There is an old adage in stock market lore about the bulls, the bears and the pigs.  All three of these types of market participants exist in the market.  Generally speaking it is never wise to be a pig in the market because usually it can lead to giving back hard earned profits.  Pigs hold on too long to a stock or index in the hopes that a stock will keep going straight up on their time line.  When stocks make life time huge moves there always comes a point where heavy profits will want to be taken. 

Heavy profit taking is what we think is about to happen to LBSR after today.  Penny stocks are famous for making enormous persistent moves when all the ingredients are right.  But they are also famous for dropping like a rock when some serious profit taking sets in.

Today we printed a near perfect doji candlestick in Liberty Star Uranium Corp and volume was also half that of yesterday.  But we also did something very significant in that we went above yesterday’s high, and then closed under it today.  This is a sell signal in terms of volume.

There was also a double top in daily RSI today and a class B divergence.  I don’t have a MACD histogram sell signal yet but that may arrive by end of this week or next week sometime.

I am not saying that this is the final top for the penny stock LBSR.  I am just saying that it is time for a serious correction and a long new base building process for any possible new move higher.

I am looking at .12 and .09 as possible correction targets in the days and week ahead.  .09 on this penny stock would represent the 61.8% fibonacci retracement

level.  If LBSR is extremely strong then it will only correct to about .11 or .13.  I think .09 is more probably but we will just have to wait and see how things shake out.

Identifying sell points is tricky in LBSR but I think it is a done deal from today onward.  That is not to say that we cannot still trade marginally higher after today but I still think it will result in a top.

The trading action after today is going to be very interesting as we will see how strong LBSR truly is in terms of buyer support coming in.  As I said I expect it to come in strong, but the speed of the shakeout will determine the strength of the strong hands.  Penny stocks tend to fall faster than they rise which is true for almost any stock out there.

This penny stock has had one of the most amazing runs we have ever seen since we profiled it at .03 cents.  We expect the story will continue to get interesting.  One thing that surprises me is that we have not as of yet seen any news.  It would seem unlikely that news would come out before the 3 day holiday weekend. So maybe LBSR stays afloat 2 more days this week and then finally goes into correction mode early next week. . .

I am being a bit too dramatic with the title of this post, but to a certain degree it is true.  I mentioned in previous posts on KATX that it must must hold .105 support to keep the bullish scenario alive for breakout later in time.

Today KATX chose to bust support and close at .098 on heavy volume.  It violated support which was very significant support.  It turns out that the 6/14/2010 very high volume down swing was a very significant clue (we talked about this before) that damaged the stock’s uptrend beyond repair.

Today’s close under .105 means that now .105 becomes new resistance and KATX may drift lower for months maybe back to very low pennies.  Only a strong close back up inside the range above .115 will get me bullish again and thinking it has another life in it.  This looks very unlikely at this point although it is not entirely impossible.

Penny stocks transition into many different phases one day at a time.  Keep in mind that I do not hold anything against KATX and there is nothing to take personally here.  It is simply a matter of making a judgment of the chart and determining which way the wind blows.  Right now the wind is blowing very bearish for this stock.  Extreme caution is advised.

I suspect that a lot of capital from KATX is being pumped into LBSR as a transfer trade.  LBSR is in a very different stage of its trading cycle however.  It may soon top later this week.

So for now it is time to say goodbye to KATX…  The long sideways trading channel was showing some possible bullish possibilities but it is important to know when to cut loose and run just as with any other stock.

LBSR today blasted higher AGAIN.  Amazing.  This penny stock had printed a double inside day the previous 3 trading sessions which was a clue that another huge move would come in today.

I still do not see clear signs of a sell signal.  But I should say that we are trading right now at the top band of resistance I mentioned in previous posts.  I am going to be SHOCKED if we blast higher and close at .20 cents this week.  I would expect at least some consolidation under the .14 level before LBSR can blast to much higher ground.

The way the stock is trading suggests that news should come out on the last day of August in the morning or afterhours.  And once again I have to stick to my original take that once news comes out it will mark the short term top and beginning of a long sideways consolidation. 

Clearly LBSR is a stock that is in very tight hands, selling pressure is limited.  But at some point everyone is going to want to unload until they get more transparency and visibility of the company direction in the weeks and months ahead.

I am going to keep my comments short today on LBSR.  I feel like we are in the 11th hour on this penny stock and very close to news.  I would advise extreme caution against going long LBSR from this point forward.  Strength should still be presumed, but the finger should be ready to pull the trigger at any time given the current trading dynamics.

Clearly it is very hard to pick a top in a stock that trades as strong as this one.  All we can do is look for clues and forward looking events.  Lets see how things shape up mid week for LBSR.

My apologies for the late post today.  I am a bit busy preparing to head out to the Cape during the end of this week.  I will have more detailed thoughts on both LBSR and KATX along with plenty more penny stocks that come across the radar screen in the days and weeks ahead.  Please bear with me the next few days if posting is somewhat light.

