Dear Sirs, I am a fairly new customer, and bought a subscription for 2 years, and already I am VERY pleased with the result. My first trade was in IDEV at $0.96, which I sold out at $1.70, you can do the math :-) 10 days later. This trade put me in a very nice financial situation for accumulating my new trades, this is a big THANK YOU, I will recommend you to anyone I know. (You are welcome to post this if you like).
Blog [ RSS Feed ]
Paranoia Profits and Penny Stocks
February 6th, 2007
In penny stocks, a little goes a long way. A tiny company loses a contract, it can derail the shares for months. They have a good quarter, and the penny stocks' shares can soar.
Let's extrapolate this idea a little. There doesn't need to be a terrorist attack on U.S. soil to drive up the prices of homeland security penny stocks - there only has to be the fear of an attack. There doesn't need to be a bird flu pandemic to increase share prices of related penny stocks, only the fear of it.
You tell me, what does the news report on? What's actually happening, or what could happen? Are television and radio reports about how to deal with our current crisis, or how to prepare for the one that 'could' happen. Your first instinct when you answer this question may change, once you've gone back to watch the news after having read this blog.
Take hurricane Katrina for example. Immediately after the fact, reports went into detail about how it could happen again soon, then how it could happen again with an even bigger hurricane, then they started reporting that next year big hurricanes were forecast to hit New York. They finally wrapped it up within a few months by talking about how we would just see more and more hurricanes, and that they would be more devastating due to various reasons (eg.- global warming, gulf stream shifts...). All the while, Anderson Cooper could barely hang on to the lamp post he was clutching, as he battled some minor breeze.
The point is that, much like with the focus of the news, penny stocks will trade higher on speculation based on the fears or focus of society, more than the actual fact. A penny stock that may get a huge contract often trades dramatically higher, then when the contract is actually awarded, the shares sell off. There is an old saying on the stock market, "Buy the rumor, sell the fact." That is what they are talking about.
The speculation of an event will always be more powerful and motivational than actually realizing the event. People waiting for test results from a doctor are often more fearful and anxious than once they get the diagnosis. This is true in life, and therefore it is true when trading penny stocks.
Remember, all people do more to avoid pain than to gain pleasure. CNN figured out long ago that more people will watch a story on how cancer will destroy them, than the number of people who would watch a story on how to eat healthy to avoid cancer.
So, if we have to play this game, I say be aware of the fear. Be aware of people's focus. That is where tremendous profit in penny stocks await.