EMFP: The trade that broke me

In my About page, I summarized my trading history. You'll no doubt see that between now and then, I admitted that I plundered my trading account twice. Needless to say, that was a memorable period in my life. The easy money from my lucky early years bit back hard and were taken away within months. I'm surprised at myself why I'm even back at this game now. There's a reason why I'm bringing this up. No, I am not broke again. I only commit what I can lose in trading now. Still, I am aware that I need to do a lot better in terms of risk management and discipline before I can become a decent trader. But I digressed. You see, like a dead pirate clinging on to his treasure, I've never let go of those shares from that trade that broke me. As of this writing, I still have a sizable shares of EMFP that I purchased from 2006 for average of $1.23. For the record, here are my 3 entries:

  1. November 9, 2006 for 3500 shares at $0.77
  2. November 30, 2006 for 9512 shares at $0.56
  3. December 31, 2006 for 34695 shares at $1.46

Actually, comparing the dates and entry prices with the chart of Figure 1, it seems that my record is wrong because the trading prices on those dates are way off. I will need to dig up some paper and check my record. Anyway, my average price is correct at $1.23. For the first few months of the share price dive, I was so naive that I thought the stock was cheap. Then once reality sets in, I was just in shock that I didn't do anything about it. By then, it was too late to savage anything worthwhile.

As you can see from Figure 1, the move from $2.00 to $0.20 took 1 year. Since then, I just wrote this position off in my mind and left the shares to collect dust. As you can see, EMFP even dipped to $0.01 last year. My intention is to unload it in a later year when I need a tax break. However, this week, EMFP moved from $0.07 to $0.35 and closed at $0.20.

You see, EMFP, or Emergency Filtration Products Inc., markets a product called NanoMask that has been independently tested to be effective against influenza and other viruses as a face mask. With the recent talk of a global pandemic because of the swine flu scare, it's clear to see why there's renewed interest in EMFP.

In fact, the volume has spiked to about 2 million yesterday and almost 1 million shares today. There were days and weeks with no share traded at all for EMFP in the past year. I am not so naive anymore to think EMFP may climb back to its former glory. However, I hope EMFP can stir up some more interest and trading volume, just so I can finish the fight once and for all and close this embarassing trade in my log book. So, I'd like to start this trade log and put EMFP back on my radar. I should have unloaded a chunk of my holding yesterday when EMFP stayed around $0.25.

However, I thought that I've waited this long, I might as well let this flu panic play out and give EMFP more time to do something. This is the first of my mistake, greed. This could very well cost me my last chance to ditch this. My reason for holding is that we've hit the 200 day MA at $0.35 yesterday (Figure 2), so a bounce back was expected.

Then today, EMFP held above the $0.13 support (low was $0.14) on the retracement. With the still relatively low volume, this stock is swinging like a wild bull. So large trading ranges is a given. There are definitely a lot of resistance at $0.30. Yet, we have established an up trend since the bounce from $0.01. This recent gap up at huge volume would look good if EMFP can break above this up trend with this momentum. Otherwise, breaking below $0.13 support would lead this back to the coffin. Anyway, it's too early to tell. I usually say watch the price levels at this point, however, in this case, I say that it's more important to watch the volume. A sustained level of volume in EMFP means there's finally some interest. And since we're pretty much at rock bottom for the price, volume would lead to higher prices.

Emergency Filtration Products Inc. (5 years, weekly)

Emergency Filtration Products Inc. (daily left, weekly right)

Posted 28 April 2009 in stocks.