Penny Stock Trading: Hot Penny Stock Alert

Holy crap. You would be really hard-pressed to find a better example of what to look for in penny stocks than you have with First State Bancorporation (NASDAQ: FSNM) right now. I found this stock, oddly enough, through trying out my new handy-dandy “Chart Patterns” feature in my OptionsXpress account. The ironic thing is that I do all my penny stock trading through my TD Ameritrade account, and I have had the OptionsXpress account since 1999 but have let it “lie dormant”, basically, due to my concentration on trading penny stocks as well as futures contracts (yep, these chart formations work for futures, options, penny stocks, etc. just the same). But, recently got the idea to try the “Virtual Trading” feature in OptionsXpress for some futures trading techniques that I wanted to test out (never stop paper trading, I’m telling you). There’s a whole “Toolbox” section in every OptionsXpress account where you have a truckload of trading tools you can use, and many of them favor the technical trader (such as myself). So, I was wandering through the menu of the Toolbox when I noticed the “Chart Patterns” feature. I clicked on it, and lo and behold, they had different stocks and futures contracts that demonstrated technical potential based on common chart patterns! They had an overlay of the chart pattern on top of the regular stock’s chart, and you could plainly see the formations taking place in real-time. This blew my freakin’ mind. Now, I have something that picks out stocks and futures contracts that automatically fit a certain chart pattern criteria—are you kidding me??? So anyway, I found the FSNM penny stock by using the Chart Pattern feature, and let me tell you, after visiting BigCharts just to confirm and get clarity on the formation (old habits die hard), I would almost put my hand on the Bible and promise that this stock will move up in the near future. Now don’t get me wrong, I can’t say anything definitely, for in the markets there are NO absolute guarantees, but having done this for about 9 years now and seeing these types of technical formations over and over again, at this point it’s almost a no-brainer. I’m not officially recommending that you buy FSNM right where it’s at (it closed at $0.561 today), but I’ll say this much—I’m in. As soon as I can get the order placed, I’m in. Here’s the 6-month chart of FSNM so you can see what the fuss is all about:



Sorry for the blurriness of the image. If you want to check it out in clear detail, go to BigCharts.com and type in FSNM where it says "Enter symbol/keywords:", and then select the 6-month chart. Okay, notice the huge precipitous drop from the $1.00 price level (back in November). The stock fell until it found support at about $0.60 (that’s a guesstimate by the way; I’m just eyeballing it). This happened in one day, and if you notice the volume, almost a million shares were changing hands that day. Obviously a panic of some kind caused major selling pressure. The stock saw a pretty serious rally in mid-January this year that caused it to race up and crack the $0.75 per share level. It looked like all systems were go as far as the chart formation goes; it actually had the appearance of a nice bullish symmetrical triangle, but then at the very beginning of February, another sharp drop in price takes place, plunging the stock to the mid-$0.40 level. Very discouraging price action to the unwary, that’s for sure. After all, look at the momentum it had just the month prior, and now it craps out for seemingly no reason. Folks, if this is not proof positive of some kind of price manipulation, I’ll freakin’ throw my computer out the window and call this whole stock trading thing quits. Okay, that was a little extreme (LOL). This whole price breakdown at the beginning of February is what’s known as a “shakeout”—price action being manipulated behind the scenes by the smart money to discourage public buying and induce selling, thereby giving them the convenience of buying even more shares at a good discount to the soon-to-be-marked-up price. I’ll never forget what Warren Buffet said about buying stocks…he simply said (my paraphrase) that he buys stocks just like he buys toilet paper—when it’s on sale, he buys more. People, I will (somewhat) boldly declare that FSNM is on the bargain counter right now. Mark my words. Does that mean that it’s going to explode tomorrow? I have no freakin’ idea. I don’t know if the move will take place next week, next month, or next year. Nobody except the insiders that are “in the know” really will be able to determine this. But hear me loud and clear: This stock is showing some serious technical strength, especially these past two months, where it’s been snaking along in a sideways channel pattern. I encourage you once again: Study your charts. You can have some serious confidence that this type of price action in penny stocks will lead to some almost guaranteed wins in the market. Again, nothing is a 100% sure thing, but this type of price action places the odds heavily in your favor. Notice the strong resistance at $0.60 right now. The volume is spot on right now as well...a little over 100,000 shares trading per day. Rest assured, if you see a breakout and CLOSING PRICE above the $0.60 level, it will be nothing to take lightly. This one’s got some foundation, and the rise, I believe, will be quite significant. We may even see a revisiting of the $1.00 level…hey, all kinds of insane returns are possible with penny stocks.

Me? I’m getting in ASAP. This formation, especially in the world of penny stock trading, is showing some decent maturity, and if it takes a little while longer, I don’t mind the wait. I really believe that FSNM will be worth the wait once it starts popping.