It has been a while since I have written about penny stocks

I love penny stocks.  But it seems for whatever reason I have completely neglected this group of stocks over the past several months.  I have not completely neglected penny stocks in the sense that I have been dabbling in the more mainstream penny stocks between $1 and $5 on both the Nasdaq Composite index and the New York Stock exchange.

Given the huge market surge since March 6, of 2009 these days it is becoming harder and harder to find 1$ to $5 nasdaq or nyse stocks that are ripe for a nice move.

Of course the recent exception to the rule was ABK Ambac Financial Group, Inc. Ambac had an absolutely outstanding rally from the depths of the .60 cent range all the way up to a high of $3 and change that occurred through multiple gaps up.

The nice thing about ABK is that you have a very liquid stock and generally very high volatility.  The downside is that you have the potential for this stock to go bankrupt at any time.  I have been in stocks before that had a ‘possible bankruptcy’ press release and let me tell you it is not fun at all.  So ABK is probably best suited for day trading at this point to avoid one of those end of day or pre market PRs.

Anyway to get back to the point I was making earlier.  I will try to cover more penny stocks here in the future.  But I must tell you that in general I really do not like to talk about penny stocks just for the sake of throwing a few symbols out at you. It just simply is not my style!

I am the Senior Citizen of Penny Stocks!

I am kidding.  Well sort of.  What  mean is that I already know how extremely dangerous penny stocks are.  Most penny stocks are junk.  I am sorry to say it, but it is true.  You truly need a fabulous combination of criteria all coming together at once to make for a great penny stock play.

That is why I am referring to myself as the senior citizen of penny stocks because I would much rather try to find a small handful of penny stocks PER YEAR instead of 1000 of them per year. 

Why?

Because honestly most penny stock plays do not work out as I have already mentioned.

But imagine for a moment if we could somehow identify the few penny stocks that have real mega runs on an annual basis.

Lets say we are able to fine ONLY 3 penny stocks that have mega runs on an annual basis.  By mega run I mean a penny stock that is able to deliver 300% gains or better.

So, assuming you start with $5000 and invest in in penny stock number one that gains 300% or more you would then have $20,000.

Then assuming all proceeds are plowed back into the next winning penny stock of 300% gains or more you would then have $80,000.

Then, lets say you roll the dice again and find another penny stock that delivers 300% or more and put all $80,000 at risk.  You would end up with $320,000 on just 3 penny stock trades!

A few footnotes…

Most other traders will tell you that you are absolutely insane to even consider plowing ALL future proceeds into the next potential penny stock winner.  And I do in general agree with this point because you are putting too much at risk and can easily get blown out.

So my whole point of bringing this up is simply to make the point of how important it is to try to find QUALITY in penny stock land versus QUANITY.

QUANTITY to me in penny stock lands sucks!  I have to be honest about it.

The way to go about finding penny stock quality is something I will try to go about pointing out here in future posts here at penny stocks penny stocks dot com.

By the way I don’t claim to be the supreme expert in penny stocks and that everything I find turns to gold.  But I do claim to have a decent amount of experience in this sector and know how to read charts pretty well and identify the difference between a garbage penny stock and a potential true winner.

It is a constant learning process and we are all in this together.  There are some secrets, but a lot of picking the best winners is simple common sense believe it or not.