Hot Penny Stocks

I had to chuckle a little bit when I started thinking about how I was going to cover the topic of hot penny stocks in today’s investment climate—many people are wondering if anything at all in the realm of the stock market can be labeled as “hot”. And honestly, I’m being just a slight bit facetious when I’m using the term “hot penny stocks” because those who know me know that I don’t play those games of touting some stock based on hype alone and not based on solid price action according to the stock’s chart. If you don’t learn anything else from me…shoot, if you haven’t learned anything at all thus far, PLEASE remember that the chart is king. Price action is king. It’s almost like a pilot who trains to be an instrument-rated pilot; he learns how to move beyond just flying based on his eyesight, and now has to move into a different level of perception where he must rely solely on the instruments to tell him which direction he needs to be flying. This can be scary, especially when all he sees in front of him is a huge hunk of clouds, and no visibility at all to the ground or anywhere else. He must rely on what the instruments are telling him about the climate, the temperature, his altitude, and so forth. The same thing applies to penny stock trading: You are going to encounter a lot of “noise” out there, and much of it is designed to distract you away from simply relying on those chart patterns that you’re so familiar with. There will be plenty of temptations for you to want to “embellish” upon the system of simply trusting what the charts are telling you, and instead you’ll want to immerse yourself in company data, earnings reports, advance/decline stats, commitment of traders reports, P/E ratios, industry news, comparisons to other stocks in that sector, on and on and on. To take some words from a very famous book, “Be not deceived”. If the chart is not telling you to make a move, don’t make a move. If the chart hasn’t shown you sufficient evidence to enter the market, don’t enter the market. Don’t get into a stock based on hype or emotion alone. That’s pretty much what fundamental analysis boils down to…at its root, it’s simply emotional trading. It’s always basing your trades on the promise of what the company will do, or how they will perform, with honestly very little empirical data to back up any claims of future growth—most of the time it’s based on a whole lot of conditional promises—things like “IF the company can secure these contracts”, or “IF the industry demand begins to lean towards these types of products or services”, but there’s very little real-deal concrete evidence to back up any claims made. This, in my mind, is no way to make a trading decision, but yet you have people in the fundamental analysis crowd (not naming any names, but one big online presence that rhymes with “snotley drool”) who criticize technical analysis and dismiss it as “fortune telling” or “soothsaying”, but yet the charts are concrete historical evidence of certain trends and patterns that reoccur, and have a high probability of occurring again in the future. This the basis of meteorology; they simply study the past 100 years of weather patterns for any given day and they make an educated guess based on statistical probabilities about what the weather will be like tomorrow. Not a big deal, and it seems to be more of a solid science than banking your investment decisions on some prospective “hot product” or projections of future growth. This doesn’t take into account the “book-cooking” that can happen behind the scenes in a lot of corporations, along with a host of other types of fraudulent practices that may be going on under the surface…but a stock’s price chart will tell you EVERYTHING you need to know, as all of these potential unseen problems will be factored into (and reflected in) the stock’s price action. That’s one area where the insiders can’t really hide what they’re doing, is on the price chart…it’s in plain view to everyone, if you know what to look for.

Well, I wanted to get further into what I believe are some good stock picks, or some hot penny stocks if you will, to keep an eye on, but it will have to be for a future post. Gotta go…see you next time.