Penny Stocks Penny Stocks

One Penny Stock and a Dream

You know I don’t post on this site that often.  I hope to change that at some point.  But what I have found over time is that good penny stock setups do not occur that often.  So for me to post a penny stock a day on this site would most certainly be a disservice to all.

So I am not quite sure how I will go about posting new content on pennystockspennystocks dot com yet.  Perhaps I will post penny stocks that fall in the ‘watching category’ which will probably be about 99% of them and then once in a while I will post penny stocks that move into the ‘high alert’ category.

The fact is that most penny stocks and penny stocks setups are horrible.  But perhaps one tenth of a percent of the penny stocks out there at any given time are SUPERB setups.  And the superb setups do not come around that often.  Image if you could jump into just 4 or 5 total penny stock setups for the WHOLE YEAR and each of them were huge runners.  Wouldn’t you rather do that instead of throwing good money after 100’s of bad?

PGCR Placer gold corp which I previously profiled on this site some time ago was one of those superb setups.  It had a BEAUTIFUL technical analysis backdrop which I described clearly in those posts.  It was extremely powerful.  The best penny stock setups have clear parameters which make them superb candidates for big runs and sometimes sustained runs.

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A trader friend of mine pointed out INAR to me the other day.  After he first mentioned it I looked at it only briefly and concluded that it needed to do some more work after the initial early August breakout type move on huge volume.   But now I am looking at it a bit closer and this penny stock might have some potential.

It appears clear from looking at the penny stock chart of INAR that the big spike rally in mid May was preliminary demand.  Then we saw a sell off and a retest of the .001 level which INAR was completed successfully.  Price was able to hold the double bottom without breaking down below.

Now we are seeing another attempt at a rally on huge volume.  After the volume and price spike after a week ago INAR has settled down into a small sideways  trading range.

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You can click on the chart of PGCR above to see it full size (note please ignore the x axis monthly dates because they are incorrect, the price is correct but the dates are wrong. It is the only way I could get the data in my charting program).  I still like the way PGCR is trading so far.  It continues to trade sideways now near the longer term triple bottom support area. 

I continue to believe that PGCR could be close to a spike rally north.  If I am wrong then I think the best alternative is to see PGCR trade sideways for a longer period of time. The 13 day moving average has still not crossed above the 50 day moving average but it is awfully close.  Volume has really dried up as of late, but is that surprising in August? 

If PGCR is able to keep trading sideways without breaking below .002 then to me it would be a bullish longer term development because the stock could be building a big base and longer term cause for the eventual move up.  But it is imperative that PGCR is able to hold .002 .  Perhaps the best shot PGCR has for a repeat type super spike rally is the October to January 2009 time frame.  Rest assured I will post here when I see important new developments.

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The penny stock VIPR Industries may be setting up for a move this week.  It is somewhat of a simple setup but could have some juice in it.  Caution is still advised because there is not much sideways cause for VIPR. 

The positives here are the bombshell volume that occurred about 3 days ago on the first spike upwards.  That was on over 100 million shares.  Then the next day retracement downwards was on dramatically lighter volume.  The drop off in volume was substantial and I do not usually see such a dramatic drop off in volume like that after such a big move, especially on penny stocks.  The actual percentage drop off in volume on VIPR was by about 68% which is huge. 

We may have very quality volume here in VIPR.

Then on last Friday price on VIPR starting catching wind again and volume increased substantially to about 67 million shares.  So roughly 60% of the free tradable float could be bought up at this point.

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The penny stock Placer Gold Corp (PGCR) which trades on the pinksheets forms a chart that is worth studying in my opinion.  The chart you see above (click on it to make it full size) is a longer term 2 year daily price chart of PGCR. 

It is worth studying because in my opinion there are some well defined parameters that make for clear cost benefit analysis.  Many penny stock charts that I look at are not so clear.  Typically there is a lot of congestion, noise, lack of price data, and just general confusion in the price chart. Or the price movement has wide swings all over the place and it is difficult to define clear trends or parameters that are worth acting on.

Reason 1

But with PGCR I want to tell you about a few important observations I have made.  For starters, I see long term support at the .002 level.  The .002 level is a significant level and a level that PGCR must hold in order for me to remain open to bullish possibilities.

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I am not seeing too many superb setups right now as of today so I thought I would do a little write up on what I believe to be the important factors that make for the best penny stock setups.

But before I do that CEMJQ might be worth a quick mention.  If it can hop above .25 and stay above there it may be able to get another run started.  Right now the broad market is going into a pretty nasty correction so I am not sure what effect that will have on CEMJQ as of now.  But so far CEMJQ has held up well. A break below .20 would destroy any chances of a good pop in the near term.  So maybe worth keeping an eye on.

Ok, so now what are the factors that make for the best penny stock setups?

I have been thinking about this for quite some time and I can tell you that there are a couple factors that make for the absolute BEST penny stock setups, but they are exceedingly rare.  They are:

• A penny stock that has had a very large upward move, but then has gone into a long sideways consolidation (perhaps forming a large triangle or a head and shoulders bottom formation).
• The previous point has occurred only AFTER a very long decline in the penny stock (ie. long bear market trend).

