Penny Stocks

I think Liberty Star Uranium & Metals Corp momentum is drying up a little bit today and we may be due for a short term pullback.  Remember, no penny stock every goes up in a straight line.  It has had a nice strong advance that has been quite persistent since the breakout over .03.  It was a clear sign of strength.

But today at least at mid day volume does not seem to be coming in as strong and the relative strength index on LBSR hit a peak of 87 today well into the powerzone.  The MACD histogram appears to be showing a slight slowing of momentum as well.

So it would seem there are some ingredients for today being a short term top.  We may trade flat to only slightly higher the next 2 days and then possibly drop down to .04 to .045 range as a short term thrust down which will probably be bought quickly.

If we are right about LBSR entering a short correction here then it will most likely be very short lived (at least the worst of it may be) because of the inherent strength of the longer term chart.

It would be particularly short term bearish if Liberty Star Uranium & Metals Corp closes at .06 today because it would create a dragonfly reversal doji candlestick on this penny stock.  Also, we previously mentioned the topping tails of the last few days which is an indication of some supply coming into the stock.

So it would definitely not be the end of the world to get a little pull back in LBSR.  If we are correct about it starting within the next couple of days then the retracement should offer a healthy chance for this penny stock to consolidate and build new cause.

There is an outside chance that the current consolidation is only a pause and could lead to a quick new move higher above .07, but for now that seems like an unlikely outcome.

It is very tough to look too far ahead but if we get a dip to .04 then it could set the stage for another horizontal type trading range that builds cause for an eventual breakout move to a new plateau above .07.  

If you ever begin to start trading penny stocks try to remember this one very important rule.  Penny stock quality is much more important than penny stocks quantity.

There are a million penny stock sites out there (probably more) and maybe most of them focus on quantity.  We can understand the desire to have a lot of quantity because it makes it seem like there is a lot to choose from.  Certainly people want to have a lot to choose from in the penny stock universe and this is not necessarily a bad thing.  But it is only those finely tuned minds that are able to filter out the quality penny stocks from the quantity that stand a better chance at this game.

To be honest there is not that much quality out there in penny stock land.  One really has to search long and hard to find it and also recognize the simple fact that there are probably only a small handful of true quality penny stock setups in any given year.  It may be more than a handful actually.  Maybe it is about 10 to 20 true quality penny stock setups.

In our view, this should probably be the most important task that any potential penny stock investor should embark on.  Making the definite decision to only focus on finding the absolute number 1 rated penny stock setups instead of just the hottest recent big mover that seems like its should go up.

I have been trading penny stocks for about 10 years now off and on and I can tell you with zero doubt that it is extremely difficult to trade penny stocks with a consistent winning record year after year.  I don’t mean to sound discouraging, but in my view it is a simple truth.

So the question is how can one build up better odds over time and consistently win in the penny stock sector year after year ?

To me, this is the most important question one must ponder if they are looking to participate in this sector.  The penny stock sector can offer potentially enormous rewards if a proper strategy is developed to win in this sector.

It is the desire and definite chief aim of this penny stock site to attempt to come up with a long term winning penny stock trading strategy.

We do not claim to know all the rules or secrets but we do feel we have a keen eye towards what makes for the best penny stock setups.

The average penny stock can provide to traders 20 to 100% gains on a daily, weekly or multi week basis.  It is very easy to forget the power of compound gains when trading penny stocks.

Did you know that if you were to compound a starting capital of $500 at a 50% rate that it would grow to $1,108,418.91 after just 19 trades?  But this assumes that after each trade you would re invest your entire proceeds into the next trade which would expose oneself to the highest possible risk with each trade.  This is not advised but I point this compounding example to show how even 30% to 50% returns achieved consistently enough times can lead to massive wealth building.

But the issue is how do you find the penny stocks that are going to return 30 to 50% on a consistent basis?  The answer is that it depends on the penny stock price chart.  Either the penny stock has all the ‘right stuff’ in the chart or it doesn’t. 

We feel very strongly here at penny stocks penny stocks dot com that when we see a superb number 1 rated penny stock chart setup, it jumps out at us boldly and really makes a statement.

A problem that occurs is partly the result of their being so many penny stocks and so many potential setups. It can be easy to get suckered into the less than perfect setups and then suffer bad draw down and losses.

But think about this for a moment… Imagine if there was a penny stock trading strategy that on an annual basis tries to only find the number 1 rated penny stock setups a few times a year. Perhaps those setups would return 30 to 100% returns.  And then imagine if you could consistently achieve these returns year after year.  It goes without saying that if done successfully, a large amount of compounding of capital could be achieved.

But it is perhaps more easily said than actually done.  The ability to identify and participate in only the strongest possible penny stock setups on an annual basis is quite a challenge.  It requires the ability to scan through hundreds or thousands of penny stocks and then having the foresight to only participate in those setups that are deemed number 1 rated.

Probably the hardest part of such a strategy is resisting the temptation to jump into less than near perfect penny stock setups…

Well you now have an idea about our frame of mind here at penny stock penny stocks dot come…

Now lets get to work…

The following list is the penny stock scan for today.  These penny stocks are automatically scanned and are not rated by us and have not been reviewed.  They are just meant as a scan of the penny stock universe so as to see what is moving in the penny stock sector at prices below .10 cents.

Volume Spike Scan of 150% or more combined with Price Advance:

MACD Bullish Cross:

2 Day Bullish Movers:

Have a great weekend.  By the way I just noticed out of this list that TAON looks quite interesting as yet again another penny  mining stock.  I will have to study the chart for a while and see how it looks, but my first glance at it made me think it might look quite good…

The mining penny stock LBSR today moved into a consolidation stance and looks like it will finish with a doji indecision candlestick.  There was gain a semi large topping tail on the daily candlestick that somewhat mirrors the topping tail of yesterday as well.

