Upgrade Your Bathroom Experience

I'm going to propose an idea here. Sure, you may think it's a little ridiculous at first but hear me out.

Traders are constantly at risk of being betrayed by their bodies. Say you're watching a stock setting itself up for some perfect technical indicator. You wait patiently for the perfect moment to pull the trigger. Then you realize you really have to pee. Do you miss the perfect opportunity? Or worse still, do you pull the trigger and run off, hoping the stock will cooperate with you and continue with the trend you expected. Hundreds or thousands of dollars could be on the line. That's one expensive pee break. One can only imagine the sort of devastation if you had to go number two.

How about we solve that problem? Technological solutions are already entirely pervasive in our modern world. It's about time we make the transition to dedicated bathroom computing.

I don't think you could find a better choice than the Acer Aspire E1-531-4665.With 2.2GHz of processing speed and 4GB of RAM, you'll be placing trades and checking email faster than you can say 2-ply.

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.

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...

Beginner's Guide To Trading Penny Stocks: Part II

Which stocks do I buy?

You'll want to decide which stocks to buy based on many factors. The elements you choose to favor when deciding if something will make a good trade becomes your trading style. The two most influential things to consider though are the technicals and the fundamentals. Technical analysis tends to be more important for penny stocks so we'll talk about that first.

What is technical analysis?

Technical analysis concentrates on the price action of the stock in an attempt to identify strategic buy and sell points. In other words, you look at how the stock has traded in the past to predict how it will trade in the near future.

This chart is choked by a slew of technical indicators (those straight lines moving across the graph). Each one purports to tell you something different about the stock in question. Luckily for you, most of them aren't worth learning when it comes to analyzing penny stocks.

Basic technical analysis, and what I rely on most when determining my trades, examines just two things: support and resistance.

In this graph, I've drawn lines to mark the areas of support and resistance. They are determined simply by where the stock has been. We can see that the stock hit the one dollar mark twice in the past then bounced back, thus establishing the one dollar area as support. If the stock were to bounce off the one dollar mark again, that level of support would be strengthened. The more times it hits a support level and fails to break below that level, the stronger it becomes.

The same is true of the resistance level. We can see that the stock hit the $1.43ish level twice, then fell back down. We can then say that this stock price is a resistance level. You can also see that the price action tended to hang around the 1.40 level a bit. This is mostly because it's human nature to favor nice round numbers so people set their trades there more often than they would at some other arbitrary number like say $1.37.

So how do you use this new information? Basically you use these levels to maximize your potential gains, and minimize your potential risk. Continuing with the example of the CLDS chart above, you wouldn't want to trade it at it's current level of $1.25 because it's mid-range of it's support and resistance levels. There's no reliable way to predict if it will go up or down from this point so you're better off not trading it. On the other hand, if the stock fell back to the one dollar level you could consider buying because that level offers support. It also allows you to create a logical trading plan before you even enter into the trade. Your plan might be something like, "I'll buy this stock at $1 and look to sell it at $1.40 where there is resistance. If the stock falls below $1, the support level, I will immediately close my position for a small loss."

The reason why your plan accounts for the breaking of support below one dollar is because the breaking, or collapse of support, is a strong bearish sign. It indicates that the stock will go down so you won't want to have a long position in that stock. A long position means that you've bought the stock in the hopes that it will rise in price.

Which stocks do I sell?

@lx21 Tweets & Results

Tracking @lx21's tweeted predictions...

$ABKFQ tweet advising short position:

Beginner's Guide To Trading Penny Stocks: Part I

Penny stocks are an attractive jumping off point for people who have never traded before because they're cheap. You can purchase a large number of shares with only a little bit of money, which means you stand to gain an excellent return if that stock price rises. While these reasons are certainly valid, we need to explore a little deeper to really understand how a novice trader should be making their investments.

What exactly is a penny stock?

Holy crap. You can buy so much stock!

Browsing the internet will uncover several definitions. The term basically just refers to a cheap stock. Personally, I consider stocks less than $5 a share but greater than around 30 cents to be a penny stock. Stocks under 30 cents might be more appropriately termed sub-penny stocks which should be avoided by the novice trader. Penny stocks are also typically less well known so you might not consider a big name company trading under $5 dollars to be a true penny stock.

Stocks, including penny stocks, are traded over exchanges. You've probably heard of some of the major ones such as the NASDAQ. Each exchange has its own requirements that a company must meet for their stock to be traded on that exchange. Since exchanges like the NASDAQ have more strict regulations concerning what companies must disclose and report to investors and the SEC, you won't see many penny stocks trading there. Instead, most penny stocks appear on the Over-The-Counter (OTC) markets.

Characteristically, penny stocks are more illiquid than other stocks. Liquidity, in this case, refers to the stocks volume, which is just another way of saying how many of that stocks shares were traded. A stock with high volume is basically just trading a lot. In order to be liquid though, that volume must be consistent throughout the trading day. Liquidity is important because it determines how easily you can buy and sell that stock.

