Just As I PHOT

There's no denying that the chart of PHOT looks good today. It could be on the verge of a breakout which would be a huge buy indicator. It also has good volume and plenty of investor interest. It's a medical marijuana company which is a hot sector. Unfortunately, it seems that it is a little bit too good to be true, which is what I first thought as soon as I saw the word marijuana paired with OTC. Much of their success should be attributed to hype rather than solid fundamentals (the latter being what you should prefer in a breakout play).

So What's Wrong?

The first question I ask myself when visiting a company's website for the first time is: "Are they selling products or stock?" In other words, is the company profiting from what they claim to specialize in, e.g. medical marijuana accessories, or just from convincing investors that they're a good company worth giving money to.

Below is a screenshot of their company webpage which at first glance is absolutely selling the stock rather than any products. Go look at any company you trust and check out their website. Chances are, you won't even see a ticker symbol on the page. If you do, they're usually hidden in the footer with a link for investors. Growlife on the other hand features everything you need to know about buying the stock rather than real products. It even includes a headline on the front page that predicts the stock will double in share price. That alone would be a big red flag for me.

 Fundamentals

If you're still wondering if you should give them the benefit of the doubt, check the numbers. They aren't pretty. According to their latest 10-Q, the company has less than a quarter-million cash on hand but they have doubled their total liabilities to over three million since last December. Operating losses are growing rather than diminishing over time which doesn't bode well for their future. As of June 30th of this year, they've experienced a net loss of ~2.8 million dollars compared to a loss of ~878,000 that time last year. Not exactly the kind of success story I'd like to buy into.

How Do I Trade It?

Same as anything else! It depends on price action. If that 10 cent level breaks on high volume, it's a buy indicator regardless of how poor the company is. Hype moves stock and there's no reason you shouldn't be profiting from that. That being said, you'll be one of the smart buyers who will know that this company doesn't deserve to be breaking out to new highs. I'm hoping you know enough not to hold onto it if you do buy it.

If you were thinking about shorting it, you've got the right idea but it probably isn't worth it. At 10 cents and solid support at 5 cents, there just isn't enough downside to make the risk worth it. Personally, if the stock fails to break 10 cents I wouldn't pay much more attention to it.

Trading With A Full-Time Job

These past few months, I've been trading while working a full time job. I quickly realized that my undiluted penny stock trading strategy would be too dangerous to use in the workplace. The very thing that makes penny stocks so attractive, their volatility, necessitates constant monitoring while trading them. That just wasn't possible for me, and I suspect the same would be true of anyone else with a full-time job.

Reducing my risk back down to tolerable levels was actually fairly easy. In a way, I just became much more picky. I asked myself several questions:

• What major factors are influencing the stock price? (e.g. promotions, CNBC feature, forums, news, etc.)
• What are the chances something happens that will drastically drop the price while I'm holding it?
• How much do I expect the price to change? Why? Will that change make me enough money for the risk to be worth it?

For the most part, these questions shouldn't be new to you at all. You want to know the answers to questions like these for every trade that you make. The difference though is that I want there to be almost no chance of something unexpected happening, since my ability to react to it will be drastically reduced or eliminated.

I also only want to be trading stocks that I expect to change quite a bit. While I would normally trade something and aim for a 10% gain, but take 3-5%, the revised strategy aims for closer to 15% gains. While I probably won't hit that goal, it means that I only trade stocks with something significant happening. It's a practice of discipline that will force you to sit and watch many opportunities pass you by. You'll be rewarded of course by a much higher win rate.

As an example, we'll look at Google (GOOG):

Google isn't a stock I would normally trade. It's complex, expensive, and traded by thousands of people who are much smarter than me. The good news though is that all those traders means it follows trading patterns since most of them are self-fulfilling prophecies. It also isn't in any major danger of dropping like a rock so long as you watch the SPY. That means I can hold the stock at work without constantly fearing for my wallet in the back of my mind.

My analysis wasn't complicated, since complexity isn't my cup of tea. Instead I happened to catch the stock while it was approaching a major support level, represented by the blue line. I didn't quite get the bottom but waited for a solid green day to buy after bouncing off the support level. My aim was around $900, which I also didn't quite get but I did manage to make an easy 3+% gain on a ~$17k investment. It may not be much, but it was low-risk which is what I wanted.

