Wondering how to ride the rocketship without getting burned? Here’s your trade on Aurinia Pharma (AUPH). (March 13, 2017)


I want to look at Aurinia Pharmaceuticals ( NASDAQ:AUPH ). Last week the company had some pretty sporty things to say. First of all on the 7th they reported that their Phase 2B trial is going to be presented at the National Kidney Foundation Clinical Meeting next month, so that pushed the stock up. Then on the 9th, which was Thursday, right here on the 9th they reported strong earning and that pushed the stock up even more.

Now, what I was going to talk about today, in this video, was how to trade the stock and set yourself up to hold it for as long as possible. And I was going to mention how I thought about buying some additional stock today, but instead I sold some. So that is what I was going to talk about, talk about raising your stops. And then as I was getting ready to do this video, low and behold, Boom! The company reports that they are going to be issuing a secondary offering, and at one point the stock is down like 24 percent. So the focus of my video is a little bit different today, though the results are still the same.

As a stock is moving up like this and you are long, you have to be taking profits along the way. You can’t just be buying and then buying more and buying more. Because what you are doing is, you are increasing your position size but you are also increasing your cost basis because you are adding on the way up. Now, I like to add stocks on the way up, but I add them on pullbacks within an uptrend, add, add, add, that type of thing. But just to be adding when the stock is moving higher and higher and higher without taking profits, you are really kind of playing with fire.

So what do we get after market? The company reports earnings and I took some profits today. I still have some stock, I am still up on the position. Although you know what? I will still be watching this tomorrow morning early. I almost sold some after hours when it first fell, but I thought, “No, generally when ever I take actions after hours, that involve stock trading, it is usually something that I wish that I didn’t do.” So I will wait and see how this thing works tomorrow. But I would not be particularly happy if I had been buying more shares here as opposed to scaling out of some.

Because what that has done is, it took some shares off the table, it took some risk off the table and it also dropped my cost basis on my current position, it dropped that down. Smaller position, lower cost basis, so yes, I don’t like it, that this stock is down so much, like 15 percent after hours and it will probably get a big flush tomorrow morning as move traders get the news. But I am happy that the cost basis is lower and that I have got room to maneuver here. That is a much better deal than buying it all the way up without taking some off of the table. So the lesson here: Just make sure you are taking stuff off the table on the way up, because then when you get a secondary offering like this it is just an, “Oh crap!” As opposed to, “Oh sh….”, you know what I mean.

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