Volume also dried up markedly today and is suggesting in the short term that momentum is starting to shift.

I am going to make a short term forecast for early next week but keep in mind that these short term forecasts can be very variable as far as specific timing.  I think we could go into a one or two day retracement early next week perhaps down to the .042 level as the low point and then some type of intra day reversal back topside again.

The reversal may be enough to get LBSR back up to .07 again which may then cause some new sellers to come in again.  If so, then it could cause a drift down back to .045 again for another retest and then an eventual new trend build higher.

The above forecast is very speculative.  But overall today I have to say that the action in LBSR is still very encouraging.  We have recently completed 3 white soldiers candlestick pattern which is a very strong indication of who is in control.  The fact that we sold off today should not be seen as extremely unusual.  In fact, given the fact that this is a mining penny stock it should be seen as a normal garden variety pull back today.

I am writing this update as of 2:48 PM eastern time on August 13, 2010 and so I cannot be sure exactly how we will close yet on LBSR.  If by some lucky chance LBSR closes near the top of the range today then it may hint that today’s doji candlestick was simply the half way point resting point.  If that is the case then we could trend higher very strongly early next week.  Still, the volume is lightening up today and so my bias is that we consolidate in the scenario I already outlined earlier in this post.

In our opinion, strength has to be the presumption with LBSR.  Any pullbacks should probably be seen as opportunities for accumulation, again in our opinion only.

I really do not have anything negative to say about LBSR as this point.  If the earlier scenario plays out then we should see .043 as the low sometime next week and then an upwards reaction from that level.  I am seeing signs that this penny stock is being accumulated consistently.

One thing I can almost guarantee you is the LBSR will once again move into another sideways type consolidation at a higher level.  This next consolidation will be the key for next price evolution.

I should say that it is also a definite positive for the mining sector in general to have the very seasonally strong month of September coming up.  That is about as good a scenario as one could ask for in terms of timing.  In addition the seasonally strong penny stock trading season also runs from September  to January time frame.  So in our view there should be plenty of room for more upside surprises in LBSR.

Lastly, you probably know by now that I rarely if ever discuss fundamentals here at penny stocks penny stocks dot com.  But I should say though that the fact that LBSR is working a deal with a more established mining company Northern Dynasty Minerals Ltd is an extremely positive sign from a fundamental standpoint.  Northern Dynasty Minerals Ltd current market cap is about 632 million dollars.  I do not ever recall since I began trading penny stocks, when a penny stock actually had a real tangible working relationship with a major mining company.  This fundamental fact makes this a unique situation.

There have been other penny stocks in the past that have had a lot of speculation of being associated with a much larger mining company, but that was only pipe dreams and speculation.   In this case it appears to be real and meaty enough that you can sink your teeth into it.

So yes, I focus on technical analysis of penny stocks here, but that does not mean that one should give some consideration to outside fundamental developments that may be ‘game changers’.  Most penny stocks don’t get good breaks like the one LBSR has right now.  Their potential massive resources in the ground, a rising gold and uranium price in September 2010, make for a possible perfect storm for this penny mining stock…

More developments to be posted as warranted…

The penny stock Stratton Holdings Inc may be once again coming near a reversal point.  I mentioned this penny stock before as one that seems to be fairly liquid and also constructive in that it seems to want to trade in a slow upward slanting trading range.

It has been a fascinating penny stock in that it has shown very clearly with reversal candlestick hammers its intention to trade back to the top of the wide swing trading range.

STHG appears to be forming a small reversal hammer again today and is trading in a downward slanting flag formation.  Volume is also contracting down within this formation.  I suspect that it may make a shot at the topside of this falling wedge and get another 1 to 3 day move topside before succumbing to overhead resistance again.

This penny stock just fascinates me for the simple reason that it trades with robust volume and has nice big ranges.  It is like a blue chip stock with big trading ranges and interesting valleys along the way.

Next week STHG may make another run to break overhead resistance.

This is one to keep an eye on because of its large penny stock swing trading range and seemingly clear reversal signals.

Still, there is always the risk that this penny stock will break down from the up trend line support in force since 7/7/2010.  STHG is sitting right now along this support line and it does need to get a topside reaction soon otherwise it will risk spending too much time near the support line of this swing trading range.

Think of the gold price as ‘big daddy’ and the penny mining stocks as the little children of ‘big daddy’.  If the big daddy breaks out to a new all time high and powers higher creating a speculative frenzy, then the little children of big daddy a lot of the time get really excited as well.

My point is that the gold price can sometimes be important to adding speculative fuel to the mining penny stock sector.  The same could probably also be said of the uranium price.  If the uranium price were to blast higher to new all time highs it could light a tremendous fire under certain uranium penny mining stocks.

I remember many years ago there were two penny mining stocks that shot dramatically higher during the gold price super spike into 2006.  They were Franklin Mining and Roanoke Mines.  Franklin mining shot higher from .0009 to .15 and Roanoke Mines shot higher from .0001 to .15 cents all within a few months.  The amazing fact about the Roanoke Mines move was that this stock was not even a functioning penny mining stock company and was just trading on the pink sheets lingering around with no real operations.  That my friends is what a speculative frenzy in the gold price can do.

Having said that, I do not mean to say that any penny mining stock cannot get a good run going if the gold price just stays flat, goes sideways or even moves down.  Sometimes specific mining company events take precedent over everything else.

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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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