I'm also waiting patiently for Pacific Clean Water Technologies, Inc. (PCWT) to get high enough to short. The higher it gets, the less risky it is. Unfortunately, as you probably know, shares will also become more difficult to borrow. I'll probably start looking for shares around the 50 cent range, assuming it can even make it that high.

4 Reasons I Don't Trust XUII as the New APS Pick

1. Awesome Penny Stocks usually releases their picks on Tuesdays or Thursdays, not Mondays.
2. While XUII traded millions of shares in premarket and many traders considered this confirmation of the alert, the pick wasn't confirmed by email until around 10:30am. Lot's of speculation creates sketchy unpredictable price action.
3. XUII started getting pumped by Victory Mark Corp. on May 1st which has made it more crowded and less relatable to previous APS pumps
4. $ACCS which was speculated to be the new pick before the open did have a classic pre-pump chart. While I'm just guessing here, it made me wonder if they intended this as the pick, then switched to XUII to kill frontrunners. That would also explain the alert being delayed until around 10:30am.

I was hoping that APS would recall their pick but that seems less likely now that they have placed an XUII banner on the website. Regardless, I won't trade this like I would other APS picks. It's just too different which I consider to be risky.

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.

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.

How To Make Back Your Gas Money While Trading At Work

Today I made 4% of my investment and two weeks of travel costs. The best part is, I made the trade while sitting at work, devoting less than 10 minutes of attention to the whole thing. Perhaps this post will help you enjoy similar easy profits.

Find a niche

For my current job, I have to wake up early. Really fucking early. There is however one benefit to waking up four and half hours before the market opens: I'm awake before many other traders. This may seem inconsequential and on many days it is. But the thing to understand is that it presents me with trade opportunities that fewer traders are aware of. The fewer traders, the slower the market reacts to news. This last fact can allow you to make some easy profits.

The lesson here can be extended to other areas too if you're creative enough. You might try trading at other time periods when there are fewer traders (e.g. lunch hour on the East coast, after-hours trading). A word of warning though, fewer traders also means that price action may not reflect overall market sentiment so trading outside of regular trading hours can also be risky!

The example

Between the hours of 4 and 5 a.m. of this morning, two different and very positive articles were released on Seeking Alpha in regards to VRNG. I was alerted to this stock by Tim's chatroom members. Another option for finding such a play would be to run pre-market scans that search for high volume along with a higher stock price (or high dollar volume).

As I have said in previous posts, hype can be a powerful force even when all of the facts may not check out. For this reason, I knew that I wanted to buy and hold for a short time-frame. The following picture shows the pre-market action that I bought in to and quickly sold.

As you can see, I bought just as volume started to pick up, and the bid began to get stacked. This indicated to me that other traders were getting excited about the news and the price would rise. I also bought not long after a substantial pull-back from pre-market highs which told me that this stock had good potential to rise. Furthermore, the price had broken out from it's historical highs, all pointing towards a strong buy.

7 minutes later I sold for a 20 cent gain. Had a held just a few minutes later, I would have made even more but I couldn't have known and I don't really regret it. Plays like this are all about looking for speed and low risk. Considering that I was actually at work during all this, it wouldn't be fair to my coworkers to devote my entire attention to the stock. Thus, regardless of how positive the price action may have seemed at the time, I was happy to take and quick gains. Furthermore, as you can see from the price-action following the open, too much patience would have cost me big.

The lesson here is to use your particular circumstances to your advantage. In this case, I was able to get into a play ahead of the crowd. I also minimized risk by choosing my entry carefully, thoughtfully and strategically. To further minimize risk, and to keep my job, I executed and closed the trade quickly. I hope that others might be able to draw from this and make some more easy money of their own.

The Danger of Facebook

If you're reading this I assume you are thinking of, or already are trading the Facebook IPO today. I would like to urge people to reconsider and leave this one alone. Here's why:

You have no advantage. As I've said before on this blog, good trading is all about taking superior risk/reward trades. This company is commanding the attention of every big trader and firm not to mention thousands of other people who have no idea what they're doing. The IPO will trade nonsensically at first because of this so how can you hope to predict any clear directionality?

With a company like this, there are a million different opinions about what it is worth. Only a few of those people know what they're talking about. If you're only knowledge of FB's worth is derived from the latest news articles you've read, what makes you think that you're better equipped to make money than any of the other people that also read those articles? Remember that trading is a zero-sum game. Someone has to be losing for you to be winning and when you're up against tons of people who understand the details of an internet company, you're starting off at a disadvantage.

