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Mind management is key to trading success. Controlling your emotions and avoiding the pitfalls of the Fear of Missing Out (FOMO) is critical. Secondly you are never out until you have completed the trade. We look at Orphazyme's $ORPH stock wild ride with 20 volatility halts ending in a violent island reversal trapping longs.

Stranded on a desert island

On June 10 shares of Orphazyme A/S ORPH soared 383.8% highe, to make the Denmark-based biopharmaceutical company's stock to the top of the leader board prior to a trading halt. It was the biggest gainer listed on major U.S. exchanges which attracted a plethora of momentum traders with FOMO.

ORPH was up as much as 1,387% at its intraday high of $77.77 was halted for volatility for the 20th time Thursday June 10 at 3:24 p.m. Eastern Time with a huge gap down at the last trade at $25.30, and remained halted before opening lower again. The move was a classic island arrival all be it it in a violent reversal revival. Trapped on both sides. Bearish Island Reversal

 

Fundamentals and rationale are out the door in a FOMO MOMO rally. The stock's rally gave the company a market capitalization of $884.3 million. The delibitating halt of around $40 down came after the company confirmed that there was no news released Thursday. The company confirmed the last announcement was May 7, when the company said a pivotal trial of its treatment for Lou Gehrig's disease failed to meet primary and secondary endpoints, sending the stock plunging 32.8% that day.

ORPH halts

A few points here if you are chasing Momentum (MOMO) be aware of the risks, here was a company purely up on buying chasing buying and not knowing why and hoping the were out before the last guy. Lately many stocks are up purely on short squeezes, where investors buy the stock in the hope that option sellers or short selelrs have to cover. There usually is a reason why a stock is heavily shorted.

Usually in a case like this daytraders look for related or sympathy trades in the hope of catching the next run. The sympathy play after Orphazyme, was the next biggest gainer Thursday the Boston-based biotech Galecto. The company's stock $GLTO ran up 170.0% prior to its seventh halt for volatility at 3:15 p.m. So here we have a stock have no tangible relationship running up on a stock run up on no tangible news.

GLTO halts

For risk managment the stock had no options and for most daytraders the stock was hard to borrow so difficult to short.  Furthermore the halts were fast if not immediate so many were caught holding the bag if they couldn't out before that final gap down. A reminder why the trade is not over until both sides, the buy and sell are complete. In other words the profit or loss is realised. This can be a huge problem in leveraged positions.  Stops may not work either in halt situations due to immediate halts and then there is slippage.

Trading is dangerous, in a nutshell is this trade right for your risk plan?

KnovaWave . Trade Smart

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