Bargain Penny Stocks

Well, I don’t know how many “I told you so” moments we’ve had on this blog so far, but now it’s time that we add another one. As I first mentioned back in September in a post about how to read penny stock charts, I highlighted Cell Therapeutics Inc. (NASDAQ: CTIC) due to the very tightly-wound trading range it was in, and had been in for about a solid month. Again, the price charts tell you everything you will ever need to know about trading penny stocks, and once you get proficient with reading price charts, you will almost develop a “sixth sense” about what stocks are ripe for an upswing. Now, I’m the last person to try and mystify the stock market, or to try to infer that there’s some kind of “metaphysical principles” that will help you time the markets or whatever (sorry, but I’m no fan of “The Secret” or anything like it). I’m not talking about being some kind of “market psychic”. I’m talking about just simply analyzing the price action that’s right in your face, spelled out by way of the price chart. You can see, based on the movements of volume and based on the intraday trading ranges of a given stock, whether or not a stock is on the bargain counter or not. As a matter of fact, I titled this post “Bargain Penny Stocks”, because if there’s one thing I’ve figured out, it’s how to identify when a stock is on the bargain counter. This is not to bring any kind of glory to myself, or to try and brag about how many times I’ve been right or whatever, because again, you can pick bargain stocks all day long, and make the correct predictive calls about a market or a stock, but that doesn’t mean that you will know how to correctly trade that stock. It took me a long time in real-deal trading mode to figure out that distinction. There are traders who are absolutely excellent at identifying hot penny stocks before they make a run up, but still they lack the discipline and proper trading methodology to properly trade the stock for a profit. They may enter at the right price, but then the slightest “bobble” may scare them out of the stock prematurely, or they may stay in too long, way after the party is over and the stock has topped, and then they take the unwanted ride back down the roller coaster. So, being able to identify winning stocks is only one part of being a successful trader; you have to master the actual art of carrying out the trade itself as well. But before I get on a very long roll, let me show you the most recent chart of CTIC, after the “pop” (that I told you was coming) took place in the past four trading days:



Now this is the six-month chart of CTIC, and as I mentioned in my September post about reading penny stock charts, the stock’s price had been slinking along in a particularly obvious tight trading range…the classic “narrow sideways channel” that I always talk about. I knew that this type of compressed price action was bound to see some type of deviation in price in the relatively near future, and indeed, roughly one month later, we have seen that move. On 10/14, the stock started showing some real “signs of life” by finally breaking above the critical $0.40 level and posting a high of $0.46 per share. From the previous average level of around $0.38 per share (pre-breakout), that’s basically a 25% increase in a very short period of time. The stock then went on to hit an ultimate high of $0.49 per share on 10/19, which represents roughly a 33% increase from the average price before the breakout. Volume was super-heavy during this toppy action, with about 37 million shares being traded in only two trading days (10/19 & 10/20). This heavy volume was signal enough for me to believe that distribution has happened for this stock (meaning, the stock has changed hands from strong hands to weak hands), and you will see the price deflate probably back into a “lull” state for another possible accumulation, but more than likely it will decline into the twenty-or-so-cents range from here—just my personal take. Funny thing is, every now and then I’ll do a news search on the stock to see what supposedly triggered the price event—and of course, usually the news item gets released on the day the stock is topping out, so the insiders have someone to sell to in the midst of all the hype. Sure enough, a favorable news item broke out for CTIC on 10/19. I’m too bored with this type of crap to try and paraphrase it, so I’m just gonna copy & paste it here by way of my TD Ameritrade “News” feature: "Cell Therapeutics, Inc. ("CTI") (Nasdaq and MTA: CTIC) announced today that the Pediatric Committee (the "PDCO") of the European Medicines Agency ("EMA") has adopted an opinion agreeing to CTI's Pixuvri(R) (pixantrone dimaleate) Pediatric Investigation Plan ("PIP") for the treatment of lymphoid malignancies and solid tumors in children between ages of 6 months and 18 years. This positive opinion clears the way for CTI to submit its Marketing Authorization Application ("MAA") in the E.U. later this quarter for pixantrone for the treatment of patients with relapsed or refractory aggressive non-Hodgkin's lymphoma ("NHL").” Funny thing is, I didn’t even know what the company did (and still don’t fully) when I highlighted it back in September; I had only the price chart to go by, and I knew that it was poised for a “pop” in price. What am I saying by this? I’m saying what I have said from day one—all you need is the price charts, because price action is always king. Over and out.