Tag Archives: pennystocks

OTC QBs and Scanning

May 12, 2015

StocksLive (by Cinnamon Mobile) and OTCMarkets.com is how I scan for OTC QB slow uptrends.

StocksLive iPhone app

StocksLive is an iPhone app that has “activities.” These activities have catered scans for specific market types, billionaire portfolios, industries, and more. I use the PINK activities by technical scan and search by chart for an uptrend of 3 days plus and make sure it is an OTC QB status (the ticker profiles on StocksLive show this). I’ll then look at QB prospects through iHub and more in-depth chatting platforms, building a watch list over time.

A second scanner I use is the Current Market and Closing Summary on OTCMarkets.com. These two scanners are for scanning during the current day or after market closes. I filter by OTC QB by clicking the OTCQB icon. Each of these two scanners shows four views of active, advancers, etc. I generally focus on advancers because I can sort by highest % gain and see $ volume as well. I look for QBs with $50,000+ trading $ volume and a 10%+ gain for the day. Over time I build a watch list from daily usage of the OTCMarket scans. You start to see patterns of tickers that will continue a slow uptrend when watching over several days because the same tickers start appearing on daily scans.

#pennystocks #pennytrader #pennystockscans #stocks #stockchat #stockmarket #stocktrading #stockscans #stockslive #otcmarkets #otc #OTCQB #watchlist #pennywatch #otcqbscans #traders #trading #traderchat #tradethechart #tradethenews #tradingresource #tradingstrategy

OTC QB UPtrend & TA Cheat Sheet

Leave a reply

May 2, 2015

The OTC (over the counter) exchange is like the Wild West of stock trading. It’s below the big U.S. NYSE and NASDAQ markets and companies on the OTC have more lenient reporting standards.

After penny trading for a year with a start in April 2013, and practicing paper and virtual trading a year before that, I’ve developed a penny stock trading strategy called UPtrend. It means I trade upward price movements to garner gains while not short selling. The ultimate goal is to capture 20-50% gains, called the greed line, each trade.

This strategy suits those with cash trading accounts. The idea is to find tickers that will have an uptrend for a week+ allowing the trader to meet T+3 clearing.

This doesn’t mean you can’t use the UPtrend strategy to day trade. Charting analysis in the 5min/1day and 15min/5 day become critical as a day trader tries to garner quick gains. Criteria listed below would just need to change to shorter periods and more recent or rumor based hype.

UPtrend Strategy:

+ 2-3 day uptrend minimum

+ Recent PRs from company

+ TA with PSAR of buy signal, 30+ ADX with +DM above -DM, and CCI above 0 or oversold below -100.

+ Positive ticker board presence on social trading mediums like iHub.

QBs are generally audited and have recent financial filings. I find QBs to have less risk of loss versus Pink Sheet tickers while still seeing quick results. I’ll want to hold an OTC ticker no longer than a month, because OTC ticker’ time moves faster than with ANN penny stock tickers.

I feel trading tickers with these minimum requirements hedges my trading risk for losses. Towards the end I discuss additional DD I may perform to feel better about my trade.

Strategy In-Depth

UPtrend Chart

Here’s an example of possible UPtrend charts:

Charts are from 5/1/15

News and PRs

A great resource for PR search is Quote Media. We’ll use $MNTR as an example ticker to research. MNTR was an OTC QB ticker I traded in 2013 during my winning streak. I saved my notes and will use in analysis here. Do a ticker search and get: $MNTR news.

Because no Revenue has been filed yet we want to read PRs for indications of Revenue in the future. The PRs issued in 2014 indicate 60% of Bhang Chocolate was acquired for $39 million value and $5 million was acquired as a line of credit. An Internet search on Bhang Chocolate reveals Revenue being generated through chocolate sales. MNTR also announced MMJ industry funding will be had by issuing preferred shares at $7/share, and naked short selling issues as an explanation for the pps correction.

The news is very rosy for Mentor Capital.

TA Cheat Sheet

I’m going to add a quick cheat sheet of momentum and other indicators and the values I expect. First, you need to know what oversold and overbought mean. Oversold means chart indicators are pointing to too many traders have sold and the trend will reverse soon. Overbought means the opposite with too many buyers having bought making the pps uptrend unsustainable with correction expected soon. Some use only 1 or 2 indicators solely, while I like to use many for a “stars align” feeling.

