The Myth About the Penny

In simplest of terms, penny stocks are usually determined by three basic factors. They are, the price per share, the market that the stock trades upon and the market capitalization of the company from which the stock derives. If you are considering trading penny stocks, you should know that even these factors are up for debate, depending on which broker you use. Some brokerage firms will treat all stock from companies under a certain market cap as penny stock. However if  penny stocks were determined strictly by price, some of the largest companies in the world almost became “penny shares” during the first part of 2009. The Securities Exchange Commission is supposed to consider all stocks with a price per share of less than five dollars a penny stock. But in the realm of financial services there are many shades of gray, or in this instance pink.

Pink Sheets, is an electronic quotation system operated by Pink OTC Markets, and displays quotes from broker-dealers for many over-the-counter securities. Companies do not need to fulfill any requirements (e.g., filing financial statements with the SEC) thus making them a risky investment. Because of their lax accounting and reporting guidelines, many feel “penny shares” are vulnerable to manipulation. I’m referring to the famous scam “pump and dump.” Where at times influential investors can pump up a stock, sell it for huge profits, then D-list the stock.

I would like to pass on some ideas and strategies, which with a slight mind set adjustment and a little training, you can reap big profits. I further contend that this can be accomplished on a shoestring budget. I think most regular folk always saw the market as a playground for the big cats. That was until the influx of trading companies to the internet. So how much investment  capital should you have? To quote the investment companies
disclosure, and I’m paraphrasing; “never invest more than you have to lose”. It is like gambling, make no mistake about it. That being said, I think with the following strategies, you can plan on investing a few hundred to a few thousand. Ideally, two to five thousand is an excellent starting point. If you keep an open mind, you will see for yourself, how the combination of these two systematic plans of action, can lead to enormous profits.

PENNY STOCKS combined with CANDLESTICK CHARTING

So let’s say you found a way to insure yourself that penny stocks are the way to go. I think you can start to see the potential for large gains. I am going to provide you with a couple of penny sectors to get you started. The first is an actual example that I made an astounding killing on. The “Nano Technology” sector is a great place to start. There are many Nano companies that already have financial backing and poised for tremendous growth. I’m not going to tell you which stock, because that would take all the fun out of researching for you. However, I do want you to take a look at the kind of numbers this form of trading is capable off.

I’ll get to “Candlestick Charting” in just a bit. But I did want you to know that to find these little jewels I did use candlesticks. By tracking the technical’s I found a nickel stock that was getting ready to make a move. Don’t get me wrong, I think fundamentals’ are very important, if you are planning on a long term investment for your retirement, for example. For the purpose of swing trading however, knowing how to read the technical’s is all you need. After following the stock for a couple of days, I got in at 8 cents for 50,000 shares. My investment was $4000. Now the main investors didn’t come in until it topped a quarter.
At that time I had already more then doubled my investment. I stayed in it for a few weeks, setting my stop loss at thirty cents. At its peak the stock went to almost sixty cents. I got out with more than $24,000 profit. Granted this doesn’t happen every day, but it does occur more often than you might think. You just have to know where to look.
The other sector I would strongly suggest is “Clean Energy”. With all the attention clean energy is getting, the new commitment by our new administration, I’m sure there are small companies that are diamonds in the rough. As we move onto the next part of the equation, I want you to keep this in mind. The fastest way to become a millionaire, short of  discovering or inventing something, or hitting the lottery, is to make the right penny stock investment.          

Let a Candle Light Your Way

Charting Techniques That Can Make You Rich
Now that you understand the fantastic possibilities a penny can bring, let me tell you the secret of unlocking this pink treasure. Let’s start with the investing 101 concept that everyone knows. Buy low and sell high! So simple, yet why do so many fail to do it? Well one reason is most uninformed investors, get in much too late. Even a technical investor who does not use Candlestick Charting is playing a guessing game of sorts.

The Chinese invented the market concept, and the Japanese perfected charting techniques with the use of the candlesticks.
It is easy to understand this complex system, if we simply break it down to the ticks on the chart you follow every day. We know that the lower tick is where the stock opened and the higher is where it closed. Now if we made the two lines parallel and connected them, what would we have? A candle. However, during that movement, the stock might have gone lower or higher then where it opened or closed, So our candle has formed a tail and a wick. Is it starting to make a little sense to you?
Take these examples:  

1. Lets assume a stock opens two cents higher than it closed yesterday.
It later closes three cents higher than that. Should we get in? Not necessarily. Because as the candlestick showed us, even though it had a five-cent swing from the day before, a long wick was created. This meant that it went even higher then it eventually settled on. That tells us that the pressure to go higher wasn’t strong enough. We will put it on our watch list, and keep a keen eye on it.
2.A few days passes with similar results. Suddenly there is a break in the resistance. The stock has formed a candlestick with a long tail. What does this convey? We might put a buy signal for a couple of cents
higher, because the long tail tells us that the bulls are ready to take over.
3. Ideally you want to wait for clusters to form. Of course the greatest indicator is a long candle. One that opens and closes with hardly any wick or tail.
4.Remember that volume will also help to determine the right stock.

There are many “characters” in the Candlestick System. I attended a $2000 workshop to learn this type of charting. However, you can learn these methods for literally pennies, compared to what I spent. If you have the right trading company that offers Candlestick Charts, make sure they also have penny stocks. Many of them don’t cater to  “Pink Sheets”.

I hope this has helped in your research. I don’t profess to being an expert, but I do know of some. I obviously don’t have the time to go into all the details now, but at my site Market Mentalist you will find all you need to know about investing online. I have a page devoted to Online Penny Stocks for Profit. There is also access to some of the top trading systems available including software, books, newsletters, and Forums. Whether you are an inquisitive novice or a seasoned pro Market Mentalist offers the online investment resource you just might be seeking.