I know you're thinking that you don't need to understand to ride the hype that will carry the price upwards. You may even be right. But the risk is just too great. It is my personal belief that this hype will create artificial inflation that is unjustified by the companies fundamentals. If that is the case, you may be setting yourself up for a nasty fall down the line. Perhaps sooner than you think.

I just want people to be careful. If you understand how Facebook makes its money and you feel comfortable taking on the risks than go for it. I just fear that too many new traders will be throwing money at this thing without any knowledge of how the market works.

NIA Pump: SYNC

Update: Following an analyst downgrade, the stock hasn't really been able to recover. When such an event occurs, it becomes difficult for pumpers to continue their exaggerated claims of greatness and reality sets in more easily. It remains unclear as to whether SYNC will ever return to its pumping highs, although we saw a recovery of SNPK following a similar event with the announcement of a FINRA investigation (unrelated pumper). The only thing that seems certain at this point is that SYNC will never reach the same price levels as BVSN did.

Around 9:58 this morning, the National Inflation Association (NIA) announced it's latest promotion as Synacor Inc. (SYNC). Johnathan Lebed of Lebed.biz and one of owners of the NIA, also announced that SYNC was his new pick. As a result, their previous pump, BVSN, dropped nearly 8% through the support it had held for most of the week. Although NIA stated in the initial email that it still held shares of BVSN, I suspect it won't return to these levels in the foreseeable future.

Considering that BVSN was a multi-month pump, there are very good odds that SYNC sees more upside over this next week although anything beyond that is uncertain. NIA did not seem to provide much artificial support intraday however, considering the alert caused a massive spike that quickly fell back to prepump levels. I myself took a small position on the dip considering the superior risk/reward and expect to see a significant gap up tomorrow.

Already the stock has seen some upward trending in after-hour trading probably as a result of traders realizing it is the new NIA pump as well as traders seeing the bullish action after finding it on % gainer scanners such as yahoo. SYNC has since received further pumping from Lebed and Wall Street Grand (WSG), further increasing the chance of a morning gap up.

I should also remind people of the massive fall that BVSN suffered following its highs that have only continued since then. Do not trade this with the hope of massive gains. It is unlikely that SYNC will be as successful of a pump as BVSN was although based on just some quick glances of the company, it does not seem to be as much of a shell as BVSN was. As such, there might be some potential in this pump and I look forward to seeing how far it can go. That being said, there is a very good chance that I will exit my position in early trading tomorrow just in case.

Don't take any unnecessary risks kiddos.

Original email:

NIA already owns a large position in its new stock suggestion. Please see our disclaimer at the bottom of this email for information on the amount of shares we own, our purchase price, and the holding period we have agreed to.

NIA's last stock suggestion BroadVision Inc. (BVSN) gained from its December 12th suggestion price of $8.31 to a high on March 6th of $56.46 for a gain of 579% in less than 3 months. Although NIA remains very bullish on BVSN at its current price of $24.03, NIA just made a major new discovery that it believes could become its next BVSN.

Synacor Inc (SYNC)

Currently: $8.84

http://synacor.com

SYNC's customer-branded platform enables cable, satellite, telecom and consumer electronics companies to deliver TV Everywhere, digital entertainment, services and apps to their end-consumers, strengthening those relationships while monetizing the engagement.

The hottest stocks on Wall Street this year are cloud computing plays and NIA believes SYNC could become one of the biggest cloud computing winners of 2012. SYNC just went public in February at an IPO price of $5 and has been starting to break out in recent weeks after reporting unbelievably strong 1st quarter results. NIA considers SYNC to be insanely undervalued compared to all other 2012 cloud computing IPOs.

SYNC's integration, authentication and engagement platform enables cable, satellite, telecom and consumer electronics companies to deliver digital entertainment, services and apps to their own consumers, thereby strengthening those relationships while monetizing engagements. With 45+ customers, 21 million high-speed Internet households, 81+ million average monthly search queries, 2.8 billion average monthly advertising impressions, and 75+ content partnerships, SYNCdelivers a compelling consumer experience across multiple devices.

SYNC has only 26.74 million shares outstanding and a market cap at $8.84 of $236.38 million. SYNC has grown their revenues from $39.9 million in 2007, to $52.6 million in 2008, to $60.8 million in 2009, to $66.2 million in 2010, and $91.1 million in 2011. SYNC recently reported record 1Q 2012 revenues of $30.7 million, up a stunning 64% from 1Q 2011 revenues of $18.7 million. SYNC announced that they expect full year 2012 revenues to equal between $123 million and $126 million.