I mainly utilize PSAR, DMI with ADX, and CCI TA indicators to save time.

Candlestick pps presentation shows the opening and closing pps info as well as the day’s pps range.

Volume. It is said volume proceeds price, unless everyone is selling…

MA = Moving average. You want a smaller day MA to be crossing or over a larger day MA. Such as the 8MA over the 32MA.

BBs = Bollinger Bands. The tighter the bands the more it is expected a pps uptrend will occur. Pps candles trading above the dotted neutral line is bullish (buy) while riding below is bearish (sell). Pps candles riding above the upper BB means overbought. Pps candles riding below the lower BB means oversold.

PSAR = Parabolic SAR. A PSAR dot below a pps candle signals buy while a dot above signals sell.

Ichimoku Cloud = pps estimated movement. Pps candles above clouds signals buy, below clouds signals sell, and riding in clouds signal flat trading estimation. Green clouds are based on 26 and 9 MAs and move faster than red clouds which are based on 52 week MAs. Cloud movements of green (support) and red (resistance) can note trend reversals. This is a complex overlay that a trader could devote trades solely off of.

ADX/DMI = Average Directional Index with Directional Movement Indicator. A more sophisticated indicator, ADX tells a chartist if a trend is weak (below 30) or strong (above 30) while making sure the +DM is on an uptrend and above the -DM to signal a buy trend.

CCI = Commodity Channel Index. Values above 0 signal buy. Oversold is a value below -100 while overbought is signaled with values above +100.

RSI = Relative Strength Index. Values above 50 mean buy. Values above 70 mean overbought while values below 30 signal oversold.

CMF = Chaiken Money Flow. Bars above the neutral line signal buyer pressure while bars below signal seller pressure.

MACD = Moving Average Divergence/Convergence. Looking for the MACD line to be above the MA line and rising above the threshold bars signals a strong ow Index. Values above 50 mean buy. Values above 80 mean overbought while values below 20 signal oversold.

OBV = On Balance Volume. Said to indicate large buying volume. This indicator should be uptrending to signal many buyers are holding versus selling occurring. Similar to Acc/Dist.

ROC = Rate of change. Basically, an uptrend above 0% signals buyer pressure.

The general rule I use with all of these indicators is to see an UPtrend in the lines or trend lines, except PSAR. You will want to look at charts from 3-Month and 6-Month to see how strong the trends have been in the past with a chart to isolate those indicators that haven’t been reliable in the past periods.

I recommend becoming very familiar with each chart indicator one at a time. As you become familiar with each you can utilize more or less according to historical trends, your comfort level, and various situations such as news springing from the company. A few situations will render chart reading obsolete for a day or week: A large group is alerted to enter a ticker; the company issues positive business news; a major contract is signed; a large shareholder decides to exit; and etc.

Here are a series of 6-Month charts on MNTR with my TA from the cheat sheet above.

This first chart shows a 200 and 50 MA with PSAR overlay over a candlestick chart. RSI, MACD, CMF, and volume are included. On 1/21/14 you can see the 50 MA crossed above the 200 MA, and the pps went on a strong uptrend.

The PSAR has been a good indicator of buy over the mid-term despite mini pps corrections along the uptrend from 1/21 to 3/14/14. The PSAR can lag a day or two as evidenced by the PSAR dots above the candles 3/14 when the downtrend really started 3/17, but when PSAR moved up the candles the sell signal was right.

Note how the candles were just touching the 200 MA on 4/10/14, and this bounce off the 200 MA on 4/11 is a very bullish indicator.

The RSI signaled oversold with a value below 30 on 4/10/14. Notice the large candle on 4/11 with RSI uptrend starting. Historically, the RSI has been a good indicator of oversold as the pps corrects temporarily each time it hits 70 along the pps uptrend from 1/21 to 3/14.

MACD came alive 1/21/14 with a large pps spike shown in the large candle body. You can see MACD was signaling overbought around the time the pps corrected on 3/14 as the MACD line hit 1.5. Note the sharp MACD line dip below the red MA line on 3/17 which indicated a strong sell signal. MACD just starts to spike upward on 4/11 but caution of a sustained pps uptrend until MACD is above the threshold bars.