The reason why the above two points make for the absolute best penny stock setups is because you are doubling your odds of success.  You have a situation whereby a stock has come down after a long bear market but then has entered a new bull phase and THEN gone into a long sideways consolidation… It is that long sideways consolidation that you must watch like a hawk and determine an entry point because then you will be able to ride up with the next major up trend.

These types of penny stock setups are the most ideal because you can ride the trend up for a month or two knowing in full confidence that you are in a bull phase move of the stock.  You also have plenty of CAUSE built after the initial move and sign of strength.

There are three penny stocks that I can think of that made such moves and all three of them were extremely profitable to those that were able to identify the initial structure and then jump on for the next move.

The symbols for the three are SRSR, GSPG and IDGI. Sarissa Resources, GoldSpring, and Inca Designs.

To the left is a chart of SRSR (Sarissa Resources) just to give you an idea visually of what I mean.  The first long red arrow shows the long previous bear trend I was alluding to above.

Then you see that initial large sign of strength move off of the bottom. But THEN SRSR went into a long sideways consolidation forming a symmetrical triangle.  That price action is the mot valuable because it is just churning and cause building for the next big move.  It gives you plenty of time to prepare for the next move and gives you advance notice of it as well.

You will see plenty of other penny stocks make 100% moves from all sorts of formations, but I have found over time that this general structure is the most powerful and reliable in terms of realizing extended profits.

The problem is you do not find these patterns that often.  So if you ever do see one please let me know so I can share it with other visitors here at penny stocks penny stocks dot com.

The other type of penny stock setup that I like to try to find are the dormant bottom variation where you have a penny stock that has been trading very flat for a long time with only minor rallies and spotty volume.  Preferably it will have a very low number of total outstanding shares and a small float as well.  These can be also very tricky to find and identify because of their low trading volume.

What I like to see with these dormant bottom plays is successively higher price ranges, sort of like a stair case.  When you start to see that off of a flat long base, then keep open to the possibility that you will see a very big move coming.  Certainly volume analysis helps a lot too when trying to confirm their possible success rates.

So far I have not been able to find a good piece of scanning software that is able to identify penny stocks that trade in a long flat base. 

The best real time scanning software I have seen so far for pinksheet and otc bb penny stocks is equity feed.  They may have some scans that help identify long consolidating penny stocks with flat bases but I have just not used the software enough to be able to tell you that it can do that.  But there are definitely good volume and price scans contained within equityfeed.

IDOI is a penny stock that trades on the OTC BB and I wanted to give it a quick mention because the chart structure looks fairly attractive to me.  It was up about 55% today on huge volume.

IDO Security makes a security products for airports, schools, and other venues where forcing people to take their shoes off is too much of an inconvenience.  I did not know this but apparently the complexity of many shoes design, in addition to their thickness prevents normal security scanning techniques to be effective on them.

I really think most people hate taking their shoes off at airports and other locations where there are security zones.  It is just one big hassle, not to mention a little bit embarrassing.

The downside of this penny stock is that the outstanding shares are near 1 billion.  However the chart still does look somewhat promising. Looks like a triple bottom to me and a relatively flat base and now a rally with very strong volume off this base.

It seems a lot of the float is bought up if not all of it already.

A form T was also recently filed indicating that the owner has recently bought a good amount of shares.

So do we have a running penny stock here or not?  Well the volume says so, the long base says so, but we will just have to see.

Given today’s big move I am hard pressed to find another good entry point in IDOI.  Probably the best setup is to wait for the first consolidation to see if it has enough legs to stand on and then maybe find a low risk entry that way.  But chasing a penny stock like this one at the highs is a dangerous game.

But I did just want to mention it for watch list purposes.

I did a post a while back about UNCO and was exploring the possibility that UNCO may be coming into a buy point.

Well now we have some hindsight and clearly it can be said that UNCO never activated a REAL buy point as a signal to go long and stay long.

Why am I mentioning this?  Because I was browsing quite a few message boards and all along this decline it seemed there were quite a few that were jumping in UNCO during this waterfall like decline.  The chart to the left does not show most current prices.  But right now as I write this UNCO is trading near .008 and has gone sub penny again.  The decline has clearly been relentless since the very large sign of strength rallies we saw in late May.

So What is the Lesson here if any?

The ‘lesson’ if you will is that UNCO NEVER clearly activated a buy point during this long retracement phase.  A buy point would have been a price closing with good volume above that pink colored down trendline.  But UNCO was never able to accomplish that and gave no reason for traders to go long.  I am calling this a ‘lesson’ because what I have found is that even in pinksheet and otcbb penny stocks, one can still manage risk and use buy triggers like you would on any other type of stock.

It is a false myth that technical analysis does not work on OTCBB and pinksheet penny stocks. I disagree completely.  That is not to say that applying technical analysis can be somewhat challenging on these types of stocks sometimes.  It can be.  Sometimes the charts are very spotty in terms of volume and the signals can be very hard to read without careful enough analysis.

If UNCO really was to be a strong momentum stock then around June 8th to 15th it should have held more sideways price action and accomplished a breakout above the downtrend resistance line. But it did not do that, so it was time to look elsewhere.

These stocks that do these slow tiny declines day after day can be very deceiving.  They seem to call out to us to buy them, and their slow daily decline does not cause too much alarm.  But they are still dangerous and again, they need to show us a CONFIDENT signal (ie. breaking out above the pink down trendline) before they warrant taking any kind of trading risk for a long position.