SYNC's 2011 revenues of $91.1 million were up 38% from 2010 revenues of $66.2 million. If SYNC generates $126 million in 2012 revenues they will achieve growth this year of 38% once again!

Let's take a look at the valuations of other recent cloud computing IPOs:

Guidwire Software (GWRE), revenue growth last year of 19%. Trading for 8.23x 2011 revenues.

Demandware (DWRE), revenue growth last year of 54%. Trading 13.44x 2011 revenues.

Infoblox (BLOX), revenue growth last year of 30%. Trading for 7.20x 2011 revenues.

Proofpoint (PFPT), revenue growth last year of 26%. Trading for 4.75x 2011 revenues.

Brightcove (BCOV), revenue growth last year of 45%. Trading for 8.23x 2011 revenues.

These 5 other cloud computing IPOs from this year have similar revenue growth to SYNC and they are trading with an average price/sales ratio of 8.37. If SYNC was trading for 8.37x their 2011 revenues it would have a market cap of $762.5 million and a share price of $28.51. If SYNC generates 2012 revenues of $126 million and trades with a price/sales ratio of 8.37, SYNC would have a market cap of $1.055 billion and a share price of $39.44.

SYNC is profitable with 2011 net income of $9.9 million. Of the other recent 5 cloud computing IPOs mentioned above, onlyGWRE is profitable. DWRE, BLOX, PFPT, and BCOV are all losing money.

SYNC just announced yesterday morning that it has acquired Carbyn, the HTML5 Platform that delivers a unified experience for apps across Net-connected devices including smartphones, tablets, laptops, and connected TVs. Through this acquisition, SYNC will be able to offer customers a branded platform where their subscribers can enjoy a variety of content and HTML5 applications including video, music, games, newspapers, and magazines seamlessly by signing into their account on any device regardless of operating system (OS) or browser. Carbyn fills a gap in the marketplace and is a vital piece of SYNC's TV Everywhere content strategy.

Josh Constine of TechCrunch says SYNC and Carbyn "are a great fit, a veritable match made in the cloud."

Intel (INTC) a $144 billion company is a major SYNC shareholder. Charter (CHTR) a $6.13 billion company is a majorSYNC customer. CenturyLink (CTL) a $24 billion company is another major customer of SYNC. Toshiba (TOSBF) a $17 billion company recently became a major SYNC customer.

Disclaimer: NIA owns 350,000 shares of SYNC that it purchased at an average price of $8.53 per share. NIA has agreed to a 60 day holding period on these shares but intends to sell its shares at some point in the future after the date of July 2nd, 2012. NIA reserves the right to increase its SYNC position at any time. NIA currently owns 35,000 shares of BVSN. NIA intends to sell its shares and can sell them at any time. NIA reserves the right to increase its BVSN position at any time.

NIA is not an investment advisor. This email is not a solicitation or recommendation to buy, sell, or hold securities. Never make investment decisions based on anything NIA says. This email is meant for informational and educational purposes only and does not provide investment advice. NIA's co-founders have previously disseminated information about BVSN in other media outlets.

Additional legal disclaimer information: http://inflation.us/ legaldisclaimer.html

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.

LQMT & AAPL Rumors

Bad news for LQMT: http://www.cultofmac.com/164378/purported-iphone-5-sim-tray-crushes-our-dreams-of-a-liquidmetal-iphone/

Update: LQMT looks like it will be a very interesting stock tomorrow so you should definitely have your eye on it in the morning. After dipping from it's previous highs based on the hype, the stock has rebounded based on renewed hype and a 0.3 million dollar financing deal on Friday. There is now the potential for both a double top and a breakout so be ready to play this both ways. The high odds trades though will probably depend on the breakout though because even if it double tops, a short carries the risk of a confirmation of apple news and a later breakout lacking some sort of catalyst to bring it down quickly. The breakout should be a good long and following a huge spike would also offer a good r/r short considering the many people trading this don't understand the mechanisms at hand here so the company probably doesn't deserve to be trading much higher than it is already all things considered. For instance, since the financing, the market cap has increased from 57.6M to 96M, a 38.4 million dollar change based largely on just that 0.3 million dollars. Such an overreaction is what makes this a potential short later on.

