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Are Reverse Splits Worth Trading? - YouTube
Channel: StocksToTrade
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- Many of you might've
heard about a reverse split
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and started wondering what it is.
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Or maybe you saw a stock up
800% and then you're like wait,
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this stock isn't actually up 800%.
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So today I'm gonna talk about
what a reverse split is,
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the mechanics of it,
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and also how you can potentially profit.
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(upbeat music)
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Hey everyone lead trainer
with StocksToTrade.
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Tim Bohen here.
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Definitely check out the SteadyTrade team.
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It's a mentorship program
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where Mike Huddy and I
do twice daily webinars,
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every single day.
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Direct interaction, you
get to see our screens,
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you get to ask us live
questions every single day.
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I mean, that's the
great thing about it is.
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You're never more than a couple hours away
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from being able to directly
real time communicate
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with a mentor.
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So that is the best way
I think to learn trading.
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So check out the SteadyTrade team below
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and we talk about reverse
splits pretty much every day
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in there too.
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So you can really get granular
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if I go too fast in this video.
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All right, so let's talk
about what is a reverse split.
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Let's start out at the beginning, okay?
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So, most reverse splits are
gonna be NASDAQ listed stocks
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because NASDAQ has a certain price level
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that they expect the stocks to stay above
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to be listed on their exchange
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for a certain amount of
period of time, okay?
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Now why is that?
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It's strictly just an image thing.
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The NASDAQ has decided
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that they don't necessarily
want the one sentence stocks
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or the thousandth of a penny stocks.
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Like you see on the OTCs.
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It's just a kind of a
way to market themselves
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and keep the stocks all above
$2 a share on average, okay.
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So it's just an appearance
thing at the end of the day.
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But what that means is,
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many of these stocks well, not many.
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Pretty much every stock
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that does a reverse split is sketchy.
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As far as I know, there's
only one legitimate stock
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in the history of the stock market.
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The did a reverse split and oddly enough
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it's one of the greatest
stocks Amazon, okay?
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So Amazon is the unicorn
of reverse splits.
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Other than that, it's almost
always sketchy companies
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because they're losing money,
they're putting out bad news,
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they're doing sketchy stuffs.
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So their stock is selling off.
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Rightfully so, I mean a
lot of people might ask,
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why is a stock 20 cents?
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Ah, a stocks 20 cents 'cause
it's a terrible company
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and nobody wants to bid it up
to $2 or $20 or $50 a share.
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Back to Amazon.
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Amazon $3,000 a share for a reason.
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I just looked out the door
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and the UPS truck just delivered
four more Amazon packages
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to me, okay?
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So that being said, what happens is,
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these stocks sell off, sell off, sell off.
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They need to keep their stock
up to stay on the NASDAQ,
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or they'll get kicked down to the OTCs
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which is bad for their reputation.
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A lot of legitimate
investors like last I knew
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and double check me on this.
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Like most media like CNBC, most
mainstream media have rules
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where they won't even
mention an OTC stock.
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So you're never going to get
mainstream media coverage
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if you're on the OTCs.
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So, let's say your stock
fades down to 10 cents.
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What you're gonna do is,
you're gonna do a reverse split
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to reduce the number of shares
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and crank up the price of the stock.
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Now, this is what I
want you to understand.
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They're not changing their market capital.
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Remember the market cap
is your enterprise value.
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So that's what I could
buy your business for.
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So if you sell me your business for,
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you've got a restaurant,
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you sell me it for a million dollars.
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Your restaurant's market
cap is a million dollars.
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It's the same on the stock market.
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So what they'll do is by
reducing the number of shares,
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it pumps up the price of the
stock, market cap is unchanged.
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So let's say for simple math for me,
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you've got a $1 stock
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and you've got a million
shares Outstanding.
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Again, your market cap
is a million dollars.
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If you do a 10 for one reverse split,
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what's gonna happen is
your stock price goes to 10
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and your freely tradable
shares goes to a 100,000, okay?
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So think about it.
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Your restaurant's still
worth a million dollars.
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Your per share is $10 versus one
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but the market cap still a million.
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So, that's why you'll come in
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and you'll fire up your StocksToTrade
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which if you're not using
StocksToTrade you should be.
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Check out the link below to get trial.
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You'll fire up your StocksToTrade
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and you'll see some stock up a 1000% .
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And you're like whoa,
what's going on here?
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It's not a 1000%, it's a reverse split.
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So, keep that in mind.
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Check your news.
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One of the great things
about StocksToTrade.
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We have all the SEC filings.
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We have all the news.
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You can jump over to the
news tab instantly know that
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it's a reverse split.
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Okay, I gave you the background one.
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A lot going on there but
it's a simple concept.
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If you can just like to me,
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if you write it down on paper,
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it might click with you a little more.
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So, but anyway, let's talk
about how to trade them.
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You can see on my screen, TAOP.
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This was a exception to the rule, okay?
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Normally what you'll see
with these reverse splits,
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they just do the split,
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they get back up compliant to the NASDAQ
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and then nothing happens.
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Now what's unique with TAOP.
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They did the split
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and you can see it went up
from 32 cents to $2 post-split.
