Best Damn Penny Stocks: ZPPB

Best Damn Penny Stocks (BDPS) released Zippy Bags Inc (ZPPB) as their new promotional pick this morning. On the alert page, BDPS reported being compensated $500,000 for the promotion. I received my first email at 9:39am although I heard that others received emails as early as 9:32am.

This time difference is of critical importance if you hope to trade these sorts of moves considering the price had quadrupled within five minutes of the open (before I even received my first alert). Unfortunately, buying after the first few minutes of trading is exponentially more risky with less potential for profit.

That being said, there is still the opportunity to make money later in the day so long as you can tolerate greater levels of risk and can afford to lose your investment should things go sour.

I personally fall under that category of high risk tolerance so I bought 20,000 shares at $0.27 just for 3pm. Unfortunately, I can't say that it was a great trade but I can explain my thoughts to give you an idea of how one can trade these pump and dumps.

Before making such a trade, you need a decent background in pump and dumps, especially BDPS pumps since each promoter's picks behave differently. Previous pumps also offer a better idea of how current picks will perform so it's useful to look back at old charts (in other words, this post will be helpful in the future).

Honestly, I didn't find as many intraday charts from previous BDPS pumps as I perhaps should have before entering into my trade. Instead I was relying on my memory that BDPS pumps rarely dump on the first day of the pump. Another somewhat sloppy mistake that I made was entering my buy order while the stock was hovering in the 0.28-0.29 range during the hour before I was executed. I knew there was support at 0.27, which is why I set my buy there, but it would have been much less risky to simply wait for that level before sending my buy order. As you can see from the chart, the price actually broke through the 0.27 level and even touched 0.25 for one tick which gave me a nice little heart attack. Had the stock continued to fall, I probably would have lost most of my investment.

In order to avoid such panic attacks, you can set price alerts using your brokers software which will audibly alert you to a specific price level. That way you can decide whether the bid support looks firm enough to buy or if it looks like there may be more dipping before a bounce. Watching Level II will greatly aid you in this decision. The caveat though is that many other traders will be doing this as well, making it difficult to get an execution once the price begins to bounce. That though is the quintessential obstacle in trading pumps; it's difficult to buy at the lows when there is strength and it's difficult to sell when the stock is falling and you're watching your money disappear in front of your eyes.

Lucky for me, the stock didn't collapse at that moment and I went on to make a profit. I knew from the previous BDPS pump BFLX that I wrote about here, the price tends to uptrend in the final hour and close strong. From looking at daily charts of previous pumps, I had decided that it would be too risky to hold my position over night since these pumps don't last for very long compared to Awesome Penny Stocks (APS). I set my sell at $0.30 since price action seemed to consider it a key level throughout the day. I initially thought it would even break .30 for a very strong close considering the rise in volume during power hour so I thought I didn't think I was being greedy. Unfortunately the highest tick was 0.2999 and I didn't get executed. A good lesson there is to take safe profits when you have them especially when building a smaller account.

Contrary to my predictions though, the stock actually dipped during the final minutes of trading and I had to exit at an average of 0.286. I also failed to close my entire position and remain long 2.5k overnight. Based on previous pump performance and the tiny position size, I plan to sell my remaining shares tomorrow at the open. After that I may look for shares to short in anticipation of the dump.

Update: Closed the last of my position for a small additional profit. As I expected, BDPS does not provide good setups for gap-up plays. If that's your thing, consider the next APS pump keeping in mind that for each additional day into the pump, the risk of the dump becomes greater and may even occur on the first day if the pick is recalled, the stock is halted, or the company releases a PR stating they have no involvement in the pump and don't know why the price is jumping so much.