Brendan McDermid/ReutersSummary List Placement
Ryan Hasson, a senior trader at Kershner Trading Group/SMB Capital, just made the biggest trade of his career on an over-the-counter bitcoin stock.
Five years prior, Hasson had just jumped on a one way flight to New York from South Africa to start a job in trading, with no prior experience.
"I was able to very quickly absorb all the lessons that I learned in those six months, like a sponge," said Hasson on the "Chat with Traders" podcast on January 20. "And I honestly think I was in a better position, arriving there not knowing anything than if I arrived there with my own strategies or idea of how to make money in the market."
On the podcast with host Aaron Fifield, Hasson broke down his transition from trading everything trying to identify his edge to then focusing on low floats, which are stocks with only a small number of shares available for trading, to then diversifying into other trading strategies, such as swing trading.
This decision to diversify his trading approach, around two years into his career, helped him develop one of his best strategies, Hasson said. Now he leverages the swing trading technique in a range of ways.What is swing trading?
Swing trading is a style of trading that attempts to capture short to medium-term gains in a stock over a period of a few days to several weeks.
Swing trading is considered a speculative trading strategy, which is particularly relevant right now, as many top investors raise concerns about speculative bubbles from SPACs to bitcoin. This comes at a time when retail investors, on apps like Robinhood, have been driving up the price of relatively unknown stocks based on specific themes, such as electric vehicles.
Some big-investors believe the speculative bubbles are set to burst. Others believe there is room to run.
On January 21, the research department of the investment banking firm Evercore hosted a webinar on the positives of speculative bubbles with William Janeway, a senior advisor and managing director of Warburg Pincus.
During the webinar, Janeway said the unprecedented financial regime where the risk free real rate of interest, which is negative and less than the rate of inflation, has almost mechanically generated the valuation of cash flows in the future, especially those cash flows that are furthest out in the future, which are the most speculative investments, such as Tesla.
"Sooner or later, interest rates are going, if not to normalize, they're going to increase and that again ... will have the consequence of reducing the value of far out future cash flows and ending this particular set of bubbles," Janeway said.
Dennis DeBusschere, senior managing director at Evercore ISI and host of the webinar, said this is why the firm isn't excited about being negative on some of these speculative bubbles, or valuations on a long term basis, because there needs to be a lot of confidence that risk-free real interest rates are going up a decent amount, not just a little bit, which looks unlikely right now; a sentiment echoed by other major institutions at the moment, suggesting there could be potentially further opportunities for swing trades as the market runs higher.
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"We had blockchain/bitcoin, we had the marijuana theme, we've had COVID-19 [theme], all the vaccines, and now we have the bitcoin/blockchain again," Hasson said. "So it's identifying stocks that have a real good chance of moving in this theme, gaining a bit of euphoria and attention."Identifying swing trade opportunities:
Hasson looks at four components in identifying swing opportunities:Trader conversations
"When many traders stop mentioning the same symbols or the same theme or sector, you know, there's just a lot of attention, a lot of traction," Hasson said.Twitter
"Looking on Twitter, how many people on Twitter are starting to talk and get a bias around particular stocks and a sector," Hasson said.Technical and fundamentals
Hasson looks at a range of fundamentals from:
- How many names within one sector are performing well that day?
- Examining the volume traded within a basket of stocks in a particular sector? Are all the stocks trading abnormal volumes?
- Does it look like some investors are starting to accumulate positions?
- Has this stock run before? And if, so where did it get to? What's the current float size and outstanding size?
- He also looks at the company itself and any press releases that could relate to any moves.
However, Hasson notes traders must keep an eye on these stocks for a few days until there is confirmation this is a theme.Peer stocks
"I just try and gauge the overall psychology around that particular stock and other stocks in that sector," Hasson said. "So that's typically where the process starts and then, figuring out how high the stock can go is a whole other discussion."Swing trade strategy:
Once an opportunity area is identified, it's about deciding whether to trade and what the right approach is.
"[A swing trade] is all about risk, reward and probability," Hasson said.
To demonstrate how he approaches swing trading, Hasson lays out his recent Bitcoin OTC trade on the podcast.
"[I] actually just closed out this trade, ended last week, [which] was the biggest trade I've had in my career," Hasson said. "And this was a Bitcoin OTC name that has been consolidating for months."Market screening
First, Hasson monitors all the stocks within a specific theme, whether that be marijuana or Bitcoin, on a market screen window.
For the Bitcoin theme, Hasson had identified over 10 stocks on the NASDAQ as well as over-the-counter stocks to watch and monitor everyday.Peer stocks start to move
A peer stock, HVBTF, started to move. The stock went from $0.50 to between to $2.50 to $3.00 in a matter of weeks.Placing the trade
Once the stock Hasson had been watching moved above resistance, a trading term that refers to the point a stock price is expected to stop and reverse. He placed a position as it moved to $0.20 and planned to stay long, as long as the stock stayed above resistance and did not get below the point he believed he was wrong, which was $0.10.
"My risk-reward was really good, based on the way I believe this could go and where some of its peers had gone," Hasson said.Adding to the position
Hasson then had a plan to add more to his position, if the stock went "for broke" and moved past its previous pivot high.
A pivot point is a technical indicator that is the average of the high, low and closing prices from the previous trading day.
"What these OTC names and some of these swing positions provide is just immense risk reward where again, you're able to risk $0.10 and this particular stock went from $0.20 to $1.58," Hasson said.The end game
Ultimately Hasson's strategy focuses around sympathy trades. He said it is easier to catch the sympathy trade, the stock that follows the leader than the leader itself. The same applies to the short side, once the leader falls then the sympathy stocks fall like a house of cards, he added.
"So catching them on the long side, which in this particular case, was a three week trade," Hasson said. "And then flipping on the short side once if the bubble with these particular stocks bursts and then holding for the retracement, which could also be a two to three day or one week position."
However, even with the perfect opportunity and strategy, traders need to be aware of their own technical setup. Hasson asks, how does this look from a risk reward perspective? Is there enough liquidity?
"So it's got to tick 10 boxes," Hasson said.
And even if it does pass those 10 boxes, Hasson must also pass his own pre-flight checklist, which he dives deeper into on the podcast.
Read more: Billionaire investor Ray Dalio warned the US could be on the verge of civil war. Now a prominent market bear is saying investors should monitor this under-the-radar bubble, which could trigger unrest.
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