Short Term Trade in – LAC.TO ( LACDF)
Earlier last week I had invested in Lithium Americas Corp which trades on the TSX ( Toronto Market) as LAC.TO and as LACDF on OTCQX ( US Market) . This was one of my short term speculative trades. I have purchased it at $.92 CAD, and have watched the stock fall to $.78 CAD . The biggest drop came today at $.10 CAD per share. I have previously invested in this company and made money on speculative short term trades. You can read about my past trade here.
This stock in the last 2 months has been trading above $.87 CAD and above $.84 CAD over the last six months – at times going over $1.24 CAD. Last week I made my trade based on the range I have seen the stock trading in – hoping to pick up some quick profits. As it is common in investing – the stock broke through its six month trading range – in technical analysis they would call this a break through on a support level. Never a good sign !
Handling Large Loss In An Individual Stock
Today the stock hit $.78 CAD. As an investor, watching a short term trade drop 15% is painful ! It can leave you with an uneasiness in your stomach ! However , if you want to invest in individual equities you must be able to handle such drops and make logical decisions.
So what I did was try to analyze what caused the price drop:
- News ? When I searched for news items on the company for today- I didn’t find any. So publicly available news about the company wasn’t causing the drop in price.
- Market Manipulation ? Today is a holiday in the US so the trading is only on the Canadian Exchange. My initial thought was someone was trying to manipulate the price since only one of the exchange was open today. However the price drop was on a trading volume that is higher than average trading volume for the stock. So I don’t think this drop in price today is due to market manipulation .
- Positive Development for Competitors ? When I couldn’t find news items on the company for today – I searched for Lithium specific news items. There were some positive news items from other Lithium companies . European Lithium Ltd increases lithium resources significantly . Southern Lithium is Granted Permit to Drill Cruz Property, Salta Argentina . The 2nd article is positive news for a company that also is mining Lithium in Argentina . Which led me to believe, that this may be one of the root causes for the drop in price.
- Insider Information ? Another possibility is insider information – insider trading. This is hard to predict or figure out in real time from the view point of a retail investor
Sell Or Hold?
I couldn’t find any reason to cause me to sell the stock. In this case, I am going to hold even with the current loss. I will monitor closely and execute a sell if necessary .