In 2005, 450 sheep jumped to their deaths, according to USA Today.

One sheep dove.  Another followed.  All of a sudden, a flock of sheep began jumping off a cliff for no real reason. Shocked shepherds would watch as another 1,500 jumped.

Many unfortunately died.  Those that lived were lucky, landing on well… pillows.

They were all caught up in a wave of herd mentality.  There was no logic to it.  They just did it because every other sheep was doing it.  Sadly, this very same thing happens each and every day among traders and investors.

We buy because every one else is.  We sell out of fear.

But we never question what we’re really buying, which can be quite costly.

Here’s the perfect example.  In 2009, Kiplinger’s ran an article by Robert Frick, titled, “Don’t Trust the Crowd.”  It noted:

What's scary about the herd mentality is how insidiously it gets you to see things differently. In fact, a recent experiment showed that we may actually be hard-wired to believe what the crowd tells us. In the experiment, conducted at Emory University, participants were asked to look at an object (an assemblage of cubes) and then judge how it would look if it were rotated slightly. But there was a twist: Other participants--who in reality were actors hired for the experiment--were instructed to give wrong answers in an attempt to sway the opinions of their fellow participants.

Sure enough, the real subjects, influenced by the actors, gave incorrect responses, despite what their own eyes told them.  Brain scans found that participants didn't just decide to go along with the crowd. Instead, the crowd's opinion actually changed their perception of the problem. Participants "saw" the objects differently. The herd, it seems, alters our perception of reality.

What allows a Wall Street participant to think outside of the herd is the awareness of just how easily we are influenced, as also highlighted by that article.  “Then you can concentrate on the smartest investing strategy: spreading your risk across many types of investments and periodically redistributing your money among them.”

This is one of the key reasons we attempt to exploit herd mentality.

The only question now is how, which we want to begin sharing with you in Traders Daily Education, using a unique combination of technical, fundamental, news and billionaire strategy that’s designed to exploit the excessive fear and greed of the herd.

And believe it or not, the strategy has worked quite well these last 20 years.

I wanted to share that because I’ve seen some questions come in about strategy.

I’ve also been asked about longer track record, which I’m sharing below as well using this very strategy.  While I did not personally take a position in these trades, here was my beta test since March 2017.  Overall, it looks very good with the exception of some big losses in there.

Open Positions

First Data (FDC) stock -- $17.80

We recommended this trade just yesterday.  It remains a long-term hold as society just begins to go cashless. At the moment, the stock is still residing in a tight coiled spring between $17.80 and $19 a share.  We’d like to see a break to at least $20, near-term.

Disney (DIS) -- $99.25

Disney December 15, 2017 100 calls -- $2.85

We opened this trade just this week.  It’s a hold on excitement surrounding the new installment of Star Wars coming soon.

Shopify Inc. (SHOP) -- $96.90

SHOP November 17, 2017 105 calls -- $4.20

SHOP is just beginning to rebound again, picking up another $2.46 yesterday.

Remember, after an incredible sell-off on the heels of a Citron Research report, many analysts, including myself, believe it’s nothing more than an overreaction.  Even Piper Jaffray has noted that the business is legitimate and is sticking with its $110 price target.   Credit Suisse believes the bearish argument from Citron is flawed.  And Baird analysts are dismissing the suggestion that SHOP is a marketing scheme.  Hold both trades here.

Cypress Semiconductor (CY) -- $15.37

We recommended this trade just last week.  It’s now up to $16 and is just now beginning to gain momentum.

Vale S.A. (VALE) stock – $9.80 entry

We mentioned this opportunity not long ago, as a way to trade the cobalt and manganese shortage story with electric vehicle demand heating up.  Hold.

Sturm Ruger (RGR) stock -- $52.50

American Outdoor Brands (AOBC) stock -- $15.70

AOBC January 19, 2018 17 calls – 75 cents – exit half

We are still bullish on the gun trades.  We see no reason to exit either opportunity at this point.

