Mai Teri kah ke lunga…
Aurobindo Pharma is a favourite stock of punters across the Globe.
Its heavy debt levels coupled with dubious quality of management makes it a preferred candidate for daredevils to short-sell the stock.
If one is nimble with the short-sell and square-off, a tidy packet can be effortlessly made.
A trader named Mitesh Patel has been aggressively bearish on Aurobindo Pharma.
“Mai Teri kah ke lunga…,” he proclaimed, cheered on by a massive follower base of 65,000 followers, as the stock plunged like a stone on the back of massive short-selling.
Mai Teri kah ke lunga…
No any trendline
Now 501.5 https://t.co/PLdkxmskcH— Mitesh Patel (@Mitesh_Engr) February 17, 2020
However, Aurobindo shocked everyone by suddenly announcing that it had received a clean chit from the USFDA.
The stock surged like a supersonic rocket, notching up massive gains of 20%+ in a matter of a few seconds.
“One more record but on negative side this time. Lost 5.5% capital,” the trader announced mournfully as he and the other short-sellers scrambled to square off their positions and salvage something from the ruins.
One more record but on negative side this time. Lost 5.5% capital. pic.twitter.com/2KJl6MygfW
— Mitesh Patel (@Mitesh_Engr) February 19, 2020
He also revealed that he trades “naked” and “without hedges” and that this has enabled him to rake in a massive gain of 310% YoY.
Also, a strict adherence to capital allocation ensured that only 2.2% of the capital was lost despite the catastrophic situation.
Few had suggested to me to hedge position. But remember. Without any hedge and being a direction I made 310 % this year by doing only naked selling.
Auro Pharma took away only 2.2% of capital even after 13% upmove.
This is how I am keeping max position in any stock.— Mitesh Patel (@Mitesh_Engr) February 19, 2020
Punters load up on the stock … only to crash land
In the aftermath of the euphoria surrounding the clean-chit, traders quickly grabbed the stock in the fond hope that they would be able to scalp a few points on the upside.
However, nobody had foreseen that the USFDA would do a somersault and rescind the approval.
U.S. FDA revokes voluntary action initiated status for Unit IV: Aurobindo Pharma pic.twitter.com/jCHNU4ZhrQ
— BloombergQuint (@BloombergQuint) February 21, 2020
Seasoned market watchers were at a loss for words at the unprecedented action.
What nonsense…. pic.twitter.com/EpZuCaPpUJ
— Darshan Mehta (@darshanvmehta1) February 21, 2020
The most bizarre thing has happened. USFDA has revoked the VAI status on Aurobindo unit 4. The stock rallied 20% on this. Now it will give up most of that on Monday. Truly bizarre. Never seen this before.
— Anuj Singhal अनुज सिंघल (@_anujsinghal) February 21, 2020
Have you heard such a thing? Three days after giving a decision, US FDA (no less) revokes the decision on Aurobindo. Bizzarehttps://t.co/Y0w8Q77r1V
— Niraj Shah (@_nirajshah) February 21, 2020
Aurobindo move 20% on news of Unit 4 getting VAI Status from US FDA.
Now it informs that VAI has been cancelled and unit is still under review.
See a massive gap down Monday. Negative for stock.@shail_bhatnagar @NeerajCNBC @pandyapradeep @hemant_ghai @AshVerma111 https://t.co/CiYIDGJvOi
— Yatin Mota (@YatinMota) February 21, 2020
Means the rally is going to come undone. Unit 4 does not have a VAI. We dont know the classification as yet. https://t.co/XBo4LW85ns
— Ekta Batra (@ekta_batra) February 21, 2020
Some traders lamented the sorry state of affairs while others put on a brave face.
Just before couple of days killed bears, Now it is time to kill bulls of aurobindo pharma.. Sad and idiotic act. Whom to blame? To Company or USFDA? https://t.co/DO3dAC0bew
— Catch the trend ?? (@bhuvanshan) February 21, 2020
Aurobindo move 20% on news of Unit 4 getting VAI Status from US FDA.
Now it informs that VAI has been cancelled and unit is still under review.
See a massive gap down Monday. Negative for stock.
— chinmaya Hegde (@chinmay44) February 21, 2020
In past i have handled such situations and reduced losses to almost nill.
And I have position size very much under control so i am not worring as much as many people are getting worried about my position.?
So chill out guys. Whatever i will do in my position will update here.
— Pathik (@Pathik_Trader) February 21, 2020
Entire Pharma sector is at risk now?
One unsaid fear worrying everyone in Dalal Street is whether the fiasco by the USFDA will bring the surging rally in Pharma stocks to a grinding halt.
Pharma stocks have already notched up massive gains in 2020 on the back of euphoric buying.
Pharma Stars This Year
Wockhardt +57%
Granules +53%
Strides +40%
Auropharma +32%
Apollo Hosp +23%
Abbott +20%
Dr Reddy +14%
Biocon +4%Underperformers
Cipla -6%
Sun Pharma -7%
GSK Pharma -17%#StockMarket pic.twitter.com/VgxX1UOXwa— Mangalam Maloo (@blitzkreigm) February 20, 2020
Our view Aurobindo action will have an impact on the whole pharma sector on Monday. Intermidiary top we suspect for pharma sector
— Shares for lifetime (@LifetimeShares) February 21, 2020
Expecting most of the pharma companies to open in substantial Red on Monday morning due to the negative news of Aurobindo. #ProTip: If aggressive buying comes in to take advantage of all the dips, #Pharmamegabullrun is confirmed.
Thisis how you identify start of sector cycles
— JEEVAN JYOTI RATH (@JEEVANRATH) February 22, 2020
Never trade without a stop loss or a hedge
Anyway, the take-home lesson of the Aurobindo-USFDA fiasco is that trading without a stop loss (or a hedge if the position is held overnight) can have disastrous consequences.
Also, one must bear in mind the position size and not get carried away by the euphoria and take out-sized bets.
Trading is like game of chess. One silly mistake of urs and u ll be on losing side of the game.
Most of the time that silly mistake trader do is "trade without stoploss". Avoid this silly mistake.#stoploss = #saveCapital
— Pathik (@Pathik_Trader) February 18, 2020
A good trader is a good strategist.
• Knows the game
• Knows what an opportunity looks like
• Manages risk–is daring when the time is right and conservative when it's not
• Avoids all trades that don't fit his/her proven criteria
• Loses gracefully@TradingComposur— TA Harsh Dixit (@HarshDixit84) February 21, 2020
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