Never trade a stock with a chart like this

The chart above shows a penny stock with very low trading volume, meaning it is also very illiquid. You may run into charts like this because they often see large percentage changes which create a tempting illusion to new traders. A stock that is up 250% in a single day might make you salivate when considering how much money you can make if you had just bought in the morning. You start to see the illusion for what it is though when you consider all the factors. The biggest problem is that low volume, illiquid stocks, rarely show a clear trend. They may gain 50% or more from a single trade then 30 minutes later be down 100%. Basically, they're terribly unpredictable and you should just train yourself to recognize which stock charts to ignore.

A trend can be more easily seen here

This chart shows a stock trading with extremely high volume, making it liquid. As you can see, it's much easier to see a pattern which is really the key to successful trading. You can use the pattern of the trading to better predict how the stock may behave in the future and plan you're trades accordingly. We'll go into that more later though.

Beyond just looking at a chart, you can use the more quantitative analysis of a stock's dollar volume. Dollar volume shows the relationship between volume and stock price, which provides a more accurate picture of how liquid a stock is. For instance, a stock that trades 20 million shares in a single day might seem like a high volume stock with good liquidity, but if that stock is only valued at $0.0001 a share, it only traded $2000 dollars worth of stock which is pretty much nothing. Dollar volume is usually shown when looking at stock quotes but you can give yourself a rough idea of it by simply multiplying the days total volume by the stocks current stock price (although it would be more accurate to use the stocks average price for that day). A stock that trades a few hundred thousand dollars a day or more is generally going to be liquid enough to consider trading.


Which stocks do I buy?

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.

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.

The myths and mistakes of amatuer traders

Even if you only trade occasionally, you've probably consulted some form of internet community for advice, be it a trading forum or chat room. If you haven't, well, you're doing it now. There is a plethora of great information out there, unfortunately it too often seems that for every good tip, there are 5 poor ones that are more likely to steer you into the habits of an unsuccessful trader. In this post I hope to list and debunk some common myths that I often encounter online.

• "I want to play BLAH but I don't know how... should I buy or should I short?"
• "I know it's a bad short, so it must be a good buy."
• "I know it's a bad buy, so it must be a good short"

If you don't have a good idea of which way a stock is going to move, don't play it at all. Just because something is a bad buy or short, does NOT mean that it is a good idea to play the stock in the opposite direction. A stock may be a poor short because there is strong technical support close to where the stock is currently trading. There may also be strong technical resistance above where the stock is currently trading, meaning that it would be a bad trade regardless of whether you went long or short.

• "BLAH is going to teh moon!!!"
• "Long BLAH"
• "All in... BLAH"

It is also imperative that you consider all aspects of the trade. Do not fall victim to the false security of seeing several other traders make the trade you are thinking about. Since 90% of traders lose money, the odds say that those traders just made a bad call and you would be wise to think before blindly following. Read all recent news, and check if there are any planned announcements on the horizon. There are also much less obvious factors such as the release of share lock-ups that could take you by surprise and cause you to lose money. The more research you do, the better you will be prepared to make a good trade.

• "BLAH is still being pumped/promoted... it will go back up/it isn't dead yet"

Stock promotions can take many forms ranging from internet forum hype, paid internet ads, spam emails, to mentions of the company on TV. Many people mistake these promotions as a risk free cue to buy. While it is true that many stocks rise initially, even that isn't a certainty. Furthermore, a promotion can go on for weeks as the stock continues to drop. The purpose of a promotion is to allow shareholders to sell so anything being promoted will be inherently burdened by selling pressure. Many times this selling pressure outweighs buying interest, causing price to fall and you to lose money if you buy into the promotion hype.

• "BLAH heading north, guarantee that it will hit 5.50 by next week."

There are times when all factors may point to the stock behaving in a certain way. However, even in these cases it is important to shift your thinking into terms of risk and reward. If all your research seems to indicate the stock moving in a particular direction, you may have low risk, but there is always some risk. There are NEVER guarantees in the trading world and you should certainly never take the word of an anonymous internet user of any such "guarantee."

• "Any trade that makes you money is a good trade!"

False. Good luck can make you money on a bad trade. If you fail to recognize a bad trade (even if you made money on it), you are liable to continue making such trades which will ultimately come back to bite you in the ass.

• "I'm in BLAH now but I don't know when to get out."

You should plan your exit before you ever enter a trade. If you find yourself in a trade and don't know what to do, it is best to get out.

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.

GWBU & ENRG?: AwesomePennyStocks Pick

Today AwesomePennyStocks (APS) again impressed me with their sneaky promotion tactics. It seems as though their official release was today with GWBU although ENRG was also released by pennystocks123, what is (or maybe used to be) an APS sister site. Either way though, ENRG isn't trading with any sort of strength so I would avoid it regardless, unless it can prove with volume and price action that it is going to make a move.

The problem with GWBU though is that you can't treat this as day 1 of the pump, as it has been trading with elevated volume for the past few days. Thus, if you have also just discovered it today, I would trade it as you would previous pumps after the first week. The sort of strategy I encourage here is a conservative one, thus I decided not to go long on the stock immediately. Instead, I will sit on the sidelines to see how this confusing situation plays out and wait for any major (20%+) dips to take advantage of.

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.

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.

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.

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.