Liquidmetal Technologies Inc. (LQMT.OB) has seen a recent surge in attention due to the prevalence of a rumor that future Apple products will be utilizing the services/products that LQMT has to offer. While most blogs have chimed in to this buzz with their own cheery outlook on the company, I just wanted to add some realistic cynicism to the picture and remind people that just because a rumor is popular doesn't mean that it is anymore truthful. Bloggers just want to capitalize on people's interest (admittedly, myself included), so they write about the rumor which creates the illusion of added credence for each additional mention by other blogs.

I don't want to rain completely on the parade and tell everyone not to buy LQMT. Rumors are certainly powerful forces (as we have seen from this stock) and there is nothing wrong with buying into the hype so long as you have a good understanding of what is creating that hype and you take your gains instead of waiting to hear if the rumor is true or not. I'm sure some of you have heard the famous saying, "buy the rumor, sell the news." In this case, you ideally would have bought somewhere around 22 cents when the rumor mill was just starting to turn and volume was picking up, allowing for a nice breakout. At this point though, you need to be wary of how far the stock has already gone, and realize that your risk/reward is no longer fantastic. The hype could fade at any moment and the stock could begin to decline as investors realize there may not be any confirmation of LQMT partnering with Apple. Worse still, the company could release a PR commenting on the recent volume and declaring that they are unable to confirm or deny the rumor, which would likely cause the price to drop quickly enough to make exiting difficult.

That being said, the price could certainly continue to rise and for those of you with higher risk tolerances, it might be your kind of play. I only wish to convey the bigger picture here and urge people not to hold in the hopes that the rumor will be confirmed as doing so is a pure gamble and in order to stay profitable, you need to choose plays that give you good odds.

A potential play to keep an eye out for though if you would prefer something less risky, is an actual confirmation that LQMT and AAPL are in fact cooperating in the production of future products. My suggestion for tracking such an event is to set a google alert for the two tickers and just generally play close attention to the two stocks for any legitimate news issued by the companies themselves.

Low-risk Earnings Winner Plays

Playing earnings winners is a proven successful strategy so long as you understand how the price action normally takes place. Since so many other investors play this niche as well, discipline is key to making money. Often during the trading day the stock will be choppy, and demonstrate a lack of clear directionality. When this is the case, you must learn to ignore the stock and wait for your opportunity even if you think the earnings were wonderful.

The two best times to buy an earnings winner are in the morning and in the mid-afternoon breakout. The latter is ideal as it entails greater possibility of upside with a similar level of risk.

So how do you go about finding these earnings winners to catch the morning spikes? Yahoo's price % gainers page provides this ability for free until you're willing to pay for real-time quotes. Personally the free version suites me just fine. You should check this page every morning at around 10am EST. Here you will want to be scanning for stocks with high volume (>500,000), and a decent percent gain. Typically you will want to avoid banks, biotechs, stocks related to commodities, and foreign companies as their trading is affected by a multitude of other factors that make them higher risk unless you understand exactly what is affecting the price. Once you find a stock that seems to fit the criteria, click it's ticker and check the latest headlines. You will be looking for headlines announcing earnings earlier that same morning. In order for this strategy to remain low-risk, you will want these earnings to have significantly exceeded estimates. If you get this far, you now have the option of buying now, or placing it on your watchlist for the afternoon. Remember that an afternoon breakout provides the better buying opportunity but there is certainly no guarantee that the breakout will ever come. The problem with buying in the morning is that you have little ability to predict where the morning spike will end. The best way to get an idea of how the stock will act is to check how it has acted in the past. Does the stock have a history of running following earnings or does it quickly level off even after seemingly good earnings? Even with this information, it is possible that as soon as you buy, the stock will begin to decline and you will have bought at the top, the worst place to enter. If this turns out to be the case, just get out immediately and either move on to another stock or wait for that afternoon opportunity. As I said earlier, the key is discipline and if a stock acts in a way that you didn't expect (e.g. goes down after you buy), just get out.

