Liberty Star Uranium & Metals Corp once again traded higher today on increased volume.  The last three days have clearly been a confirmed breakout from the .03 resistance.  Today the stock did show some supply come in during the end of the day and this is evidenced by the medium sized topping tail in today’s price candlestick.

I mentioned yesterday about the ‘three white soldiers’ candlestick pattern and it with today’s bullish candlestick it appears to be a valid pattern.  So what now ?

I think we are getting close to buying climax for the short term.  I am not quite sure if today was it.  We did see the supply come into the stock today near end of day and usually what you will see is an attempt to rally back up to near today’s high which is .069 and then see if the stock has enough energy to power higher.  If it stalls near .069 then we have likely seen the short term top for now and will move into a consolidation pattern that may last several weeks.

The steadily rising volume has supported the recent advance and so clearly the trend is up.  The long term weekly charts also continue to look very good.  Sometimes I have seen penny stocks make a mid range close like we have today and then go higher one more day in a massive blow off power candlestick. It would probably be too speculative for me to predict that right now.

Instead I will just stick with the fact that some supply showed itself into LBSR stock today and the onus on the bulls is to take us higher straight out of the gate tomorrow otherwise we will likely start to consolidate again somewhat similar perhaps to the mid July period.

Here is a list of Penny Stocks that fit the volume spike scan criteria.  They have had a 150% + volume spike above their average daily volume.  I am not cherry picking any of the stocks in this scan and I have not reviewed all of their charts nor given them any penny stocks penny stocks.com rating. 

They are here just for the purpose of ideas and to see what the penny stock market showed us today.

Volume spikes that are out of the ordinary can sometimes be good indications of new trends or changing trends but of course must always be taken within the context of the overall penny stock chart pattern.

There is a candlestick pattern known as three white soldiers which basically shows three strong bullish candlesticks in a row with the open of each candlestick into the previous days candlestick.

We don’t quite fit that pattern yet, but there seem to be some similarities.  The last two candlesticks look very similar in that they are full demand candlestick bars with very small bottoming tails if any and also no topping tails either.  This is about as bullish as the doctor can possibly order.

The icing on the cake for LBSR would be for another candlestick tomorrow that looks similar to the last two days.  It would be about as perfect a breakout in any penny stock I have ever seen.

The strength in LBSR seems to indicate that it will travel a bit higher before peaking and then establish a new base at higher levels.

I should mention that the .03 resistance is now strong support.  I should also mention that it is very common for any stock (does not just have to be penny stocks) to retest the breakout area which in this case is .03. In other words, if LBSR were to break down tomorrow and then get a big sell off going it would be perfectly normal for it to travel down to .03 again as a test of support.

In this case I do not believe we will do that because of the unusual indicated strength of recent days.  Instead I think LBSR will just form a higher base and leave .03 in the dust.

A move back down to .03 would however provide a good chance for accumulation again as long as it holds as support.  But again I do not expect us to go anywhere near .03 in the next days.

Clearly at some point LBSR is going to enter into a new consolidation again.  I really cannot predict at what price this may being from.  It could start from .06 or .07 or even higher.  It is just one of those things we have to let the stock tell us what it wants to do.  The signs will be obvious in the form of an intra day reversal or a double top on the intra day basis.

I think we have maybe another 1 or 2 days to go higher with the outside chance we gap up tomorrow in a one day blow off.  It is all about energy build up and release.  These penny stocks are no different than any other stocks.  They build cause, and then breakout, and then start the cycle all over again.

The long term weekly price chart of Liberty Star Uranium & Metals Corp LBSR looks very constructive and should probably be studied as the blue print for what to look for in terms of a sustainable penny stock trend.

The weekly penny stock chart of LBSR shows that since 10/10/2008 there exists a long basing formation that is not quite flat but close enough.  This long range represents a transfer in ownership from bearish to bullish that takes place over a long time frame.  The flatter the base, the more bullish the new potential bull run.

The base is close to 2 years long and should provide enough energy for a sustained move higher.  In the weeks of May 2009, LBSR attempted to get a rally going but it could not overcome the force of selling pressure and then fell back into trading into the base.

But now during the last 5 weeks LBSR has again attempted to break out through this level and was successful during the last two days on high volume.  This represents a break out from this long trading range and a transfer from an accumulation/ basing phase to a new bull market.

The new bull market advance should be able to advance for at least 6 months given that we have a 2 year base.  Certainly the advance could go on longer than that but of course we will need more data and price candlesticks to see how things develop over time.