So just a few quick comments on the LBSR and KATX charts today.

LBSR (Liberty Star Uranium Corp) today sold off but once again showed a bottoming demand tail on the candlestick.  This is a short term bullish sign.  However today was also an inside day in that yesterday’s high and low were not tested of taken out.  Volume lightened up today on the decline which is a bullish sign.

The MACD histogram is once again flashing at least a potential sell signal but it is unconfirmed and it will fail as a sell signal if we close above the 8/25 swing high.  However if we close tomorrow (Friday) below the .1022 swing low it will be a confirmed sell signal.  I am also noticing on the intra day chart at least a potential head and shoulders topping formation.  If we close down tomorrow it may begin to form the head and then the neckline would be at .08 which is likely going to be good support.

At the risk of sounding repetitive, I continue to believe that LBSR is trading into news and we would advise caution after news is released as it can tend to act as a strong reason to sell even if the news is extremely positive.

At some point LBSR is going to have to start building sideways cause again.  It has already exceeded the high tight flag formation measured move and is now in the stratosphere.  So key for 8/27/2010 is whether or not LBSR can print a new high AND close at a new high.  If it does that then expect higher prices early next week.  If it closes below the 8/26 low then expect some early weakness next week.

The penny stock KAT Exploration KATX has different dynamics taking place in its penny stock chart, much different than LBSR.  Today KATX did a deep retracement of yesterdays big belt hold candlestick (a big candlestick that shows strong close and strong move right from the get go).  In fact today’s (8/26) deep retracement makes the candlestick pattern look like a potentially bearish piercing pattern (this is when you get a deep retracement into a bullish candlestick the day before that covers 50% or more of the body of the previous candlestick.  The potential bearishness of this pattern will not be confirmed unless we get a close under .115

On the plus side, the deep 8/26 retracement on KATX was on 1 million less shares, a bullish sign.  Still the most important consideration is to try to see the forest for the trees on this penny stock.  I can talk to you about daily price action all day long, but what about the bigger picture on KATX?

The bigger picture involves the 6/1/2010 price peak and the long downward slanting consolidation we have had since then.  The key points are that we have been trading in a consolidation in descending fashion.  This simply means that we have a series of lower tops each time we have tried to rally.   This is a concern because you usually do not want to see lower tops over an extended period because it shows that there is consistent supply coming into a stock (selling).

However, on the plus side we see that .11 has been tested 3 times so far and has consistently held support.  We have had 3 nice upward reactions off of this support line showing demand.

So the battle will eventually be lost or won.  If KATX breaks below .11 and closes below .105 then I have to assume that the sellers won and a new potential bullish scenario is lost.

If KATX on the other hand in the first week or two of September can break above .15 or higher, then we can start to assume that a new bullish phase may begin.

These are the trading dynamics of this penny stock. The battle is either going to be won or lost.  There is no reason to get emotional about it.  It all comes down to supply or demand.  A break below .105 would put us in a situation of saying that we cannot recommend holding onto KATX any longer.  Why? Because that would show a violation of support.

The problem with penny stocks is that when they turn long term bearish they do not make it very obvious.  They tend to die a slow drifting down death.  Those who do not pay attention to the clear signals ahead of time stand to risk riding a penny stock all the way back down to where it began its journey.  I can name you plenty of penny stocks that have suffered this fate.

But at least as of right now I can tell you that no clear major sell signal or new bullish signal has been activated yet.

I should also mention that if the gold price can somehow manage to blast higher to new life time highs, it may help to support the micro cap mining stocks.  My current technical analysis of the gold price suggests that it may in fact do that in September.  Also, September is the seasonally MOST bullish month for mining stocks and precious metals.  So it would seem that the wind can be in the favor of many penny mining stocks.

Still, the levels are clear in KATX and must be respected.  I will have more coverage of LBSR and KATX in the days and weeks ahead as well as more detailed charts and analysis.  We try to provide the best penny stock coverage and the most depth because it matters.

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KAT Exploration Inc today showed a sign of strength once again and bounced off the very critical .11 cents range showing renewed demand for this gold penny stock.

At this point it looks like KAT Exploration Inc has passed the test of holding key support at .11 cents.  I mentioned before about how important that level was to hold to keep the overall chart structure intact.

The good news now is that if KATX can get a breakout going topside out of this large descending wedge it could lead to a test of the highs near .24 cents and maybe beyond.

The volume ticked up nicely today as well.  The daily MACD histogram looks bullish and the WEEKLY MACD histogram will flash a buy signal if we can get a close above this weeks closing weekly high.  This would be a potentially very important weekly buy signal if it is confirmed next week.

This gold penny stock is a typical well behaving penny stock that has decent liquidity to trade just like regular stocks.  Still, it is important to consider that as of this writing KATX has not actually achieve a topside breakthrough of that red dotted down trend line.  This means that it still has important work to do to prove itself.

