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What are Penny Stocks – Suggestions for Monday 4-13-09

Posted on April 12, 2009 by Penny Stocks Picker

A brief explanation about what are penny stocks.  In addition to about what are penny stocks you will find some top penny stock suggestions for Monday.

What are Penny Stocks Defined Briefly

A stock represents a share (unit) of ownership in a particular company.  Companies issues shares as a means to raise capital to invest in projects.  Shareholder(s) are partial stakeholders in the company and only have an indirect equity interest in the company (benefit as the share price rises and also may receive dividends).   Shareholder(s) may have voting rights (depending on type of shares) but does not give the shareholder authority to act on behalf or use company resources.  A shareholders total equity stake in the company depends on the number of shares held in relation to the total # of issued shares (% ownership) or more simply, total # of shares owned times share price.  Market capitalization and share structure of publicly traded companies will be highlighted in a future post (but includes;  Authorized Shares (A/S), Outstanding Shares (O/S), Restricted Shares, and Free trading shares (Float)).

Penny stocks (i.e., small cap stocks, mirco cap stocks) are like other stocks but are normally associated as high-risk investments for a number of reasons.  There can be a difference in opinion as to what the share price is that defines a stock as a penny stock (stocks trading $5.00 or less, others say 2 cents or less) and what exchange the stock is traded on (NYSE, AMEX or NASDAQ vs. OTCBB, or Pink Sheets).  It’s more common for penny stocks to to be referred to stocks that trade outside of the three  major exchanges (NYSE, AMEX, or NASDAQ) and are usually associated with the Over the Counter (OTC) exchange via the OTC Bulletin Board (OTCBB) or Pink Sheets.  It is my opinion any stock trading less than $5.00 per share on any of the exchanges is a penny stock.

Stocks may attain the penny stock status due to speculative investment (start-up) or because of negative issues.  Penny stocks traded on the major exchanges (i.e. NYSE penny stocks, NASDAQ penny stocks) have strict reporting requirements and are more transparent then OTC stocks (i.e. OTCBB penny stocks) which have little to no reporting requirements.  Shares of publicly traded companies that do not meet the requirements to be listed on the three major exchanges are either delisted from the major exchange and/or listed on the OTC exchanges (OTCBB or Pink Sheets).  OTCBB penny stocks have some reporting requirements as compared to the Pink Sheets which have very little to none and thus make Pink Sheets penny stocks the most risky of them all.  Both the OTCBB and Pink Sheets are highly subject to illegal pump and dump schemes because of the limited reporting requirements and the ability of the company owners or other penny stock traders to effect the price movement (i.e., bogus press releases, buying up the float).  If your investing in OTC penny stocks you probably should have your head examined, it’s much safer to think like a penny stock trader (See articles in the education section).  To make money in the OTC penny stocks you must be a penny stock trader (don’t fall  in love or get married) based on your own research (just use the hype as a tool to identify potential movement).  If you must invest in penny stocks you probably would be better off sticking to the three major exchanges (but they still have their issues as well). 

Hopefully you have a better understanding what are penny stocks.  You should take some more time to conduct research about OTC penny stocks before you buy penny stocks, especially small cap stocks or micro cap stocks to ensure that you know what your getting into.  The high volatility of penny stocks either allows penny stock traders (not investors) to yield significant profits (if you pay attention) within a short period of time or leaves them penny-less.

Penny Stock Suggestions for Monday

BBDA @ .0004 (Volume and Price breakout.  Chatter)

RBDC @ .0003 ( Breakout volume and price, breakout chatter.  Might be worth a little roll of the dice on this one if buying pressure continues Monday.  My guess is if you have a Scottrade account, on-line purchasing will be restricted which doesn’t help add to the momentum.)

ZIPN @ .021 (Called this for last Thursday at .013 (up 61% since).  Volume pretty much doubled.  Chatter is picking up.  However, getting more risky.)

MTIZ @ .021 (Also called this last Thursday at .01 (up 110% since).  Volume broke out.  However, it gapped up and closed lower then the open, suggesting profit taking.)

ARTI @ .0039 (I first identified this penny stock on 3-19-09 at a price of .0015 and went as high as .02,  looks like it tested and confirmed .003ish support.  I really blew this one myself (wasn’t paying attention and I know the rules, CHECK OUT my post  “Asleep at the Wheel“, you should find it both entertaining and informative).   Anyway, I bought at .006 and could have had a nice profit on the way up to .02, and now looking at 50% loss.  Volume is drying up (losing momentum).  I should have been out already but at this point (possible .003 support/bottom play) it’s worth hanging in or buying more if volume comes back. I don’t really see a lot more chatter then has been already (maybe even less).  However, It’s possible that Thursday’s test and bounce off .003 will create new interest.)

HRNF @ .0007 (Volume and price breakout)

I’ll update this post if I see anything else before tomorrow.  Don’t forget to do your homework.