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Penny Stock Investing VS Trading – Monday Watch 10-12-09

Posted on October 11, 2009 by Penny Stocks Picker

I received several questions about investing in penny stocks and how to invest in penny stocks.  I’ll say this again, my approach is to to identify hot penny stocks to trade (not to invest).  Refer to my articles in the educational section of the category archives for some details.

INVESTING IN STOCKS

In addition to trading penny stocks I do look for opportunities for investing in stocks.  There are many different approaches to identify stocks to invest in (refer to article posted March 7, 2009 “How to Pick Penny Stocks” for the basic approaches used to analyze stocks).  I try and keep it relatively simple, I’m not interested in spending hours pouring over fundamental data of a particular company.  So, let me give you a brief explantion of my stock investing style with an example.  I first started investing in Gold (~$265/oz) and Silver (~$5/oz) stocks about 8 years ago.  At that time the majority of my friends and family thought I was crazy (well, maybe I am).  Anyway, now everyone is pumping gold and you see adds and financial advisers recommending to buy gold now.  I’m a big believer in that a portion of your portfolio (~5%) should have some precious metals but all this recent gold hype tells me that almost everyone who wants in is already in.  I’m not going to say gold isn’t going higher ($2000/oz or more is certainly possible) but I think there has to be better investment opportunities.  Also, consider that around the late 1970’s to early 1980’s gold reached a peak near $900/oz.  In my opinion our current economic situation has far worse problem at this time and yet gold is now only about $1048/oz.  I would think the price of gold should be an easy $2000/oz just to match the 1970’s price adjusted for inflation…….Hmmmmm, so why hasn’t it?  I also believe that the financial condition will get better in time….I don’t expect our monetary system will crumble apart (still many tricks in the bag to pull the world out of this economic mess).  It’s just been way to negative for such a long time that in my opinion we all are growing very tired of it and are ready to start investing and buying stuff again (of course not at the same level we had in the past).
 
I suggested in the beginning of July that it was time to consider investing in Natural Gas stocks (the price was hammered down) while everyone was busy getting out and financial gurus were saying get out.  I followed that up by listing a number of Natural Gas stocks on this website (most of which now have decent gains and several of them are up 100% since then).  Now here is the point, look for undervalued sectors, commodities, stocks that have something people need or will want.  The first thing to do is to identify a service, item, commodity or whatever has been sold off and looks to cheap.  If you truly would go out and buy it now at that price cause its just so dang cheap than it is probably a bargain in the long run, this is exactly what I’m looking for when it comes to investing.  Your next step is to then identify several solid companies in that sector that have also taken a big hit or have something new in development that excites you personally. 

So, here is my two cents when it comes to investing in stocks (trading penny stocks is the exact opposite):  Do not follow the heard into the green pasture.  When the green pasture is full of all the sheep it will soon be picked clean and will not have an opportunity to grow tall.  You want to find empty trampled down ratty looking fields that nobody is interested in at the moment to invest in.  Get in when everyone else is finished getting out…..wait for the mass exodus to settle….then load up because that’s when there is room for opportunity for the grass to grow and start thriving again!  If the field has a good nurturing farmer and has the basic ingredients (you can research that) then once it begins to thrive it will turn green again….and hence, they will then all come stampeding back while you begin to make your way to the exit.

LIST OF PENNY STOCKS TO WATCH AND TRADE

When it comes to trading penny stocks I do exactly opposite of what I said above about investing in stocks.  I’m just looking for hot penny stocks that everyone wants or might want a quick piece of…golden potential and a smashing party.  I don’t research the fundamentals all that much just some basic information like the share structure, news, message board chatter, trading volume and most of all the chart.  I pretty much assume the penny stock is a POS and is being manipulated in some manner.  I usually wait for a pull back to support and then jump on for a quick joy ride.  Oh yeah, I been burned more than a few times being left with a case of the hebbe geebees and an empty wallet.

PMDP @ .0013 (Volume and price breakout, came back and tested the .0010 support level)

KWBT @ .0058 (Swine flu (H1N1) play, I first suggested this when when it was .0014 and I have traded it several times for a profit.  I don’t know what’s going on with this company but the chart is looking good.)

IOVE @ .0092 (Breakout volume, price and chatter.)

ZVTK @ .0029 (Breakout volume and price.)

PMOZ @ .83 (Paid promotion underway.)