Most people do not trade off of the weekly charts but the weekly penny stock charts have the definite ability to provide calm and perspective in the face of wild day to day swings and emotionalism in the trading space.

Perhaps the main point to be made about the LBSR weekly penny stock chart above is that there is a very large tradable void that exists between .03 cents and .85 cents.

A tradable void is basically like a big air pocket of price movement where there is not that much major resistance for a stock to stumble on.  This is exactly what LBSR has between .03 to .85.  Many stocks have long messy trading ranges that go back YEARS and can interfere with a price advance or make it a lot slower.

The fact that LBSR has this large tradable void is very constructive indeed.  While it certainly does not guarantee or indicate that LBSR will zoom to .85 cents, it at least tells us that there will be fewer obstacles to moving higher than most other penny stocks.

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TRANS GLOBAL GRP (Public, PINK:TGGI) has a reasonably good looking penny stock chart.  TGGI is a sub penny stock trading at .0009 right now and has robust volume recently and a nice saucer type bottom formation.

I am not giving this penny stock the highest rating of 1 on the penny stock rating system but it is still worth a mention as a possible mover in the next few days or weeks.

Trans Global Group positions itself as a green penny stock with a few interesting products and also recently acquired Full Spectrum Media which has a catchy type product called ‘sexlets gum’.

So it seems to have at least a little bit of ‘buzz factor’ that penny stocks tend to need sometimes to keep a good trend going.

Anyway, the most important thing is the stock chart.  The chart seems to be saying that TGGI wants to continue in a slow and steady uptrend.  But in order for it to do so it will have to break and close above .001 in the days ahead.

If you look at the chart below you can see that TGGI has traded high off of a small flat base and formed a series of falling flag patterns.  Each time it has managed to break out above them with breakout type volume.

This is what one would want to see again in the days ahead to confirm that another new mini up leg is about to start.  This green penny stock does not tend to get a break out move going for more than 2  to 3 days at most and this is a very important consideration.  Assuming it does get a breakout north from the recent consolidation, it will need to overcome the August 4th and August 5th swing highs which were both on extremely heavy volume.  This is not easy to do.

There is always the risk that TGGI can continue to trade down deeper into this declining wedge flag formation and never get a breakout going.

The two horizontal green dotted lines I have drawn in the chart show that the price of TGGI recently was halted at .0011 resistance and has now consolidated.  This is a very common occurrence when a penny stock hits overhead resistance.  The KEY to watch for is how it REACTS to this important overhead resistance and to SEE if buyers can come in.  If the too many sellers exist then the penny stock will fail and fall down much DEEPER and even back to the all time lows.  This would show the penny stock is not ready for a new uptrend.

However if TGGI can maintain composure here and get a break out into the green shaded area then it could make a run for .0018 range which is next topside resistance.

The heavy volume is a good sign, it is supporting this penny stock, but a breakout from the recent falling wedge is not a breakout until it actually happens, so caution is still advised on this green penny stock near term.

Liberty Star Uranium & Metals Corp LBSR is trading like a blue chip stock lately even though it is a tried and true penny stock.  A couple days ago we indicated that we are going to be providing ongoing coverage of LBSR because we recently gave it the highest rating of 1 here at penny stocks penny stocks.com and because of our confidence in the price structure.

I cannot say for sure whether or not we will provide daily coverage on LBSR but we will make commentary when it is appropriate to do so.  We do technical analysis here but we do realize that the LBSR is also a fundamental one.

Penny mining stocks are unique in that they can move in a leveraged aspect relative to the size or value of what they have in the ground.  Perhaps they are a bit similar to biotech penny stocks in that the stocks trade on the potential and milestones which would eventually lead to a big cash inflow.

These stocks can make extraordinary vertical moves that would in some cases seemingly invalidate the technical analysis.  But it is our view that technical analysis is never really invalidated, but instead sometimes pushed to the limits.  For example, the long term uranium price chart showed us that uranium went into a mega bubble that pushed the relative strength index to seemingly impossible high levels (greater than 90 for a long time).  A typical technical analyst would probably have seen the 90 RSI level and then said it is extremely overbought and cannot go any higher.  Well it did go higher, much much higher into a blow off super spike.

So keep in mind that our technical analysis of LBSR will try to mainly focus on whether or not LBSR is maintaining its trend strength.  But we may be rough around the edges on the daily moves and if/when LBSR goes into a blow off type upside run.

Today’s Technical Analysis of LBSR

The purpose of this post is to look at the near term technical analysis of LBSR on the daily price chart to see what we can observe about the near term picture.

