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Investing in Penny Stocks – Should I Stay or Should I Go Now? – Friday 4-3-09 Watch

Posted on April 2, 2009 by Penny Stocks Picker

So, you have been investing in penny stocks and wonder if you should stay or sell.  Well, investing in penny stocks is like using your cash for toilet paper if you don’t have a plan.  Our approach is to be a penny stock trader and take your profits (if you got them).  Please refer to the introduction article in the category archives for some additional details.

It’s our goal to identify hot penny stock to watch that are on the move.  However, the penny stock picks (suggestions) may have already run their course.  It’s up to you to make a decision to enter into a trade based on your own research (i.e., fundamental, technical, psychological).  There is no possible way to ensure that all top penny stock to watch suggestions are going to go up (if it was that easy, we would all be rich, right?).  So, how do you protect yourself?  Hopefully, we addressed some of those concerns in our articles in the education section of the category archives (i.e. protect your principle, take your profits…..don’t go all in, be disciplined…).

Trading penny stocks is like rolling the dice (gambling) and most penny stock traders lose their money.  However, if you do your homework and have a plan you can increase your chances of being correct.  When you enter into a penny stock trade you may already be in the red by a significant percentage (based on bid/ask price) and therefore it’s difficult to minimize your loss to a set amount.  Most experts would say to cut your losses when you are down 2-5% from the entry price (not likely going to be that low when you trade a losing penny stock).  Penny stocks that are trending up little by little are safer plays then ones that have jumped up in price significantly.  You really need to look at support and resistance zones.  It’s better to buy near support and sell as the price approaches resistance (not always, nothing is guaranteed to work all the time).  When a stock you are in breaks support (which can also be a trend line, pattern or other feature (i.e., moving average…)) you might want to cut your loss.  Vice versa when a stock you are in gets close to the next resistance zone you might want to lock in some or all of your profits.  It’s also very frustrating to sell out then see that hot penny stock rebound or continue up after you sold.  Support and resitance are zones, they are not always a fixed price….there is some give, kinda like a rubber band has some flexibility (as you push on the rubber band it bends to a point where it either may break or springs back).  A good way to lock in profits is to sell half your position as the penny stock price moves up (leaving you with 50% of your original position), if the price continues up to another resistance zone or begins to lose momentum, then sell half again (leaving you with 25% of your original position) and so on.  Then again you could just sell it all and move on.

If  your wondering when to sell for a profit or take a loss, ask yourself this question: Would you buy that penny stock at the current price based on your recent analysis?

Bottom line, I really can’t tell you when to get in and out (it’s a personal decision based on your analysis).   There is just way to many different possibilities based on numerous factors.  I would like nothing more then to see all my suggestions go up an up.  However, that’s just not going to happen.  So, it’s really up to you to pay attention and have a plan.  I can only tell you that you need to be a sponge and keep learning something new everyday.  Only play with money you can afford to lose.

Watchlist for Friday

GNTA @ .0232 (Identified on 3-26-09 at .008 and up 190% since.  Volume and price continue to increase. Getting a lot of attention still.  However I did sell half my position at .019.  Looks like .03 is some resistance but after that we got a gap down from .159 to fill.)

SPNG @ .025  (Identifed on  3-31-09 at .0134 and up 86% since.   Still #1 on IHUB.  I don’t know where it’s going from here but you might want to consider taking some profits if you got them to lower your risk.  Looks like some resistance at .03)

PLBI @ .0034 (Closed at high of day.  Broke through .003 resistance which is now support (but hasn’t been confirmed).  I might buy this if it tests .003 again and holds with increased buying pressure.)

POPT @ .0009 (Price breakout)

FBR @ .26 (Broke .25 resistance on strong volume and closed at high of the day.  next resistance zone is .30)