Report card 22/1/24
A bit went down...
The initial idea and goal behind this Substack was to share the journey of an intraday Trader. In doing so, my words increase my self-awareness in real-time which helps to facilitate better execution. Furthermore, writing this enables me to network and learn from other traders to improve. I believe both of these elements were on show yesterday.
In my last post, I introduced an overview of the Daily report card. I wanted to now expand on this with a review from yesterday which was rich in opportunity.
As ever, there is a lot I could do better. Improvement never ends. It is only through reflection, deeper investigation, feedback, and subsequent tweaks that I can then close the loop and move forward into my performance. Hopefully, through more examples, you can start to believe in the power of this cycle.
P/L: +$37.5k
-1 win for the day:
Despite a number of catalysts and big gaps, I was controlled and focused vs reactive
-1 mistake or point of tension:
Need to better update my planner to account for certain variables. How to better account for opportunities where I do not have the luxury of time pre-open?
-Was I conscious of my sizing goal:
YES
-Did I hit my risk-adjusted size goal?
NO in LTR. This was partly because lack of borrows meant I was scrambling. The real reason is that late drop = not enough time to plan = defaulted to old default brain pattern. These are the conditions where my system breaks down.
-Overview:
Sold headline day and I think I did a good job of taking chops in the right spots for my system. Across the best catalysts, planned via my automation, no overtrading and waiting for my spots. I was conscious of my sizing goal pre-open but the size of the gaps meant I reduced notional value. This needs further thought and a deeper dive. Furthermore, the lack of borrows meant I had to parcel up orders in a separate account. This becomes tricky to manage and again leads to a breakdown in my habit patterns. However, once I was in trade, I was much more patient and followed exit management rules more cleanly. I am proud of lots of what I did today instead of being scrambled.
The main issue to address is sizing in LTR. This was a very late news drop which invariably means faster processing speed needed and less time to be planned/fully automated. I was waiting for the lender response for my main account and was forced to split up orders in a separate account. I have addressed this issue now with a simple messaging and alert system but this all took up time which distracted my focus and ability to fully digest the magnitude. Great shout by the team to get me across the catalyst. I only did 1/2 size on open and it went straight from the start. I knew I had to get bigger and was conscious of my sizing goal so I just swept the order down to double up. However, this was not a great fill and perhaps an act of fomo so I decided to take 3/4 of this off on the first break. Fine BUT it’s almost impossible to put this fully back on at a better price in real time. Sure enough, I didnt and then stock really broke. Held decent core as per rules and scalped out into first real capitulation. Didn’t panic out around Vwap and instead just watched and noted the 98c bidder get fully slotted. This then became an inflection point to manage risk going forth.
The truly powerful trade today was stepping back and thinking about the broader implications for the Lithium sector given LTR news. The pricing environment is so poor that a Tier 1 development project is getting put on hold. This has clear implications for the growth and demand story for the juniors and even the majors. Needed higher-level thought. No doubt an element of hindsight but this sentiment and sector trades are the most powerful as non-obvious immediately AND take time for money to be deployed. I didn’t join the dots until too late.
Lots of upcoming catalysts with Quarterlies. Let today be a template and continue to bring that sizing goal to the forefront.
-Current Goal:
Increase my size in my intraday strategies
-Solutions:
Re-programme my default brain pattern through emphasis. Start the day with the statement "I need to think about sizing"
Complete my planner in full
Identify the playbook. Grade the quality of the playbook. Reference amount of size needed for that combination
Execute size via automation
Close the loop. Ask myself if I am the right size as per the checks
-Trade name:
Morning drive
-Catalyst:
Given the soft pricing environment, the company is to conduct a project review of Kathleen Valley's planned expansion and ramp-up.
A$760m debt commitment letter was terminated. LTR recently signed a commitment letter with a lending syndicate for an A$760m debt funding package. However, following recent reductions in the independent pricing forecasts for spodumene, which credit approvals were based, the commitment letter has been terminated.
Still targeting mid-CY24 first production. However, the company notes that there is no change to the 3Mtpa plant capacity design which the company is currently constructing at Kathleen Valley. Sufficient cash for the first production. However, further raise will be needed for any expansion projection surely given the debt pull
-What I did I NOT know pre-open:
A significant amount of the value in LTR comes from its underground operation. The open cut mine finishes FY25 which reaches a maximum of a 2.0mtpa operation. The underground expansion was going to be 4mtpa with a long LOM (~2040). This was meant to start FY25. Putting this on hold/delay is the sole growth engine and calls into question the valuation of the whole project.
-Variables:
Block buyers underwater from ALB selldown for 4% of the company on 18/1/24. This was just 2 days ago! 96m shares at $1.26 and "only" 68m shares had traded in those 2 days. Clearing event now becomes a major overhang.
Late news drop. 9.59am news and re-open 10:10am. No time to fully process or deploy meaningful capital. Stock may also have large offshore ownership from Resources funds.
Stale liquidity: 356k at 1.10; 397k at 1.15 ; 239k at 1.16 ALL stale
Aggressive seller of 1.1m shares down to 1.05. Another seller of 820k down to 1.07.
Daily chart extended to downside. Not optimal R/R spot but clearly stock is broken
Shortbase 8%. Risk of covering into this?
-The Trade:
Open Volume: 2.2m at 1.07 for a gap down of -11%
Entry: Open and then had to sweep 1.03/1.05. Full protection with 500k at 1.10. Plenty of time to add down to 1.02 zone
MAE: 0. Never goes offside
Size: $250k was 233k shares. I hit 200k in 2 lots. Didnt have more borrow at this time. Had the capacity to be bigger
Adds: only clear add spot to me was the failed retest and hold back above 1.00 at 10.18am. Volume into the break, lower volume recovery and weak bounce, turn back down through 100. Risk can now be defined 1.03/1.05. Still early in the piece
Exit: capit into 90c zone was clear to me and extended from vwap. However, still early at 10.30am vs my rules > then this time period. Thus I did hold core and there was a sharp V bounce. Thats just part of the samples. What I did great was not panic out into vwap at 96/98 zone which is total no mans land versus the high and versus the low.
See it moment: Volume into the bid straight off the open. I knew I was right here. 2nd see it moment was that hold back below $1. Huge volume into $1 bid prior and cant hold back above
Notes: goes from the start with bids dropping straight away. Solid protection so relax and be calm. There was actually time to add more into 101.5/1.02 with an algo refreshing. This was my early sweet spot. Volume into the breaks through 100 means real seller. Once it holds below in time and price, this was the prelude to real capitulation
-Better?
Sizing: 200k on open idealised vs my 100k and 100k add
Management of trade: exit management perfect other than the first cover of 75k out of 200k = 37%. I did this because my add was a chase but still 1/8th is the rule! Perhaps I could have been 20% here given the chase. I think I did really well to be patient and hold that core as I saw I was right from the start and knew the magnitude
Tech solutions: update grader to better account for meaningful variables; update risk-adjusted sizing
-Charts
Idealised
Other:
APX