CMF has been below the neutral line since 3/17/14. Notice how CMF is starting to return to the 0 line on 4/11. A cross above the 0 line would be bullish.

The second chart keeps the 200 and 50 MA overlay but BBs, Acc/Dist, MFI, and OBV have been added.

The BBs have been wide mainly, even before the pps jumped above $1. A switch to the Nov 13′ through mid Jan 14′ would show BBs wider than including in a chart with large change in pps. Between 2/10-2/24 you can see the BBs were at the tightest and the result was a nice pps breakout from 2/24-3/17. The candles never dropped below the lower BB to signal oversold before the 4/11 pop.

Acc/Dist has been following the pps trend. Notice the sharp decline on 3/17/14 however. This could have been telling in regards to the pps downtrend from 3/17 to 4/10.

OBV has followed the pps trend as well, though not as sharply. This is inherent in the averaging used in the OBV line plotting. Large volume changes would effect OBV more drastically such as on 2/24 and 4/11. Notice how Acc/Dist predicted the pps correction before OBV, but both predict the downtrend nonetheless.

MFI has been a good predictor of overbought on this 6-Month chart, but not of oversold. Notice on 4/1 and 4/7 how the MFI was below 20 yet the pps just traded sideways instead of uptrending. This is one reason I check the historical trending of an indicator before relying heavily on it.

The third chart adds the 8 and 32 MA as well as the Ochimoku Cloud overlay, ADX/DMI, CCI, and more clear volume bar set.

Notice how the pps candles cross below the 8 MA on 3/17/14 before majorly correcting for a few weeks. This was a major bearish signal. It’s not until 3/30 that the 8 MA drops below the 32 MA, and if a trader wasn’t out by then it was definately signaling get out then. Like the 50 and 200 MA, the 8 and 32 MA signaled buy on 1/20.

The Ochimoku Cloud was predicting support between 4/4-4/7, but the candles break below the cloud triggered a sell signal. I feel in this chart the Ochimoku Cloud loses it’s estimation ability until the next correction on 4/11 plays out longer.

The ADX/DMI had signaled buy on 1/21 when the ADX began a strong uptrend and the +DM crossed above the -DM. Between 1/21 to 3/17 the +DM stays above the -DM with a pretty consistent 30 ADX line signaling a strong trend. By 3/17 the +DM dips below the -DM and the ADX line dips signaling trend reversal (sell). On 4/11 the ADX/DMI signal are attempting to become clearer but it is too soon to read exactly what signal will prevail- buy or sell is confused due to lines meeting.

The CCI has been a fairly good indicator of overbought and oversold. Notice more extreme values past 100 and -100 have predicted pps changes. CCI has followed closely with pps movements. Between 4/9 to 4/11 the CCI signaled oversold and the 4/11 bounce wasn’t surprising.

The clearer volume bars show what was described earlier- strong interest has been in this ticker since the $1 crossing.

The final fourth chart adds the 10 and 50 MAs, price change, ROC, and Williams R.

Just like the other MAs noted before, the 10 MA crossed above the 50 MA on 1/21/14 and fell below on 3/17. The candles fell below both MAs 4/1 which was a very bearish signal.

ROC was sporadic in the first pps spike around 1/21/14. Since, it has moved slightly with the pps uptrend, downtrend, and then spike on 4/11. You generally want to see ROC above 0% for a buy signal.

The other two indicators I place as filler indicators.

I haven’t touch on support and resistance yet, so here it is quickly. Support is the general pps where a downtrend can be halted, as chart history or MAs show. Resistance is the pps needed to be broken to allow an uptrend to continue. MNTR’s support appears to be $1.40-$1.50 and resistance at $3.91. Breaking above MAs at this point would be other resistances.

If you’re short on time to create and analyze charts there are two other options I have tested to be fairly accurate in the short-term: Barchart and American Bulls.

Barchart offers free trader resources, TA, financial analysis (FA) and other features and scanners. A mobile app is also available. Here’s MNTR’s analysis:

<a href=”http://www.barchart.com/opinions/stocks/MNTR”>16% Buy overall; 0% hold short-term; 25% buy mid-term; and 67% buy long-term</a>.

