Watchlist: LOTE, WSGP, POLR

Lot78, Inc. (LOTE)

The size and strength of this pump is so anomalous that it's rather scary to trade. It wouldn't surprise me to see this thing to hit $20 but it also wouldn't be very shocking to me if it crashed all the way to $6 tomorrow. While that sort of volatility is exciting and worth watching for, I haven't traded it. I much prefer lower risk plays. I'll continue to look for shares to short but even if a bunch become available, I'll keep my position size low just in case this thing isn't done being ridiculous yet.


Western Graphite Inc. (WSGP)

A Tobin Smith pump and dump with a disclosed budget of $1,813,286. I first received an email about this on the 22nd of April which also linked to the pump's landing page. I imagine that the landing page went up on the 19th from looking at the volume in the chart. Considering that this pump is getting a bit old, I wouldn't want to hold a sizable long position for very long. The price action hasn't been very bearish yet so I'm not ready to start shorting. It might be an option to buy some dips and sell the bounces but I'm hoping for some strong upward spiking in the next few days that I can feel confident to short in to.


Polar Petroleum Corp. (POLR)

Sort of similar to WSGP in pump style, this one has a disclosed budget of $700,000 on the landing page. It doesn't seem to be getting quite as much attention as other pumps in the market so I highly doubt it will have the momentum to breakout past it's previous highs around $4.25. Everyday that it continues up, I am looking to short it more aggressively.

Beginner's Guide To Trading Penny Stocks: Part III

Which stocks do I sell?

In many ways, you figure out which stocks to sell using the same methods as figuring out when to buy. You evaluate the price action, fundamentals, level 2, and news/hype.

So say you've bought some shares around 1 dollar because you decided that was a good support level. At this point you should have an idea of how you want to exit that trade based on price action. It would be a good idea to sell your shares if the stock falls below 1 dollar because that indicates the stock is weak or bearish. The closer you buy to that one dollar mark, the less money you will lose should you have to sell out when it breaks below that level.

Hopefully though the stock will go up. There may have been some positive news in the recent past that you think people will take notice of and create more buyers. Their fundamentals may also be strong which gave you reason to believe that the stock deserves to be trading higher (remember though that price action overrides fundamentals. There are plenty of stocks higher or lower than they should based purely on fundamentals). Another good reason to buy could be strong support at the 1 dollar level in your level 2, which further protects you from potential losses as well as indicating buying interest.

In the CLDS example, and presuming the stock continued up, it would be a good idea to consider selling around the $1.40 level because we can see that it is a resistance point. It may go above that, but it may not. And since it didn't go above that level before, you have slightly more reason to believe that it won't so it makes sense to sell there. If you hold your position too long waiting to see if it breaks above that level, you risk missing your opportunity to get out with a profit. Once it does fail to break above a resistance level, other traders will also want to sell their positions and the price will fall.

Once you've comfortable trading, sell points can also mark good positions to enter into a short position. The idea is that you sell the stock before you buy it, thus borrowing it from your broker, then you buy it back later. To do this profitably, you sell high and buy low. Generally shorting is considered more risky though so unless you're sure you understand the mechanics of it, you should first try it out using a paper trading account if your broker offers one.

So how do I find stocks to trade?

...to be continued...

Audio Alert When Shortable

Since I use Interactive Brokers, the main method of determining if a stock is shortable has been looking at a colored column. Bright green means there are at least 1000 shares available to short, dark green means you can sell short but there are currently no shares available to do so. Lastly, red means the security is unavailable to short.

 

The frustrating part is that the stocks with really great risk/reward for shorting quickly have their borrows eaten up by the most attentive traders. Since locates can often become available intraday, you pretty much have to have your eyes on the column at all times if you want those shares. Unless you can devote the screen real estate to have the column visible throughout the day, you'll likely miss some good opportunities.

Luckily there are some other options. The easiest is to just set a GTC order below the best bid so that when shares do become available, you'll get executed. At least theoretically. In practice, that doesn't always work. Day orders actually seem to have priority so you might just use a GTC order to remind yourself to set a day order below the bid every morning. Just be prepared to have both orders execute if lots of shares become available and your GTC order is in range of the stock price.