HRL January 19, 2018 32.50 calls – 95 cents

HRL December 15, 2017 30 calls -- $2.15

Shares of HRL are now up to $31.72. We are continuing to hold these trades.

Comcast (CMCSA) stock - $37.95

CMCSA October 2017 37.50 calls - $1.20

CMCSA is taking its time recovering, but it’s moving in our direction. We may need to close this one out for a loss, but hold for the time being.

Carnival (CCL) -- $66.50

Carnival October 2017 67.50 calls -- $1.50 (exited half)

The stock last traded at $67.20.  We’re watching this one closely.  If need be, we’ll close out the second half of the October 2017 calls for a loss and hold the stock.  We already exited half of the calls for a win of 67% in September 2017.

NKE stock -- $53.50 entry

NKE October 2017 55 calls -- $1.35 entry

We issued a new trade on Nike (NKE) and on the NKE October 55 call. We may need to close out the calls for a loss, but will still hold the stock.

TrueCar (TRUE) stock -- $16.75 entry
TrueCar October 2017 16 calls -- $1.50 entry
TrueCar January 2018 16 calls -- $2.35 entry

On August 15, we recommended buying TRUE, as well as the October 16 calls and January 16 calls.  The stock is moving in the right direction, last trading at $15.27.

Zillow Group (Z) -- $44.75 entry, exited half for win

Zillow Group (Z) November 2017 45 calls- $3.60 entry, exited half for win

I’ve had enough of this trade.  Close it out today.

Advanced Micro Devices (AMD) -- $13.30 entry

Unfortunately, the AMD September 13 calls did not work out as hoped.  However, we continue to hold the stock at oversold conditions. It last traded at $13.88.

Closed trades:

  • Exited half of Zillow Group (Z) for 8% gain on August 8, 2017
  • Exited half of Zillow Group (Z) November 45 calls for 44% gain on Aug 8, 2017
  • Exited half of CELG October 2017 130 calls for 150% on August 31, 2017
  • Exited second half of CELG October 130 calls for 143% on Sept 1, 2017
  • Exited GOLD Sept 92.50 put and 95 put for a full loss
  • Exited half of LOW September 2017 75 calls for 71% on Sept 7, 2017
  • Exited VNDA stock for 8% on September 8, 2017
  • Exited VNDA October 2017 16 calls for 35% on September 8, 2017
  • Exited second half of LOW October 2017 75 call for 92% on Sept. 8, 2017
  • Exited LOW stock for 4% on September 8, 2017
  • Exited half of FEYE stock for 13% gain on September 12, 2017
  • Exited half of FEYE Dec. 14 calls for 68% gain on September 12, 2017
  • Exited half of FEYE Dec. 15 calls for 63% gain on September 12, 2017
  • Exited half of CCL October 2017 67.50 calls for 67% on September 13, 2017
  • Exited VIX October 2017 15 put for 18% on September 13, 2017
  • Exited VIX October 2017 14 put for 17% on September 13, 2017
  • Exited ZIV stock for 2% on September 13, 2017
  • Exited SVXY stock for 9% on September 13, 2017
  • Exited AMD September 2017 13 calls for a full loss, expired worthless
  • Exited second half of FEYE stock for 16% gain on September 14, 2017
  • Exited second half of FEYE Dec. 14 calls for 100% gain on September 14, 2017
  • Exited second half of FEYE Dec. 15 calls for 89% gain on September 14, 2017
  • Exited CRUS stock for a loss of 7% on September 22, 2017
  • Exited CRUS October 2017 60 calls for a full loss on September 22, 2017
  • Exited half of AJRD November 2017 30 calls for a gain of 200% on Sept 22, 2017
  • Exited half of AJRD November 2017 30 calls for a gain of 168% on Sept 22, 2017
  • Exited AJRD stock for a gain of 13% on September 22, 2017
  • Exited half of AOBC January 2018 17 calls for a gain of 47% on Oct. 4, 2017
  • Exited half of EXPE October 145 calls for 22% gain on October 6, 2017

Ian L. Cooper

Traders Daily