Well, I don’t want to say that I told you so, but…I did. If anybody was following my earlier
hot penny stock alert regarding First State Bancorporation (symbol:
FSNM), and you followed the action that happened today (4/12/10), you’ll see that this stuff I’m talking about is actually viable and real. Yep, almost no sooner than I was able to “break the story” back on April 6th, FSNM popped up today and broke the all-important $0.60-per-share resistance level that had been there for well over a month now. Once again, if you’re trying to figure out
what to look for in penny stocks that have potential, it doesn’t get any plainer than this. According to the price chart and the
price action on this particular penny stock, this move was practically inevitable. For those who may not be up to speed on what I’m talking about, I discovered and profiled FSNM not even a week ago, because I noticed the ridiculously perfect base action happening since early February this year. No doubt something was up the way that the resistance at the $0.45 level was so strong for a while (during February), and then that level got cracked in early March, and then the higher $0.50 resistance level became support during early-to-mid-March. Once the $0.50 resistance level became support, and more accumulation action took place, all that was left was the popping, baby. This was like a timebomb ticking. I moved on it as soon as I could and bought shares at $0.56. Just today, the stock busted through the $0.60 level and closed at $0.67. Remember when I said that if the stock busts through and CLOSES above that $0.60 resistance level, it was going to spell some pretty good news for
FSNM. I honestly didn’t think it would happen this soon, but hey, I’m surely glad it did! So here we are, and I’m sitting with an open gain of about 20%, give or take a few percentage points. What other business do you know of, what other method of investment do you know of, where you can realize gains of 20%, and many times much more, within days of placing the trade? Folks, it’s entirely possible when you
trade penny stocks online, and I’m proof of it. The thing you have to watch out for, as I am right now, is how and when to exit. Exit strategy is so important when you trade penny stocks, or any other investment for that matter. Ideally, you should have your exit strategy planned before you even enter the trade. I have a target in mind, but I’m not sure if FSNM will climb that high or not; all I know is that I believe it has the potential to crack the $0.80 level, but I don’t expect the market to give me any guarantees of that. Again, that’s the nature of
penny stock trading; you have absolutely no guarantees of anything. Period. If (and ONLY if) you are fine with that, then you can do well trading. But if you enter into the markets with all kinds of false or unrealistic expectations, you will inevitably be disappointed and probably end up blowing yourself out of the markets. But anyway, before I lose my train of thought, check out the 3-month chart of FSNM:
In light of the above price chart, one thing I did want to mention is that this business (in its most simple form) boils down to understanding
support and resistance. I cannot think of a more solid and historically proven way to trade than that. It is a known and widely accepted fact in the technical trading world that support and resistance levels represent certain psychological “barriers” for traders en masse, almost like the 4-minute mile was way back in the day. Once those levels are violated by straight-up price action, sometimes the sky is the limit (if it’s resistance) or zero is the bottom (if it’s support). Once you start understanding how powerful those psychological floors and ceilings are in regards to price action, you will really get a grasp on how actually easy it is to make profitable trades by exploiting this knowledge. It’s a well known fact as well that most traders will place their buy stop orders slightly above the most commonly known resistance levels, and this is what creates the sometimes gigantic “pops” that happen when a resistance level is violated. All of those buy orders flood the market at one time, and the buying mania drives the price straight up, causing the “spike” that you see on the chart. For those of us who have the…um…I guess foresight to enter the market BEFORE the resistance level is cracked, we stand the chance of gaining some serious mileage out of those price movements, but it takes a certain amount of (I guess) courage to get into the market when it’s still just ho-humming along. I entered this market late last week, and not even 5 trading days later did the prices pop up, putting me in a very good position for profiting from this trade. Will it happen like this every time? Heck no. But when things like this happen, believe you me, I don’t ask questions; I just take the money and run, and focus on finding the next
penny stocks to buy based on these timeless principles of price action.
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