American Bulls use strictly candlestick analysis and offers free candlestick training. Here’s MNTR’s analysis:

<a href=”http://americanbulls.com/members/SearchList.aspx?lang=en&SearchText=MNTR&PageChoice=Confirmation”>Not available</a>.

Unfortunately, not all tickers are analyzed.

iHub Ticker Board Positive Sentiment

I like to read the iHub ticker board and search for top board status to see how much positive or negative buzz surrounds my prospect ticker. Sure many lie in anonymous posts online but many show their motivation.

The MNTR ticker board on iHub shows a general long-term sentiment. DD is in the intro box and stickies. iHub also offers news related to MNTR it has captured:

Summary

These criteria generally reduce my loss risk. A chart uptrend of 2-3 days allows more optimism of a continued uptrend. Company news keeps traders motivated for a successful future, so regular PRs are a must. TA showing buy signals helps show buyer sentiment and allow estimation of the better entry and exit. A positive trader sentiment on the ticker board aids me in knowing if enough traders are interested in a continued buying behavior.

Here are additional DD and analysis I may perform to feel better about a trade:

Current OTC/SEC Filings With Revenue

Search OTC Markets for your target ticker’s OTC filings:

<a href=”http://www.otcmarkets.com/stock/MNTR/filings”>MNTR OTC Filings</a>

Note MNTR hasn’t filed SEC filings since 1998. If SEC filings were filed you could search here:

<a href=”https://www.sec.gov/edgar/searchedgar/companysearch.html”>SEC Company search</a>

Does MNTR show Revenue in the 2/28/14 filing? You have to look in the Income Statement here:

<a href=”https://www.otciq.com/otciq/ajax/showFinancialReportById.pdf?id=117601″>MNTR 2/28/14 Interim Financials</a>

MNTR doesn’t have Revenue yet, despite showing $40 million in assets and liabilities with a ($500)k deficit! At this point I would watch this target or search news for hints of Revenue occurring or about to occur through contract announcements, product/service offerings, or company updates that state Revenue is occuring and the filing is coming soon to verify. Filings take months to be available and the OTC/SEC has set windows to report quarterly info for the company to be in compliance for financial reporting.

MRIB is an example ticker I’ve traded that didn’t show Revenue in the filings. However, company PRs and CEO interviews showed multiple contracts signed pointing to Revenue to occur with their vodka sales at the time.

Momentum and other TA Indicators Pointing To Buy

TA stands for chart technical analysis. Chart reading can aid you in seeing whether buyers or sellers are more interested in your target ticker over a set time frame. Please see my stockcharts.com blog post for this free great resource to learn and do charting.

High Trending Volume

Note on the chart above the high volume trend. I want to make sure enough interest has been shown for my shares purchased to be exited in the future without the need for selling over several days. If a company is issuing PRs regularly this volume check shouldn’t be as important.

Dilution

To search for dilution you first start with the company share structure (SS). OTC Markets or the state a company is incorporated in will have this info.

<a href=”http://www.otcmarkets.com/stock/MNTR/profile”>OTC Markets MNTR Company Profile</a>

SS shows as: 400 million a/s a/o 9/30/13; 10.1 million o/s a/o 2/28/14; and 2.2 million float a/o 2/28/14.

Note: The Balance Sheet or Statement of Owners Equity sometimes shows the SS info also.

MNTR’s company shows the company incorporated in CA. The fins will discuss this also.

<a href=”http://kepler.sos.ca.gov”>CA SOS (Secretary of State) Company Search”</a>. The CA SOS has other corporate info besides legal name, address, and officers in another search. Shareholder info isn’t required to be filed in CA.

The next step is to contact the transfer agent (TA), MC Transfer, shown at OTC Markets in the Company Profile. MC Transfer will probably disclose the a/s and o/s unless Mentor Capital has gagged, to not disclose info, the TA. If the TA is gagged then the company would have to be reached for this info.