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So right here we are in
pre-market splits done.
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Now, this is what I want you to look for.
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Then what they did is they
issued a press release
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'cause they now know, this
is a topic for another video.
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They now know that there's
so many uninformed investors,
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thanks to Robinhood, thanks
to the stay at home order.
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I mean, I read an article the other day.
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There's like 3 million new
Robinhood accounts this year.
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And most these people unlike
you don't watch these videos
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or they earn in the SteadyTrade team
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and they don't know what's going on.
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So what TAOP learned
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and what I think we're
gonna see more and more of,
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they do a reverse split,
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they put out a juicy press
release then the stock spikes.
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That's what you wanna look for.
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Now we don't get these all the time
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even though I think we're gonna
get more and more of them.
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Then the great thing is, guess what?
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My favorite pattern of all time is,
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check out the other videos.
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You've probably seen it.
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If you're on the YouTube lives
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where I go live every morning.
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We're talking dip and rips, dip and rips,
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dip and rips, okay?
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What is TAOP do?
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Right here you can see this transition
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from light gray to dark gray.
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Is the market open?
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What's the TAOP do?
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Spikes into the open, pulls back hard,
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then breaks the higher the
day into that 9:45 window
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which is 10:00 AM.
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Remember the 9:45 is a window.
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Breaks that window and proceeds
to go from five to 50, okay?
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Now, as always I always like to be clear.
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You're probably not gonna
write it from five to 15.
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But think about the potential.
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If you're trying to grow your account,
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trying to get over the PDT.
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What if you buy it at that dip and rip
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at five in an instant?
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I mean, in a matter minutes
it goes to eight, okay.
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Let's say you sell that.
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You've got a few 100 shares.
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You just made a couple bucks.
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Two, three bucks a share five, 600 bucks
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in your small account
in a matter of minutes.
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And I consistently repeatable setup
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that I told you to keep an eye out for.
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That's how you grow your account.
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That's how you trade over a split.
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Okay, I'm gonna review one more time.
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But what I want you to look for
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is not just any reverse split.
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Every time there's one,
put it on your watch list,
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be ready, be prepared,
then get ready to attack
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if the price action's there
and the press releases there.
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Then that's what really sends them.
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Now I've also got another link for you
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that I want you to check out.
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Recently did a SteadyTrade
podcast with Tango Baker, okay?
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Tango Baker is one of one
of my proudest students
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from the SteadyTrade team.
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He was actually in the
SteadyTrade team for two years.
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And I was bummed actually
miss this podcast.
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Kim and Steven did it with him
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but people are raving about it.
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We'll link it below.
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And he breaks down how to spot
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when these reverse splits are coming.
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So you can even see
them coming in advance.
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It's kind of an advanced
topic for a YouTube video,
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but that podcast is great.
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And Chris is an expert at it.
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And again, what's great about him,
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he spent two years in
the SteadyTrade team,
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immersed himself in this while
owning a business mind you.
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Working, grinding, he found
his niche in reverse splits
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and trying to spot them in advance.
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So, there's a lot of opportunity in these.
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Don't fall for the Robinhood stuff
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and think that these stocks
just like this morning TAOP.
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Don't fall for it and
believe that it's up 600%.
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It wasn't, it's a reverse split.
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But when you get that recipe,
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these things are some
of the biggest movers.
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They don't happen every day,
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but when they come you can
see huge potential gains
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on this thing.
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And what's great about this,
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if you're following all
of our YouTube videos
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you know my second favorite pattern,
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is the VWAP hold high of day break.
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We're recording,
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I mean you can see the clock
on my computer it's 1:30 PM.
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What's my favorite time of the afternoon?
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2:00 PM.
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You know that if you watch these videos.
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You can see TAOP is
upholding above the VWAP.
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It's perking up right now.
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If this breaks that
intraday level of 1260,
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probably blast off into the close.
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That's the other great
thing about these patterns
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that we talk about.
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There's morning patterns
and afternoon patterns.
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I've got my top five
favorite patterns webinar.
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It's one of my favorite webinars.
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You get access to it
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as soon as you join the SteadyTrade team.
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It's part of the prerequisites
to get you ready.
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Many of the students in the
team watch it multiple times.
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'Cause I actually get on the whiteboard
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and draw these patterns out.
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And the funny thing is TAOP
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is exactly my white board drawing.
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They repeat, they repeat and they repeat.
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All right, everyone hope
this was educational.
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Remember reverse splits once
it clicks you'll get it.
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But just remember that idea
of the market cap relative
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to the float and the share price.
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And then it's pretty
simple math from there.
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All right, have a great day everyone.
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And I know I brought up patterns and terms
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and I threw a lot of
stuff out in this video.
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The best thing to do is
subscribe to our YouTube,
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ring that bell and go through the archive.
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I don't even know how many videos we have.
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Now Hundreds of videos
on all kinds of topics.
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We've got all of this
information out there
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and especially if maybe
you're stuck at home
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because of the stay at home order
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and you're looking to build your skills.
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Take advantage of it, ring the
bell, share with your friends
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And as always have a great day.
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