First, before I start to discuss the chart below I do want to apologize for not showing today’s price candlestick at the correct closing value.  It is still 15 minutes before the close and LBSR will probably close near the top of the range today.  So when you look at this chart below keep in mind that the latest price candlestick is at a closing value of .038 .

The daily chart of LBSR is very interesting because if you were to put this chart in front of my face not showing me the stock symbol and not showing me the current price it is trading at, I would probably assume it is just a nasdaq small cap stock with a very nice ascending triangle chart pattern.

The key observation in this chart is clearly the enormous sign of strength moves with the big marubozu candlestick price bar on about 46 million shares.  That candlestick was basically the lighthouse signal that LBSR is ready to start something big.  We must respect the signal that candlestick bar is telling us.  The signal it tells me (especially after trading in a long 1 to 2 year base) is new bull market.

After the mega spike to .03 on very heavy volume LBSR then transitioned into a consolidation which is perfectly normal and to be expected.  I suspect this pattern will repeat itself over the next few weeks, months or even 1 year time frame.  It is the nature of stocks to breathe in and exhale just like people do.  Small cap penny stocks in long term uptrends tend to do spike moves up and then transition into choppy trading ranges building cause for the next move.

Since the consolidation started in early July 2010 there have been a series of key reversal hammer candlesticks that have marked reversals in the short term consolidation phases.

The most recent one was a doji reversal hammer and led to today’s big breakout from this medium size ascending triangle.

The breakout from the ascending triangle looks valid to me today.  It showed wide price spread and zero supply coming into the stock by the end of the trading day.  The candlestick looks somewhat close to a maribozu type candlestick (where the open is equal to the low and the high is equal to the close). 

The closing volume today was about 6.8 million shares.  This is good but it still falls far short of the peak breakout volume of 37 million shares.  But the key today was that we closed higher well above the resistance level and above all the previous swing highs, a bullish sign.

Since the volume was dramatically lower I see at least the possibility that we pull back tomorrow to test the .0338 level or slightly lower before resuming higher.  Sometimes they initiate an early shakeout to test and touch new support.  It is actually quite common.

Finally I want to get to one last important point about today’s chart structure and that is that in terms of the RSI (Relative Strength Index) we have just entered what is known as the bullish power zone for the second time.  This level resides above the 70 level on the RSI portion of the chart above and is an indication that the bull are in control.  In fact they live and breathe up in that level.

So I suspect we will see follow on strength during the rest of this week until price blows itself out and reaches another intermediate term peak.  This peak could coincide with another RSI daily chart reading near the 94 level.  After the next intermediate term peak I would expect price to enter another consolidation to define a new range.

It is guesswork to predict how many days the RSI can stay above the 70 range.  The last time price peaked out in about 4 or 5 days as shown in the chart.

It will be interesting to see the follow through action tomorrow and the volume as well.  There will be pullbacks for sure, but for now the trend is strongly higher from the looks of the chart.

I will have some future technical analysis posts coming on the penny stock LBSR that talk about the weekly chart and the important dynamics that are going on there.

This post is just a quick heads up that VKNG or Viking Systems Inc moved above what I consider to be very important resistance at .28  I believe this ‘mature’ penny stock is slowly starting to build trend strength for a stage 2 advance that should eventually take it back up to $1.00 range again.  In the near term the .28 level would ideally hold up as new support.

It will probably take a good amount of time to get up there again, but the first key date remains the early October period as I indicated in my previous post on biotech equipment company.

VKNG can have a somewhat spotty trading style but it is important to keep the larger chart structure in mind which is a huge sign of strength from .005 to $1 range, then a long saucer bottom type formation of 3/4 of a year in length.

The best setups are those that evolve from very large patterns and show clues and signs of strength within.  I can name you plenty of penny stocks that move big every day but which ones have some real ‘meat’ behind them ?  That consideration is one of the most important ones to consider in this volatile sector.

The VKNG setup is quite rare in my opinion but it will probably take a good amount of patience to see it play out fully.

The volume was robust today but still not of the level I would expect to see for the start of a mega move.  Keep in mind that the previous run of .005 to $1 only took about 15 trading days.

We are still almost 2 full months away from early October and also still in the low volume trading month of August.  So I suspect there will still be some games being played for a while in this stock.  But September 2010 should be a much different story.

I have been thinking a bit more about the micro cap gold copper and uranium exploration company LBSR or Liberty Star Uranium & Metals Corp over the last several days and  have come to the conclusion that LBSR deserves more ongoing coverage in the days and weeks ahead.

