Lesson learned, high volatility stocks

So the market is up today and ENCY is still trending downward. I did some reseach and review on the stock over the weekend, and my conclusion is that the stock is grossly oversold and should bounce back. However, it appears the stock is a bit light on buyers.

Through years of observation, I have come to believe that short term stock price changes are about 95% herd psychology. I feel the urge myself; to sell the stock before if falls any farther. But intellectually I know the underlying fundamentals have not changed that much from last Thursday when the stock fell off the cliff. Granted this is a very speculative investment, and the company’s fortunes are in the hands of the FDA, which has delayed, not disapproved the new drug.

What helps me here is that the actual cash value of the position is quite small, and I do not have anywhere to reinvest the cash if I should sell the position. I do not need much of a rebound to turn this into a profitable trade, so I am planning to hold at least until my next covered call position “matures” on January 20.