2011 Penny Stock Picks: An Update

Well, the best laid plans of mice and men…I thought that I would post this as a follow up to my previous post regarding what I believed to be a few of the penny stocks to watch for 2011. One of the things that cracks me up is when I make a suggestion or highlight a particular penny stock on this blog, and then only days later the stock plummets like an anchor in the ocean. One of the most important qualities you can develop as a penny stock trader is what I call “intestinal fortitude”, which in plain English translates into “guts”. You have to have guts and some level of emotional stability to be able to trade penny stocks successfully. Really, to trade any financial instrument, you have to learn how to separate the market’s price action from what you’re feeling about the market’s price action, because they are truly two different things. So, I didn’t want to punk out and act like I called these stocks perfectly, because I didn’t. As a matter of fact, you would almost think that I highlighted them only to take the short side of the trade or something, it was that ironic. I will say, though, that I did mention the hesitations I had about the stocks (if there were any), and my reasons for them, in my previous post as well. I try to be as objective as possible and only judge the stock by the price action, nothing more and nothing less. Some would think that I’m being naïve by doing this, and that I should research more fundamentals or whatever the case may be. I should be looking at P/E ratios, or the growth of the overall sector, or other fundamental factors, but you know what, I simply don’t have time for that. Price action has proven to be all I have needed for the past 9 years I’ve been doing this, and I don’t see the reason to change this now. If I happen to make a “bad bet”, as they call it, I’m willing to take it on the chin and move on. The only bad thing is that I don’t have the convenience of getting bailed out by the U.S. Government when I make “bad bets”, unlike the AIG’s of this world…but that’s another topic altogether.

So anyway, I wanted to give an update regarding the three (actually four) stocks I previously mentioned. The first one is American Defense Systems Inc (AMEX: EAG). Not much has changed since I made the post…I previously mentioned the resistance level of $0.20, and how that has to be convincingly cracked before we see a significant move. That perspective still holds true in my mind, and we’re still in the waiting room on this one. Check out the most recent chart below for EAG to see what I’m talking about:


Okay, the next one I highlighted was Orsus Xelent Technologies, Inc. (AMEX: ORS). At the time I highlighted ORS, it was trading at around $0.18. Well, Orsus announced a 1:12 split on their stock, so it totally janked up their price chart, and I’m not exactly sure what’s going to come of this until the dust settles some more. Here’s the chart for ORS (notice the price is at the $2.00 mark now on BigCharts):


Next on my list from the previous post was Crystallex International Corp. (AMEX: KRY). Check out the most recent chart:


KRY saw a precipitous drop today on some seriously heavy volume, which was basically a panic-induced sellout. It was the stock market equivalent of everyone dumping the cargo of a sinking ship…people were obviously dumping the crap out of their shares today just to get the heck out, and it looks like it was basically at any cost. Tons of selling pressure brought the price down to $0.14, which was a 69% change to the downside…not good at all, if you’re long. Over 16 million shares were traded, a huge amount of volume in light of the stock’s average daily volume. When a drastic event like this happens, especially after a period of what looks like accumulation, I will sometimes do what I dread doing but can’t help to do out of sheer curiosity: I will actually look up the company in my TD Ameritrade account to see what kind of news releases they may have about the company. Come to find out, in a short news blurb, it was basically brought out that Crystallex had lost a major mining contract for its Las Cristinas mining project, and obviously shareholders lost faith once the contract was “unilaterally terminated” by Venezuelan authorities. I did mention (in my defense somewhat) that I thought the accumulation period was somewhat short on this stock, and that the stock could go either way. Well, it happened to go the “down” way. That sucks, but it happens sometimes, and it further emphasizes the point that I have tried to drive home countless times, that you should never invest money that you cannot afford to lose when trading penny stocks. This is a highly speculative game, and there’s no room for “scared money” in this arena. Can KRY recover? I actually think it can, and just like a rubber band that’s been stretched, it may even possibly have a fairly quick snap back from its current level as it gains basic equilibrium again. It’s obviously very oversold. But, KRY is a HIGHLY speculative play right now, so I would not recommend that anyone touch it right now, unless you can truly flush the money down the toilet without thinking twice about it.

My last one is CTIC (Cell Therapeutics Inc.). The 6-month chart has started to concern me:


The main reason why a “red flag” has come up for CTIC is that it recently closed below the significant support level of $0.35 for three consecutive days in a row. This type of price action can be confusing, because it could be a last-ditch effort by inside interests to snap up shares at a low price before making a run up, OR, it can be inside interests artificially propping the price of the shares up before a collapse in price. Volume has not been super-heavy or out of the ordinary for CTIC, so I’m not inclined to believe that it’s some kind of significant selloff. I’m getting mixed signals from CTIC right now, so I’m putting out the yellow caution light on it, and I myself am not going to do a doggone thing until I get more clarity from the charts, which simply requires more time and more price action. So you see, folks, Ninja Trader Guy is fallible after all (LOL), and hopefully my track record over the past three years of doing this blog has shown that I’m not completely off my rocker when it comes to trading penny stocks online.