you know that creates risk anytime we're dealing with these Chinese stocks that creates a degree of risk because we just know that a lot of these Chinese stocks end up exhibiting this really unusual behavior so look you're all adults manage your risk as you feel fit if you were able to trade this today and you did well on it you know let us know how you did if you got a WhatsApp message on this stock please tell us because that would be really interesting to know and and get that confirmation I haven't seen I I tried to search and I couldn't find any uh or anyone else posting that they got any but um it's an interesting move and really what I had just never seen was a stock that dropped 50% and then ripped up 100% that fast I mean that was just unreal so boy what a roller coaster and I know some people got smoked in that move some were long and got smoked some were short and got smoked and you know I'm sure that some people just got smoked uh here buying it or shorting it up around these areas so as always look you got to remember trading is risky you got to manage your risk but for me I'm active Trader I show up every single day I've got a window of profitability and for me that window is really early in the morning when these companies are typically putting out breaking news and then leaving before things get too crowded because at this point you've got a stock that's up a lot on in fact bad news which doesn't even make sense and you know you got to you got to start to be careful so I think of I think eventually maybe it's a week from now maybe it's two weeks from now I think that the V the price of this stock will return more closer more closely to its logical valuation which would be you know the net profit this company is doing the prospects of future operations and everything else but in the interm remember the market can remain irrational longer than you can remain solvent so if you're shorting this because you think it's going to go back to two you might be right and it might but it could go to 14 first so if you can't afford to keep holding make sure you manage your risk all right that's it for me thank you guys for tuning in this episode I'll see you