Correlating Promoters Part I

It has been a while since I've look at penny stock promoters so I figured I'd get back into the game by tracking the performance of the various promoters. Back in the day, there were a few big name promoters like Awesome Penny Stocks, Best Damn Penny Stocks, etc. I know many of those guys fizzled over time and became less effective as their notoriety increased.

To see who (if anyone) has taken over this niche with effective stock promotion, I'll be starting from scratch, learning who the players are. If you're new to this site and penny stock trading, I should emphasize now that the stocks being promoted by newsletters are almost definitely horrible companies and should be treated as such. Do not believe anything a newsletter tells you because they are being paid by someone to say it. Read the disclaimers in each email!

Why is this information useful?

There are so many promoters that come and go, it would be a waste of time to track them all. Most of them don't create enough volatility to make trading their tickers worth it. By tracking the performance of various promoters, we can get a handle on who we should pay attention to-- and more importantly, who not to waste our time with.

Ideally we want to find promoters that are able to catalyze significant price moves that will more for good short sells. In all likelihood, a stock promoted by a newsletter is trash and any upward movement will result in future predictable downward movement that we can profit from. We might also consider buying before a run-up but considering the current market conditions, I really, really doubt that will be a viable strategy.

Gather the newsletters

The first step is to gather all the newsletters you can. A simple and effective way to do this is to just search "penny stocks" on google. Click on all those promoted links on the top and on the side that are promising you the best stock picks. You'll want a separate email account for this since we are literally gathering spam which you won't want in the same email account you use for other important correspondence.

One helpful tip about email addresses is that you can amend labels to the email address by using a plus sign. For example, if your email address is myemail@gmail.com, you can provide myemail+whateverlabelyouwant@gmail.com and it will still be considered a perfectly valid email address.

We can use this to our advantage by giving each newsletter it's own distinct label. So when I'm signing up for the newsletter of http://moneymorningresearch.com/, I can give them the email address myemail+moneymorning@gmail.com. This way, if a newsletter shares our email address with any other groups, we can see who we originally gave the email to since it will still have that label with it. In the future I'll post some pictures to illustrate how this works.

Organize the newsletters

Each promoter operates several different stock promotion websites so our goal is to figure out which promoters own which sites. In the past, this was often as easy as reading the bottom of each email to see the name of the parent company. This doesn't seem to be the case anymore which is partly what spurred me to write this guide. I'll try to do some of this work so that others don't have to.

Gmail makes this process easier by allowing us to create filters and labels for each email sender. When you receive an email you'd like to create a filter for, click the drop-down menu beside the reply button and choose "Filter messages like this".

You'll be given the option to make the filter more specific if you'd like. For our purposes, the default will work fine. Click "Create filter with this search" to continue.

The next dialog asks what you'd like to do with the message. Check the box next to "Apply the label" and then select "New label...". Give your label a name that reflects the promoter who sent the email. Since we don't yet know which promoters own which sites, you'll need to create a new label for each newsletter site you subscribe to.

Lastly, we can assign our new labels with colors. This allows us to glance at our inbox and immediately see which promoters are promoting which stocks. This will become more useful as we whittle down our labels to only the most influential promoters.

I'll come back to this and expand on how to use this information in a future post. So keep checking back and in the meantime trade cautiously!

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.