Penny Stocks in 2010

Well, I said that I wasn’t going to write anything about penny stock trading again until PMU cracked the $0.40 barrier, but that seems to be taking a while (as this type of thing often does), and I’ve been itching to write a post for a while now. I have a lot of things on my mind as far as penny stocks in 2010 goes…it’s funny when I read some of the investment advisory newsletters and penny stock trading websites that are out there as they post their “new insights for 2010” or whatever the hot penny stocks are (supposedly) for this year. Folks, ain’t nothing changed about the markets…and not much will change if you simply pay attention to the price charts, and not much attention to anything else. I’ve been around the block in the microcap stock world for a while now, and I’ve learned a few things along the way. One of the main things I’ve learned is that technical trading by using price charts is very much a timeless art, and doesn’t lend itself to the “roller-coastering” of the economy or anything else like that. Yes, there are certain sectors you should probably avoid when looking to trade penny stocks, but at the same time, if you’re really doing it the “purist” way, and that’s by the charts ONLY, you will allow the price chart to tell you what stock is good and what’s not. Truth be told, regardless of the sector (i.e., biotech, oil, gold, all the other usual suspects), there will always be some “diamonds in the rough” if you just do enough research…the smart money in the markets will always see to it that this is the case. I’m still baffled by the amount of stupidity I hear on these different financial channels and pundit shows regarding stocks…they act like the only position you can take in a market is long. Folks, there are people who have made careers out of shorting stocks on the regular (Timothy Sykes, anyone?), and if I wasn’t so obsessed with channel formations that break to the upside right now, I would probably be more on the short side too.

If (or when) people ever ask me what my trading techniques are, I have one simple thing to tell them: Channel formations with upside breakouts. That’s freakin’ ALL. Yes, I do trade the symmetrical triangles and the flat-top triangles and so forth, if the formation presents itself and I’m confident that the price will continue in the same direction after that period of market hesitation, but besides that, I’m all about the channels, baby. I’m talking about those really long, really boring periods of time where price action is at a “lull”, where the daily trading range doesn’t show a lot of variance, and where volume is relatively stable and quiet. If you see this thin horizontal line on a chart just snaking along, with no great fanfare, for a period of months, you can almost bet your bottom dollar (which hopefully you won’t be down to that while trading the markets) that there will be a breakout or a “pop” from that price level. These things don’t just happen for no reason; there’s a very specific reason why price activity stays quiet, appears “boring”, and most of the time discourages the general public from staying in, thus selling out to the insiders at bargain basement prices, which they will then wait until the time is “ripe” and begin promoting the stock heavily, enough to incite public demand, but this time at a much higher price. It happens over an over again, and it’s almost shameful how hardly anyone has caught on to how very intentional this whole process is. “So how can the little guy get ahead in this type of novice-hostile trading environment” you may ask? I’ve already told you—by studying your price charts and only moving when the chart looks favorable enough to move. Not based on some “hot report” about the next biotech or arms manufacturer that’s going ballistic (no pun intended on that one), but really based on nothing more than price action. So the real point to this post is that people who are looking for some kind of new “angle” in 2010 or some new fancy trading methodology may have to keep looking if they expect me to say something world-rocking or revolutionary. I’m going to keep preaching the same thing I’ve been preaching on this blog…read some of the past posts to really get more of an insight into how this stuff works. Read Ted Warren’s book “How to Make the Stock Market Make Money for You” and really study each chapter. Look at a butt-load of charts from different penny stocks and glean from each one, whether the formations proved successful or whether they crapped out. Notice the trends in volume and price action. Become a student of trading by the charts. There are so many opportunities out there to make money in the penny stock arena that I literally can’t keep up with all of them. A good price screener will show you what I’m talking about. There are no shortages of trading opportunities, even in this so-called economic crisis. Trust me, there are billionaires RIGHT NOW building multi-million-dollar mansions. There are stock traders RIGHT NOW banking hundreds of thousands of dollars a month as we speak. Remember that trading is a zero-sum game: While one side is losing in the markets, there’s another side (which the media really doesn’t focus on) winning in the markets. And the principles of penny stock trading that you’re reading on this website are timeless, and can work in any economy. Now take that to the bank and cash it!