Even better though, are audio alerts when the stock becomes shortable. That way you don't even have to be at your computer to quickly learn of new borrows on a stock you're watching. I only figured out how to do this yesterday and I'm curious how many other people have figured it out. For now though I'm keeping it to myself because it just seems like too valuable of an edge to give out for free.

OSGIQ: Shipping Gone Wild

Overseas Shipholding Group Inc. (OSGIQ), traded surprisingly well today, finishing up 51.38% on the day. This impressive move was seemingly catalyzed by nothing more than sector hype and probably some short squeezing.

This is made interesting by the fact that the company has terrible financials. Unfortunately, quoting from them might not be very useful since their latest 8-K released just a few days ago states:

...the Audit Committee of the Board of Directors of OSG, on the recommendation of management, concluded that OSG's previously issued financial statements for at least the three years ended December 31, 2011 and associated interim periods, and for the fiscal quarters ended March 31 and June 30, 2012, should no longer be relied upon.

Regardless, it seems safe to say that the company's financials are weak. Maybe even abysmally so, at least according to two Infitialis reports released back in November.  That being said, the stock has tripled since the release of their report so clearly you shouldn't trust all of their predictions.

The best part though is that I think this stock has some more steam, at least in the short term. Originally, I actually tried shorting this midday, thinking it was pretty good risk/reward in the long run. Rather I found incredibly stubborn price action with massive hidden buyers at $3.10 for most of the afternoon. Even the break of the $3.10 level later in the afternoon didn't seem to invite any weakness and the stock even ramped up into the close along with industry leaders EXM (27.66%), DSX (5.38%), and GNK (+7.5%).

So despite poor fundamentals, I now find myself long OSGIQ overnight for several reasons. Perhaps the best reason is that it demonstrated solid price action all day with strong support to limit potential downside risk. The fun reason though is that combined with a strong close and surging sector, the stock has great potential for even more short squeezing. It's my hope that Friday will intensify this effect since shorts may feel even more apprehensive about holding over the weekend. If this surge in price allows the company to escape bankruptcy and releases any positive news, it could really fly. That of course is ENTIRELY speculative and unlikely to occur. Luckily I think today's price action was enough to justify a speculative buy and I eagerly anticipate tomorrows open to see how things play out.

Review: PennyStocking DVD

This DVD offers the basics of not just Tim's strategy, but also the basics of how penny stocks trade in the bigger picture, which makes this DVD uniquely helpful to people who are just starting out trading. Considering this, I would recommend this DVD to those people who don't have much experience with trading and aren't familiar with the nitty-gritty of trading.

Potentially the most helpful part of this DVD is the overview of the most relevant technical analysis. The reason I like these sorts of DVD as opposed to some of Tim's recorded seminars that are then recycled as DVD's, is that you get to see example after example of stock chart along with the technical indicators that can tip you off to how to trade it. Since the patterns don't change from pump to pump, these examples are extremely useful to see and absorb into your mind.

Of course the downfall is that stock charts are always viewed in retrospect. Regardless, Tim does a good job of identifying the sort of patterns that occur BEFORE big moves, thus allowing you to learn and profit from current pumps. What's nice is that he is very aware of this problem and even includes some charts that don't include the big moves so you get a sense of exactly what you would be seeing if the stock were trading today.

If on the other hand you've been trading for a while already, you might prefer something like Best of LiveStock, since it skips the more basic and general trading orientation, instead concentrating on Tim's short-selling strategy itself.

There is also some interesting but useless stuff like advertising of Tim's book and how he published it.

SEFE, Inc. (SEFE.OB): Playing the Long Side

Just because I want to warn people about the dangers of pumps, doesn't mean you can't trade them. SEFE Inc., a self-proclaimed alternative energy company based out of Scottsdale AZ, is one such pump-and-dump. A week ago I longed this stock at 1.62 as it broke out. Although I ended up leaving a lot on the table because I prefer low risk trades, I still manged to make a very quick 17+% gain which I can't be too disappointed about. The reason I got out so quickly was because I knew that it would drop eventually. A few days later it indeed dropped ~52% from 2.96 all the way down to 1.42.

