I just covered the pros and cons of trying to play a SET chart pattern, which boils down to the upside being higher degrees of probability that long term tailwinds will support the stock but the downside being overconfidence in too long of a trend can make for some very bad timing. So with those two sides of the same coin in mind, what are some ways to potentially work within these confines and maximize upside while mitigating the downside? Here’s my take on that.
Though I believe the long term strength and potential for a sustained secular bull market for these shells implies the most potential upside is to be had from longer term swing trades, that doesn’t mean you have to play them that way. I believe these to be attractive scenarios and they will attract lots of flippers. They’ll have their moments where any one can get red hot, but then can just as easily settle back down, correct sharply and even see the price and momentum go dormant again. Ideally they will prove to be resilient over time and will keep shrugging off the corrections (that’s the theory), but again, that doesn’t mean you have to play them with that time frame in mind. There is no reason you can’t just quickly flip these plays and take advantage of short term momentum and then move onto another one. Granted you will not expose yourself to the same sort of upside that a long term swing trade (dare I say (high risk) investment?) can potentially bring you, but you also limit your risk exposure greatly. If this is your calling, flip away.
If you don’t have the time, interest or inclination to be a flipper or you just want to gamble with heavier implications, you can play these in a more patient manner and aim for the grand slams instead of many singles. If you’re chasing momentum and looking to flip it, then it’s not essential that you necessarily get in before everyone. You just want in early enough to be able to flip out at a higher point before the momentum dies off. However if you’re aiming for bigger prizes, chasing momentum is going to prove to be much less effective unless you wait for it to die down and the price to settle. If you’re trying to time the bigger waves, you want to try to get in when others are getting shook out or are moving on from boredom.
The other option is to find a combination of these two approaches and make that combo work for you. You can begin to scale in during a lull, correction or quiet period, then further build your position at opportune moments over time as long as your bullish thesis still makes sense to you. If the stock then gets hot and rallies, you can opt to flip some of your shares into strength, then consider scaling back in and out as the stock ebbs and flows. While you’re flipping some of your position you’re also holding a core position that you aren’t touching and you’re letting it ride, and in the event you do hit a Deep Fucking Value runner, you’re going to be along for the ride with your core position.
No one can tell you how to do this, you need to develop your own system and approach then live with and learn from the results and feedback you get from your decisions. My belief is that many of these #OTCSET plays are potentially going to offer up some life changing upside so I absolutely have intentions to ride core positions from here to the moon on as many as I can catch. That said, I also know the ebbs and flows are inevitable so I want to keep the capital flowing and methodically work to limit my overall risk by locking in partial profits along the way.
That’s my approach but don’t let me tell you how to trade these patterns, my calling is simply to bring awareness to them and test my theory while hopefully riding the most exciting wave in OTC history. Whether you’re looking to flip them quickly, ride through the ups and downs hopefully to the moon or some combination of both, if my theory pans out then there will be room for everyone to thrive until this phase is exhausted.