🍨 Daily Scoop: The Danger | Trade Stocks

The Danger

By Tue, Sep 15, 2020

Hey Scoopers,

In absence of no significant news, investors bought the dip. — More on that in the “Overall Market” section.

Beyond the overall market, a new FDA approval rallied a COVID-19 vaccine stock, and an accounting clarity dipped another stock. — More on that in the “What’s Up?” and “What’s Down?” sections.

Oh, by the way, Nikola’s latest story shows the danger of investing in most SPACs? — More on that in the “Water Cooler” section.

But, first, here is a recap of what happened in the market yesterday:

Market Recap

  • U.S. markets: All three indices ended Monday in the green. Scroll down to the “Overall Market” section to read more.
  • Cryptocurrency: Bitcoin’s price had its own rally and passed the $10,500 mark on Monday.

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No News, Buy The Dip

The market had an excellent start to the week with indices gaining between 1.18% to 1.87% on Monday. Nothing changed compared to where we left the market, but the lack of any significant news may have signaled investors to buy the dip, and that’s what went on on Monday.

An FDA Approval

So, what happened?

Shares of Vaxart Inc (Ticker: VXRT) were up more than 45% on Monday. The company is in the COVID-19 vaccine production list. This small Pharma company received FDA approval for its COVID-19 vaccine phase 1 clinical trial, and investors were there to celebrate it.

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Adjusting Expectations

So, what happened?

Shares of Groupon (Ticker: GRPN) were down more than 11% on Monday. The stock had previously rocketed by more than 100% in August after the news broke that the company is transitioning to a new model. In this new model, Groupon doesn’t need to carry any inventory and warehouse operations. On Friday, the CEO provided more clarity about the transition to the new model. While not changing the overall picture, some changes to the accounting practices have caused investors to adjust their expectations and sell the stock partially.

The Danger

So what happened?

Everybody loves a good story, and Nikola (Ticker: NKLA) was a good story until it wasn’t. Or was it?

The news broke that the SEC is investigating the company after short-seller Hindenburg accused the hydrogen fuel truck manufacturer of fraud and lies about its technology. On the other side, we have GM (Ticker: GM) believing in Nikola, or its CEO, and taking an 11% stake in the startup.

The problem is that no one knows who is right. That’s the danger. No one knows what’s under the hood. That’s the danger of SPACs. There is no real S1 documentation, there is no roadshow, and there is no requirement to have a sane, logically put-together documentation so that investors can evaluate the potential.

You can ride the crazy market as you may bet in a gambling game. The danger is when people who have won money with Nikola attribute their success with their investment skills.

Our email address is members@tradestocks.com. Let us know if you have any questions, feedback, or ideas.

About the Author

Brought to you by Hoda Mehr, Editor at Trade Stocks, CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 8,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism and storytelling to all aspects of her work. Subscribe for free here: Stockcard.io