In the mid-afternoon you will be looking for the stock to break above the previous day high. Ideally, this break will also be a new multi-month high. The longer it has been since the stock has made this high, the better. Following this logic, all-time highs are the best since you will have passed all previous resistance points. Just like morning spikes though, breakouts can experience fakeouts, in which the price quickly falls back below the breakout level. This is another point to get out quickly because it shouldn't happen if there are lots of excited buyers. Unfortunately, there is also the possibility of a confirmed breakout, in which the stock breaks out briefly, returns to the breakout level as though it were failing, but then spikes up again. This confirmed breakout is the most bullish sign the stock can give but it easy to get shaken out during that initial dip. The safest way to play it is to get out on that dip and get back in when it starts to look like a confirmed breakout. Such trading though varies from stock to stock so it's difficult to write a single strategy to cover all scenarios. Your best friend during these breakouts is going to be your L2 (Level II), or market depth, which will give you an idea of how much buying and selling pressure there is. If you see big sellers at the breakout level, there is less chance of it successfully breaking past those sellers to more upside. On the other hand, if you see big bidders just below or at the breakout level, it becomes less risky to buy those potential breakouts because those big bidders should act as a cushion to limit potential downfall. Keep in mind though that L2 can be manipulated and so your trades must not hinge solely on your L2 data.

What You Need To Know: SNPK

SNPK (SUNPEAKS VENTURES INC), is the latest CrazyPenny/PennyPic promotion, as of this past Thursday, March 8th. The first emails were from the PennyPic websites around 2:38pm, which is somewhat unusually late in the day, allowing for an effortlessly strong close as subscribers piled on. The next day saw a nice gap up as expected and it held its gains. Likely if you're reading this, you missed the bus in the beginning and you're trying to decide whether to jump on now. I caution you greatly as buying this pumps any later than within the first few minutes can result in huge losses.

 

As can be seen in the accompanying chart, the previous pump, North Springs Resources (NSRS) by these promoters eventually dumps hard and all those who were late to the game got burned badly. That being said, the same chart also shows the fairly reliable occurrence of big bounces following all of the major drops. As a result, my suggestion to those thinking about playing this stock, to only consider buying the major drops as they offer the best risk reward. I'm not talking about the slight dips intraday, I'm only talking about the big panics when the Time and Sales (T&S) and Level II (L2) are completely red because everyone is trying to get out as peoples stop losses get triggered all at once. Wait for considerable to support to develop following these panics as often times the stock will bounce very slightly for a minute or two before continuing to plummet.


In terms of fundamentals, the company has a market value of $250,197,946 as of March 9th with 420,500,750 shares outstanding and a float of 145,500,750 as of February 22nd. Fundamentals for this company aren't worth much since it's obvious this company is worthless. This can be summarized by the fact they currently purport to be a drug company but intended to be a mining/natural gas company (they are still classified as a metal mining company). A quote from their February 8-K: "Since inception we have had minimal operations and as such we were considered a 'shell company' as that term is defined under Rule 405 of the Securities and Exchange Act of 1934. It was our initial intention to be a as an independent crude oil and natural gas exploration company; however, due to the lack of revenues and adequate financing, we abandoned our business plan and began seeking out potential acquisitions, joint ventures and/or strategic relationships."

How To Profit From Pump And Dumps

Before you read this, you need to understand just how risky buying pumps can be. Once you understand how pumpers operate, look back at previous pumps in order to gain some understanding of how they have done in the past. An important rule that seems to be commonly overlooked is that just because a stock is being pumped, does not mean that it will go up.

Today BFLX was pumped by Best Damn Penny Stocks (BDPS) and it's affiliates so I will use this stock as a model for what I'm about to say.

Basically there are only two groups of pumpers who I am comfortable buying after the initial announcement. One of them is BDPS and the other is Awesome Penny Stocks/Crazy Penny (APS). In my opinion these are the only two pumpers to offer a decent risk/reward ratio in the beginning of the pump. Make this decision for yourself though. There are certainly other good traders out there who are confident in trading other pumpers and likely some good traders who wouldn't trade these pumpers at all. Always do your own research to verify what others have told you!

When I say the beginning of the pump, I literally mean the absolute beginning from the time that you can confirm the stock is actually the pick. Often there will be abnormal volume the day before the announcement as a result of front-running. Front-running is buying the stock before the announcement so as to ensure maximum gains. The problem is that without confirmation, front-running is based purely on speculation and thus is a foolishly risky strategy. One such stock that was front-run today in anticipation of the BDPS pick was HPCS.

As you can see, the stock panicked massively in the morning as the front-runners realized they had been mistaken and scrambled to cut their losses. Not only can you lose big money from the strategy, but you end up missing the actual pick by having to concentrate on your losses. The lesson here is to never buy a pump on the rumor that it will be pumped by a big pumper. Wait for confirmation from the pumper's emails or website!