This week I am actually long again following the intraday breakout on Friday. The reason I am so confident that this stock will continue an upward trend despite the big drop earlier in the week is because of the people who are pumping it. This particular pump is being conducted by Stock Market Authority (SMA). They have a great history of controlling a stock in such a way that they can squeeze shorts and thus get the share price up even higher. A short squeeze is just when lots of shorts are forced to buy to cover, usually because they become scared by unexpectedly bullish price action. In this case it is likely that a large number of people sold short this stock following the drop, in anticipation of more downside (a big drop is often a reliable indicator of more downside in a pump). It is my belief that SMA will attempt to recover the stock price from this fall. Thus, all of those people who are short will be in the red and panicking. A few of them might then cut their losses by buying back the stock to cover, pushing the price up. This causes a positive feedback loop because each scared short that buys to cover and pushes the price up, scares the rest of the shorts who then in turn by to cover. The result is a very quick spike in share price. The best example of this type of short squeeze is one of the most famous pump and dumps which was also conducted by SMA; Lithium Exploration Group, Inc. (LEXG).

LEXG went from around 1 dollar to over 10 dollars in little over a month which is what makes it so well known. It is unlikely that such a return will be repeatable with SEFE but it does illustrate the power of short squeezes nicely and the ability of SMA to exploit them. The much more recent SMA pump that I had in mind when I went long SEFE for the second time was Raystream Inc., (RAYS.PK). This stock had multiple drops yet recovered from each for significant gains.

You may note though that this price action has a sort of "bouncing ball" pattern. Following each drop, the recovery becomes weaker and weaker. Considering this, I am not setting my goal to be an LEXG style sort of gain, but rather a RAYS type gain. Even then though these gains can be quite nice as you can see from the first drop recovery from 1 dollars all the way to 2 dollars, a 100% increase. Within that gain though you can see a considerable drop from around 1.70 down to 1.25 which would not be much fun to hold through. To avoid such a drop I will probably be taking my profits quickly and possibly reentering the stock following such a drop. No matter how you choose to play it though, remain cautious as each of the above examples eventually dropped back to pre-pump price levels.

Review: Best of LiveStock DVD

I'm actually surprised I don't hear more about this DVD as it offers a whole slew of lessons that are very neatly organized and clear. All of the flaws of normal livestock are stripped away from this DVD package and only the meat of the lessons are left for you to learn from.

I would probably put this up there with PennyStocking Part Deux and highly recommend it to those people who have enjoyed Tim's other DVDs. There is no annoying lead up to the valuable lessons as in some other DVD's and there are just so many great examples of patterns and companies that I couldn't really ask for more.

The DVD also captures a lot of Tim's personality which makes it more entertaining than many others.

The one flaw is that the video quality on the screen capture is poor so you can't read the numbers or symbols on the charts very well but for each section the tickers are edited in and Tim talks through the price action so it isn't ever a big problem.

SNPK: What Happened And What Next?

Update: I'm declaring SNPK a worthless buy once again. It would make a good short but there have never been shares available to short this whole pump and I see no reason to expect them to become available. Looking forward to the next pump.

Original Post: -----

If you're reading this post, chances are you lost money and are searching for some reason as to why your investment went bad. First off, I'm sorry for your loss. Hopefully I can help prevent such a loss from happening in the future.

What Happened?

To understand this, we need some background. SNPK was being promoted by a group of promoters that are paid to artificially inflate the stock price up. If you found SNPK through some sort of advertisement or email, these are the people who are inflating the price. The promoters job is to generate hype around the stock, sending out thousands of emails a day, telling people how great the stock is. Presumably you were one of those people who was fooled into believing the emails and their $9 price target.

Promoters can also use other tools of varying legality in order to make their featured stock gain in price. Often times it seems as though certain market makers will have a hand in the promotion by putting in huge bids to support the price at unnatural levels. When people see that support, they buy and the price moves up. The artificial support moves up and the cycle then continues until the price is way higher than it deserves to be.