There are several reasons for this which I will try to outline below. 

Occasionally there will develop important themes in the market or in any individual stock.  I suppose another way of saying this is that certain sectors in the penny stock arena have very unique characteristics unlike other sectors that can dramatically affect the price in different ways.

Liberty Star Uranium & Metals Corp is an exploration company penny stock in the precious metals sector.  Over the course of the last 10 or so years I can tell you that I have witnessed and also participated in some of the wildest penny stock runs imaginable.  I cannot say that every big run I have seen or participated in has been a penny mining stock, but a lot of them have.  Some of the most sustainable longer term runs have been in the micro cap mining penny stocks.  But why?

I think part of the reason is the unique leverage aspect of any penny mining stock.  You can have a seemingly worthless company based on their share price, but based on undiscovered aspects of their mining claims, they could be sitting on a mega million dollar bed of precious metals.  Most if not all of these micro cap mining companies are already struggling financially so there is no surprise there.  So the key is for them to be able to somehow validate the rocks they have sitting under the ground for which they have claim to.

Once that process begins and shows some signs of real momentum it can have a dramatic effect on the share price.  The number of micro cap penny mining stocks that actually ‘graduate’ to full fledged mining companies is probably only 1 in a 1000 or maybe even 1 in 100,000 ( I really do not know, I am guessing).  This however does not mean that a penny mining stock cannot have a huge run based on ‘hope’ that it will become legitimate.

So that is what I believe happens most of the time.  Hope plays a big part of it and one has to know when to run for the exits.  Of course not all mining stocks are going to make huge runs just because they are mining stocks.  Probably many or most of them will never make that big run.  It is only the few carefully selected hand picked ones that have all the right stuff in terms of their stock price chart and overall technical analysis (very important) and their ‘story’.  Some of them are lucky to have both, a good story and good technicals.

The Gold Price and Other Metal Prices

The main precious metals that relate to big penny stock moves are gold, silver, copper and even uranium.  The prices of these commodities can sometimes be very relevant to the overall moves in a penny stock.  They can help to amplify a current penny mining stock run or start a brand new run in a previously ‘dead’ penny miner.

The backdrop of a very strong rallying commodity price can be very helpful to the appetite investors and traders have for the tiny miners.

I recently did a post on a possible major top in the gold price and also a post on the possible new bull market in the uranium price.  I have since change my tune a little bit about the top in the gold market as it is currently acting somewhat better.  It will be very key to watch the gold price closely as we move into September 2010 because this is the strongest seasonal month for the gold price.  If gold can get a nice move into the end of August 2010 and really catch fire in September 2010 it may initiate a very strong new move higher which could be a very key speculative element for all gold mining stocks of all levels.

If a new mania type run develops in the gold price it could present a very nice backdrop for most mining stocks including the penny stocks.

Technical Analysis of Mining Penny Stocks

The technical analysis picture of a penny mining stock is as important or more important than where the actual commodity price currently trades at.  The mining penny stocks that have nice long bases and massive volume showing interest and demand are cream of the crop.

I am still studying the chart of Liberty Star Uranium & Metals Corp but I believe it has all the right stuff as of this posting.  It has a long base, and a very nice second strong move off of that base that also tested a previous shelf on dramatically higher volume.  This is a very good sign.

On Going Coverage of LBSR

So my basic point of this post is to say that I believe LBSR has all the right stuff and in the coming days and weeks I will try to analyze the moves that are of significance.  As long as it keeps ‘behaving’ I am going to keep covering it.  But when I feel that it has busted the bullish outlook I am going to have to pull the plug on it.

As I start to post somewhat more here at penny stocks penny stocks I am thinking that the best approach to penny stock coverage is to find a few diamonds in the rough if at all possible and then try to provide more close coverage of them until they either validate my outlook, or cancel it and break down, at which point I would of course stop my coverage.

A lot of penny stock sites out there throw a bunch of symbols at you every day without going into much depth as to why or where or what is going on with each particular penny stock.

I try to take a different approach.  I like to try to go into more detail into the penny stocks that DESERVE more attention based on what I consider to be better than average bullish parameters.

Still, the key is to be flexible as possible.  Sometimes there are 1 to 5 day trades out here in penny land.  And honestly I have to tell you that the big time best penny stock setups, the ones that move 500 to 1000% do not happen that often in a given year.  Maybe there will be 5 to 10 of them in any given year.  I could be wrong about this, but that is my sense looking at this sector over the years.

So I am going to do my best to find the biggest possible setups but it is going to take a lot of patience and perseverance.  It should be an interesting journey.  I will change my approach to writing about penny stocks as appropriate.