To buy among the first, you have to be quick. You can't just haphazardly be checking your email and buying new pumps when you see them for the first time. Fortunately, the big pumpers will hype up their pick announcement days before so you can know when to prepare. If you want to trade the pick, you will have to be waiting by your computer, finger on the trigger. The two most common times for big picks to be released are at the market open and 2 pm EST. If you can't afford to be at your computer screen the whole time when you know a pick is imminent, at least devote your full attention to trading during these two times.

So how do you confirm the picks before everyone else? There are two main tools. The main one should be to create a separate email account for all of your pumper subscriptions. Sign up to every free email list that advertises big penny stock picks under this new email address. To find out where the best pumper lists are, you'll have to do your own research. That's a whole story on it's own. Once you have your new email account, keep it open when you are expecting a new pick. It's a good idea to use an an email provider or email client that allows you to set alerts when certain people send you an email. By doing this, you can configure your email to play different sounds or send a pop-up whenever one of the big pumpers releases their pick, giving you one more advantage over other traders.

The second tool is an add-on for firefox called check4change. Within the emails teasing the new picks, good pumpers will often give you a web address that will announce the pick at a specified time. By using this add-on you can continually check that page for changes in the background so you don't have to waste your time manually refreshing the page yourself. Keep in mind that sometimes the web page will announce the pick before the emails, and other times the opposite happens. You need to be prepared for both scenarios in order to ensure the best possible trade.

Once you have the pick confirmed, you need to act quickly; send your orders in within seconds otherwise you won't get filled. This is one of the dangerous aspects of the trade. Since you have to act so quickly, it's possible to do your math wrong and take too big of a position, or worse still, mistype the ticker symbol and buy a huge position of a worthless stock. To minimize these risks, prepare beforehand. Make sure you're focused completely. If you've had a sleepless week, it may be best to sit out the pick as you can always wait for the next one. Think beforehand how much money you are willing to risk on each potential price bracket: If the stock is trading at 10 cents, how many shares will I buy? What about 50 cents? How about $1.50? By addressing these questions ahead of time, you save yourself time and stress. It may also be helpful to have orders ready to go on a few stocks that have been rumored to be the picks. As I said earlier, do not trade these before confirmation, but having the orders ready to hit transmit can make things much easier (no promise any of the rumored stocks will be the right one).

DO NOT CHASE! Chasing is sending orders higher and higher as you follow the price upwards. This is the best way to lose your money. If you send your orders and it doesn't fill, do yourself a big favor and just accept it. Missing an opportunity is so much better than losing a huge chunk of your account. To increase your chances of a fill, set your limit order a few cents or percent above the ask (Never use a market order for any of your trades, including those outside of this strategy). Often times people will miss their fill, see the stock rising rapidly and want to get in on those amazing profits so badly that they foolishly buy into the stock after it has already jumped 20%, 60% or even 100%. This can all happen within the first 5 minutes of the announcement and indeed that is likely to be the case. Even though the stock may look strong and the promotion has only just begun, you have no way of knowing how far it will go. The best way to get an idea of this is to look at previous pumps by the same pumper. In nearly all cases though, it is not a good idea to buy the stock unless you can get in within the first few seconds. Breaking this rule will mean a poor risk/reward trade. You may get lucky and make money, but more often that not, you will lose a great deal of money as the stock panics and falls. Do not think that you can rely on tight stop losses because these stocks tend to be illiquid. If the stock panics, it will be nearly impossible to get out as everyone rushes to sell to the extremely few buyers that exist. This leads us to our next point:

If you do manage to get into the stock, be ready to sell just as quickly as you got in. There is no way to predict the top so be ready to assume that the current price is the top. Have your sell order ready to go as soon as your buy gets filled. If you are confident that the stock will stay strong, at least take some profits to minimize your risk. In some cases it may be permissible to account for this by taking an over-sized position in the beginning and immediately scaling down to take profits and reduce risk.

I hope this guide will give some of you a better chance of coming away from these pumps with more money for less risk. As always, confirm what I've said yourself. I suggest you just watch your first few pumps without trading them to get an idea of how they perform and the amount of time you have to trade them. Paper trading probably won't give you a realistic idea of how this works though because the fills for buying and selling are half the battle.