Once the current float, o/s, and a/s are known then dilution can be investigated in the volume in charts or by viewing the L2 over a few days to see which market makers (MMs) are leading the Ask with 10k shares consistently. MNTR’s volume has been 1 million shares traded on highest volume days since 1/21’s pps spike above $1. The high volume days have been about 4 with about 10 days above .5 million traded. Total is about 11 million shares traded and pin pointing exact sells versus buys is almost impossible. At 11 million total trades shares my opinion would be the 10.1 million o/s displayed a/o 2/28/14 hasn’t increased much. Dilution would have to be viewed on the 1-year chart via volume overall.

This company had added free L2 viewing at OTC Markets, a rarity for a Pink Current status:

If you wanted to have decent looking basic DD posts to spread the word then DDNotesMaker might inspire you. DDNotesMaker also offers a buzz board to see if your target ticker is being viewed a lot there. Here’s a link to see the buzz board and to ticker search:

<a href=”http://www.ddnotesmaker.com”>DDNotesMaker</a>

DD can take a much deep look and time investment. Further DD can include contacting the company, visiting the company, researching the company website and social media points, industry analysis, company comparisons, financial statement ratio analysis, and etc. most penny stocks aren’t worth this effort IMO.

Many TA techniques exist. I have chosen overlays and indicators I’ve studied, tested, and am comfortable using. Other blog posts I write, and to be written, will be focused on other TA techniques and individual traders with specific TA skills I’ve grown to trust.

Promo History

StockPromoters.com is the best free database of paid and unpaid promotions for penny stocks I’ve found so far. Here’s 1 unpaid promo shown on 2/7/14:

<a href=”http://stockpromoters.com/View-Stock-Promotions-By-Symbol.aspx?symbol=MNTR&ctl00%24ContentPlaceHolderyy%24Footer1%24Image2.x=-344&ctl00%24ContentPlaceHolderyy%24Footer1%24Image2.y=-199″>MNTR Promo History</a>

Promos don’t always show in general capture. Sometimes a trader who has many followers will alert a ticker and cause short-term interest. It can be difficult to know when a group of traders has been alerted to buy or sell.

I like to use Hotstocked.com as another source of free database search for paid or unpaid promotions. The researchers there also like to write articles that can offer a start to DD for your research. Here’s a recent article:

<a href=”http://www.hotstocked.com/article/79672/mentor-capital-inc-otcmkts-mntr-continues-to.html”>3/24/14 MNTR Hotstocked article</a>.

Hotstocked paints a suspect picture for MNTR, in their usual style, citing low fins for such large acquisitions and a low pps to be issuing preferred shares at $7/share.

8/6/14 Update

This update will show the results of MNTR since my 4/14′ UPtrend analysis. I never really gave an opinion to buy or sell as I wanted readers/traders to learn and make decisions on their own.

The elements of my UPtrend strategy were being met around 4/14′:

+ 2 day uptrend: met

+ Recent PRs from company: met

+ TA with PSAR of buy signal (below candles): met , 30+ ADX with +DM above -DM, and CCI above 0 or oversold below -100: wasn’t met.

+ Positive ticker board presence on iHub: met

However, there was one blaring red flag- dilution. The chart below shows the large increase in trading volume as company PRs and promises kicked on high gear. What remains is a pump and dump type chart, as explained in my other blog posts. The effects of dilution are powerful because as issued shares are sold buyer momentum slows and buyers begin to realize they aren’t winning the battle.

That’s my basic and comprehensive look into my UPtrend strategy and obtaining DD. I hope it helps you.

Happy trading!

Please note: This page is not an offer or solicitation to buy or sell securities or to provide my TA and FA ability. My hope is to give traders a free starting point to teach “how to fish” to improve trading skills for research, analysis, ticker selection, and entry and exit with risk estimations.

Spotting Dilution

1 Reply

April 23, 2015

Dilution is caused when shares are issued or converted from convertible securities in any form. These new shares can decrease the value of existing shareholder shares.

It’s important to understand a company’s share structure before diving into a dilution discussion. A company’s common shares, which will be our focus today, consistent of:

– Authorized shares (a/s): The total number of shares a company can issue.
– Outstanding shares (o/s): The total number of shares a company has issued.
– Restricted shares: The number of shares that can’t be traded for a specific period of time or restriction that are a part of o/s.
– Float: The number of o/s that are trades in the market.

Filings and various websites offer a company’s share structure (SS) info. OTCMarkets is a common source of SS info for OTC tickers, but may not be up to date. Yahoo! Finance can usually offer SS info for most penny stocks traded on the U.S. Exchanges.