I should say also to be prepared for dramatic changes in opinion.  This is just the nature of the business.  A stock can behave very well for 40 days.  But if it does something on the 41st day that severely violates what I consider to be a valid uptrend, then I would have to shift my stance very quickly. 

Keep your head up!

Lets work on this together and make the best of it…

A buddy of mine mentioned STRATTON HOLDINGS STHG to me in an email the other week and I am consistently amazed at the penny stocks he seems to find that are usually of high quality and good chart structures as well.

The chart of STHG shows how it had an absolutely amazing run up from .0009 to .02 and change!  That is an amazing penny stock run by any comparable standard.  That is the kind of run that should have options traders wondering if they are in the right business.  A move from .0009 to .02 is like a regular stock moving from 9 dollars to 200 dollars.  Truly amazing.

But what strikes me about the chart of STGH right now is that for the last month or so it has traded in a series of swing trading ranges and is almost trading like a blue chip stock with similar signals.  It is a superb example of how penny stocks can also behave in a somewhat respectable fashion with a little patience and observation.

If you look at the chart above you can clearly see where I have drawn the red arrows that STHG formed reversal hammers that EACH TIME has lead to a move back up topside to the top of the swing trading range.

Keep in mind that this swing trading range is no small deal.  We are talking a range of 30 to 50%.

The other interesting point about STRATTON HOLDINGS right now is that the swing high on 6/24/2010 which marked the peak of the run up was on high volume and was never tested.  This is clueing me into the idea that this swing high needs to be tested before we can say the run is over.

Right now the current swing trading range seems to be bumping into resistance line near the .009 range.  If STHG can blast above .009 then I think it has entered the zone where it could get a new move back up to the swing high near .02 again.

The volume has been robust throughout the entire swing trading range and shows the stock is being supported here.

Definitely an interesting one to watch here for future possible moves with some interesting key levels to watch for.

I will probably do some follow ups on STHG in the future depending on what transpires in the chart of this penny stock.

I have been thinking about a potentially very important question in recent days…  Are call and put options a better trade then penny stocks ? Or are penny stocks a better trade than call and put options ?

I have come to the firm conclusion in recent days that penny stocks are by far a much better risk reward trade than any call or put option.  Think about it.  Penny stocks do not have any expiration date and do not suffer any time premium leakage as time rolls on.  Penny stocks can be analyzed chart wise for large technical analysis patterns just like regular stocks can.  I would say these are the main two advantages.

Options suffer from the loss of time premium as time rolls on so you not only have to be right on the direction but also within the time constraint as defined by the expiration date of the option.

Call and Put options can have horrible bid ask spreads depending on the underlying security and can also move very fast if the stock moves against you.  This is also true for penny stocks, but again, it really depends on the penny stock we are talking about.  Some penny stocks that are liquid enough actually have decent bid ask spreads and make for a reasonably manageable trading environment.  Others are extremely thin, but at least the ones that are thin can actually be analyzed on the chart.

What about penny stock trading leverage versus options leverage ?

The upside and downside leverage of options is clearly large but that benefit is again minimized in my opinion by the time decay and lousy bid ask spread.  In the options I have traded over the last few months I would say for the most part there was a  clear opportunity to achieve a 100% return with a rare chance of getting more than that.

But I have seen more penny stocks move in 100 to 500 % moves than I have seen options move like that.  And the 100 to 500% moves in the penny stocks did not come with the stress of time expiration.

Sometimes there exists penny stock chart setups that go back over 1 or 2 years long and define extremely high reward/risk scenarios.  The best penny stock setups are those that cover a large pattern over a long period of time, maintain that pattern and then break out from it.  It can lead to 500% to 1000% moves, all without the risk of time decay or expiration dates.

Now don’t get me wrong, I am not saying that penny stocks are a walk in the park and as easy as shooting fish in a barrel.  They aren’t.  But if someone told me they want to trade either penny stocks or options for the next 10 years I would tell them with zero doubt to stick with penny stocks.

To be honest I am quite surprised that both the pinksheets.com website and the OTC BB main website does not market penny stocks competitively against the whole options industry.  Think about all the business they could siphon off of current and potential options traders which represents huge potential dollar volume.

You don’t have to agree with me on this one, but I think it is a very interesting comparison.  Keep in mind though that I am comparing the buying or selling of call or put options to penny stocks.  I am not talking about all the complicated and more sophisticated options strategies out there.

Feel free to comment on whether you agree or disagree with my points.