Revisiting a Bad Trade: Long SPRNG

I woke up this morning to see a new blanket of snow out my window, and a trade I put on last week buried under that snow: Buy Spring (SPRNG) which I put on expecting to maintain for a quarter or two is now a jumbo loser. (Recall that we dumped our holdings of Winter (WNTR) previously, but were not short).

I believe that both of these calls were fundamentally sound, but ill timed. Some of that might be my selective perception and bias at work. (I want this trade to work out, hence, I am making excuses for its failure). I was so confident about the breakout of the price temperature of SPRG over $40 that i did not draw up a sell strategy, and when the breakout failed, it became a big loser. This is a major trading no-no.

Under normal circumstances, I would be honoring the trade discipline and taking  the big 10 point loss.

But I am going to do something I rarely do, and you should absolutely never do: I am going to double down on my SPRNG bet. Not only that, I am forecasting that WNTR (which trades inversely to its price temperature) will soon go through bankruptcy reorg, and trade under the symbol WNTRQ. Hence, I am now short WNTR as well.

Why? I have extreme confidence that the fundamental story remains perfectly intact (note that this is not a global warming trade, but a seasonal one); I believe this price action is an aberration. I remain extremely confident that within a period of few months or even weeks, this will be trading at a price temperature well over the recent low 30s action.

I am relying on 10,000 years of temperature data for the northern hemisphere, hence my strong conviction in this high probability bet. Unless you can express this degree of evidence based data on price (temperature) action, you should never do this . . .


Stock: OTC Nasdaq Spring (SPRNG)
Recommendation: Strong Buy from 40-50; Add from 50-60
Price Temperature Target: 85

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