Fly On The Wall Trading
Internet Trading Strategies 101
Over the last eight weeks [June, 2008] I’ve been spending a lot of time reading articles describing the current market conditions…trying to figure if it really affects penny stock investors.
Are we in a bull market…are we wading into a bear market. Or is the recent rally just a dead-cat bounce?
The dead cat bounce refers to a short-term recovery in a declining trend. There’s a (relatively) old saying in investing: even a dead cat will bounce if it’s dropped from high enough.
No matter how you slice it…I’m not sure it even matters to penny stock investors like you and me.
For example…stocks surged in Japan this week as reports showed growth in manufacturing and exports. Markets rose across Asia as investors were encouraged by Wednesday’s gains on Wall Street.
Strong earnings reports from two bellwether stocks gave penny stock investors hope that rising interest rates wouldn’t kill profits. The recent sell-off, said one economist was “just turbulence.”
The turbulence, it seems, is continuing on this side of the pond. U.S. stocks traded flat to lower Thursday as the market took a breather as higher oil prices and downbeat economic data curbed Wall Street’s momentum. So, what are we to believe, is the market heading up…or heading down?
How does the market look in general terms? As far as stocks are concerned, the S&P index is up just 0.3 percent for the year, the Dow is up 3.4 percent and the NASDAQ is down 2.9 percent. Not sparkling data.
But for penny stock investors, the recent roller coaster ride that many seasoned blue chip investors are reeling over, is just par for the course. We know that a penny stock is often volatile and just as unpredictable.
While a penny stock may be more vibrant when the market is upbeat, in general, a penny stock marches to its own tune. Why? Few investors venture into the field of penny stocks because they are either unwilling or unable to do the work required to accurately predict what these shares may do.
By their nature, it is nearly impossible to know what price a penny stock share should be trading at, and conventional financial ratios and industry comparisons are rarely effective measures for realizing a penny stock’s value. Large one-day percentage gains and losses are not an uncommon occurrence for penny stock investors.
So really, bull, bear or cat…it’s just another day at the computer screen for penny stock investors. The work may be fun…but it’s not easy. Of the 14,000 public companies in the U.S., about 3,300 are considered penny stocks that trade on the OTC Bulletin Board operated by the NASDAQ.
Their visibility is low, chances are you’ve never heard of their CEO and I doubt they have any institutional following. And while they’re highly speculative, the more promising ones have a targeted business plans, and solid positions in niche markets. And for now, they’re flying under the radar of Wall Street
So what do you do in an unpredictable market like the one we’re in? Continue applying the same principles you’ve always used when searching for that untapped penny stock. And enjoy the volatility.
About the Author
Stephen Morgan writes regularly onOnline Trading strategies and more information on forex trading strategies can be found at http://tradingwithcommonsense.com
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