Why would people promote a stock just to crash it later? It's usually unclear who actually paid the promoters and frankly it doesn't really matter. You can usually check the bottom of all emails for a disclaimer to discover an idea of who paid and how much they paid. Here is an example disclaimer from the latest SNPK email:

Check out that last paragraph. This particular promoter group was paid $50,000 dollars to send you an email reassuring you that SNPK will recover. Wouldn't you say that makes them rather biased? Also if the stock crashed 50+% while they were saying how great it is, you probably shouldn't trust anything they say anymore.

Also, the promoters are composed of a vast number of sister sites/organizations so that they can split up the amount of money they have been compensated, thus making them look less biased. I don't remember the exact amount that APS/CrazyPenny was compensated for pumping SNPK but is somewhere around 1 million dollars.

If you are still wondering why people would be evil enough to inflate a stock and then drop it so that normal people like yourself end up losing lots of money, the motivation is the same as many other evil acts: money. Imagine you have a large sum of money and you want to make lots more money with no regard for morality or your fellow human beings. So you buy a million dollars worth of SNPK at 0.28, then spend another million dollars on the promotion. You then sell your million dollars worth of shares at 2.30 just before the drop to make a profit of around 7 million. This is the sort of strategy that fuels the immoral promotional campaigns.

What Now?

Unfortunately, if you've just discovered your loss and are wondering if you should sell and take your losses or wait in the hope that it will rebound as the emails promise (the same emails that originally tricked you), I am going to have to suggest that you sell. Based on previous promotions, there is some possibility of a bounce, but even then it probably won't be by much. The greater chance is that the price will drop even more and over the next month or two, SNPK will be trending down to below 28 cents per share.

I Want My Money Back

Hopefully I can offer some guidance for how to profit from these kind of crashes rather than falling victim to their dishonesty. The key to this is shorting. If you're reading this, you probably don't understand shorting and/or have heard terrible things about it. The truth is, that shorting is just like regular trading but with the opposite goal. Thus, when a stock crashes hard, you make money. Due to the large amount of misinformation about short selling, I invite you to do several google searches about it before coming to a conclusion. Some people even say that it is illegal but that is false. If you'd like to start identifying sketchy stocks and make money from them, I suggest you check out all that profit.ly and friends has to offer.

Coping with the current loss

Big losses are devastating to your confidence both in and outside of the stock market. You don't want to make the same mistake again and next time you want to know how to make money from these sorts of events rather than losing. Hopefully I can help you with these goals.

The important thing to do is to take a break from trading. You will naturally want to regain your losses and it is likely that you will end up making trades with poor risk/reward ratios while trying to do so. By doing this, you will only make things worse and end up losing even more money. Come back to trading when you've calmed down and had a chance to relax. If you trade with the mindset of "I need to make this money," then you're probably going to trade poorly.

Review: Shortstocking DVD

This DVD is very well organized and I think covers everything you need to know about short selling. Everything from the basics to what to look for in chart patterns is covered in detail. Some of Tim's DVD's can seem like a long rant that touches on the topic at hand but this DVD actually presents more as an structured lesson which is nice.

I think I would only recommend this to people starting out with Tim's strategy since if you've been following it already, you already know what shorting is, and how to do it. The strategy for shorting is definitely covered in this DVD but it would just make more sense to buy a DVD that focuses on the strategy if you're already comfortable with shorting.

That being said, if you want to get a better handle on how shorting works, or you want to revisit the fundamentals, this DVD is a good choice.

Review: TIMraw DVD

The following post is a review originally posted on Investimonials and features a DVD by Timothy Sykes, a great penny stock short seller whom I highly recommend.

Good Overview Of A Successful Trading Strategy (4/5 Stars)

I think this DVD compliments Tim's two pennystocking DVDs quite well. It will be most valuable for people who are new to Tim's strategy though, as many of the concepts in this DVD are very basic. If you have already been trading with him for a few months, you've probably already learned many of the things that are in this DVD. That being said, I myself found this DVD helpful even though I'm one of those people who have been with Tim for a few months now. Even though nothing was completely new to me, there are big big lessons that require constant reminders before you really learn to respect them and this DVD has all of those. This being the case, I think this DVD may actually be one of the most useful to watch over and over because of those core ideas that this DVD highlights.