But so far so good.  KATX holders should be pleased that this penny stock has been able to hold .11 so far which was definitely not a given in this risky sector.

Pennystocks penny stocks first mentioned KATX way back at around 5 cents.  We also recently mentioned the gold and uranium penny stock LBSR at around 3 cents.  Clearly penny mining stocks are the place to be right now in the overall penny stock sector. . .

I am trying to think of anything bearish about the liberty star uranium corp chart today and based on all the signals I usually look at there is nothing I can find of major impact that is bearish right now.  The MACD potential sell signal in place as of yesterday failed yet again today and price of LBSR closed higher again above the recent new high.  This is yet another bullish sign.

RSI continues to push higher and if we move higher again tomorrow it could lead to an enormous blow off topside spike maybe even up 100% from today’s close.  I say this because there is a resistance line along the recent RSI consolidation and if that is broken topside it could lead price into a spike higher.

There was some supply that came into LBSR in the form of a topping tail today but we did not close under the .11 level which would have been much more bearish.

Looking at the penny stock chart above you can see that the price of LBSR is trending higher at a steeper slope marked by the higher angled trendlines.  I still stand by my earlier point that when news finally does come out for LBSR then it will move into a consolidation and cause at least a month of sideways base building. 

I also stand by my earlier point that there is a new resistance zone at about 13.5 to 14 cents.  That should mark some type of consolidation point.

Current the market capitalization of LBSR is about 52 million dollars. A price of .20 cents would put the market cap near 90 million which is quite pricey for any penny stock.  Taking new long positions in LBSR right now is not recommended unless very quick on the trigger finger.  Upside here could be maybe 50% or slightly more but those gains have the potential to be erased very quickly.

I am not bearish on LBSR but just trying to be realistic given the extension of the recent move.  Again, I have to emphasize that when news comes out it will likely be sold and market a topping point.  Never think that when news comes out price is going to go up another 100%.  It just doesn’t work that way.  It all depends however on how big the run is before the news.  In some cases a penny stock can be trading sideways for many months and then a news item will send it sharply higher.  But given that LBSR is already well into this run, one has to assume that a sell on the news scenario will develop.

Liberty Star Uranium Corp is the strongest penny stock I have ever seen in my life.  It is nothing short of astounding how strong this penny stock is.  Today a downward correction was fully retraced and LBSR actually closed up on the day.  Truly an amazing recovery today.

We first highlighted LBSR at .03 cents and continue to try to track its movements but admittedly it is starting to fool us more now because it is not following traditional signs of weakness from the indicators. 

Still, the MACD histogram is once again showing a bearish triple M pattern that would only be confirmed if we close below today’s low of .0771.  LBSR has met the measured move from the high tight flag that I mentioned in a previous post about LBSR.  In that post I pointed out that LBSR moved from .03 to .07 or a 4 cent move.  So adding 4 cents onto the top of the high tight flag would lead to a target of 10 or 11 cents which we did.

So the measured move was accomplished and this could be more evidence that we are going to move into a consolidation again. So how do we know if we are NOT ready to start consolidating going forward?  Very simply.  We need to take out the high of .111 cents on a closing basis.  If we do that then LBSR could explode higher again.  I view this as very unlikely for now but I have been wrong before in trying to pick a top too soon here.  But at least more evidence is piling up that we are near a consolidation phase.

The problem is that ‘news’ has not come out yet.  LBSR may want to trade right up into news which may come within the next 3 to 5 trading days (just a guess on our part).  I feel strongly that when and if news comes out, it will mark a turning point for the stock and the beginning of a consolidation period.  Why?  Because price usually moves before news and this penny stock has shown us that this is what it wants to do now.

If LBSR does somehow manage to trade higher again above .111 then there is a stronger previous resistance range at .12 to .14 cents which should stop this penny stock and move it into a consolidation.  I doubt very highly that we will be able to break above .12 to .14 immediately assuming we even get there.

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Today LBSR hit a higher high above last Friday’s high price swing but volume contracted dramatically.  This is a short term bearish sign because we tested last Friday’s high and then closed under it.  I also see a bearish candlestick piercing pattern where price retraced 50 percent into last Friday’s candlestick.

There is also a bearish divergence between price and RSI.  In addition to that the price of LBSR has moved to the expected duration after the bullish falling flag formation that occurred at the previous consolidation in the .05 to .06 range.

Don’t get me wrong, LBSR is extremely strong but at sometime this stock needs to take a breather and start to build more sideways cause again.  Today’s action seems to be suggesting that this process may begin now or at the latest sometime this week.

It does appear that LBSR is trying to trade into a news item.  Once the news item is released, there ought to be a classic ‘sell the news’ type situation as is usually the case.

So far LBSR is an outstanding penny stock and a sideways consolidation will be very welcome news as it could make a base suitable for much higher prices ahead.

When a penny stock starts trading up in a straight line it usually seems like it will keep doing so indefinitely.  I have been there before.  But at some point the stock will start a consolidation which can sometimes take several months to build.