Common shares are a piece of a company’s overall capital structure. Feel free to read Investopedia‘s discussion. Preferred stock can sometimes be convertible into a certain number of common shares, and thus opens up a trader’s mind to the various dilution possibilities.

Back to dilution. It’s important to grasp the basics of this dangerous activity so you can protect your trading funds. Here’s a discussion of dilution at the Motley Fool. Here’s another discussion by Frank Demmler at Carnegie Mellon University.

Dilution pros (yes there are some):

+ Gives the company a source of funds it may not have.
+ New funds can aid the company in improving operations to sell products and service, which can result in company profitability and increased shareholder value.
+ Can increase the pps if new investors purchasing shares pay a pps higher than the current pps value.

Dilution Cons (common with OTC tickers):

– New shares could be issued for a value lower than the current pps. This is common with OTC tickers.

– New shares could be issued to settle toxic debt of which interest payments were too high for the company to pay. These share issuances are usually for a deep discount to the debt settled. For example, $20,000 debt at 20% interest is settled with 1 billion shares. That would be a cost per share of $.00002. Even selling at bottom at $.0001 would net 5xs profit for that financier.

– Shares could be issued to the CEO or vendors as compensation or payment for materials/services. Usually the shares issued are great to allow the receiver to sell the shares at an amount to cover the initial liability.

– Share issuance signals red flags to traders that the company can’t obtain financing or the company is in trouble funding operations. The pps may fall to reflect the sentiment.

– Reverse splits (r/s) may be encourage from the company because the pps may be at $.0001 now. A reverse split would decrease the SS and allow the pps to fall again when more shares are issued! The trader not only loses when $.0001 was reached but loses further when $.0001 occurs again. Let’s say a 2000:1 r/s occurs and you hold 200,000 shares and the latest pps was $.0001 ($20 is being traded). After the r/s you own 10 shares and the pps is $.20. Overtime the pps falls to $.0001 and you’re holding for whatever reason still. Your 10 shares are now worth $.001! Lol?

OTC tickers in particular generally use dilution as a primary means for funding operations. This isn’t surprising because most of these companies have no other cash flow, can’t obtain loans from traditional sources available to mid and large cap companies, and have bad credit histories.

Does that mean you should go purchase stock of a company where these newly issued shares are being sold into the market? Uhhh, I don’t suggest it unless you can short sell. In steps the primary focus today- how to spot dilution.

I use four ways to determine dilution, and each are presented below in order of speed of determining:

+ Look at the 6-month or 1-year chart.
+ Watch the market makers participating on the L2.
+ Call the transfer agent (TA) assigned by the company. Track the o/s changes daily or weekly over a period of time.
+ Read filings made for share issuances such as the 10-Q or SC 13G.

Below are examples of these methods.

Using Charts

A chart can show volume spikes. These volume spikes can be explained by various phenomenon but in the OTC it’s usually dilution causing all those newly traded shares to appear.

NTEK 1-Month chart showing mini pps spikes and corrections as the pps falls overall.

NTEK 3-Month chart showing large volume spikes at the end of a dump.

NTEK 1-Year chart showing volume increasing overall during and after the pps spike.

NTEK 3-Year chart showing volume as a primary indicator. You can see clearly the volume is dramatically larger at the beginning of the promo. Where did the shares come from? You may know now…

The Investor Hub red versus blue volume indicator can also be used to aid in spotting dilution on a ticker chart. Red means Bid slaps while blue means Ask slaps. Dilution can occur via both Bid and Ask transactions but desperate dilutors Bid whack most of the time. Why? Because they most likely received shares at a deep discount to the current pps and unloading shares before buyers catch on and stop buying is the priority. Buyers slap the Ask when emotionally excited about a ticker and that’s a dilutor’s best case scenario. As the Ask slapping ends buyers move to a mindset of Bid sitting to get cheaper shares. The dilutor doesn’t mind this scenario either because they’ll sell to the Bid as large Bids appear.

Watch the MM Participation on the L2

Specific market makers are often utilized by certain dilutors. Here are some common retail dilutors that traders have identified over time, from my Market Participants blog post:

ACAP, AGIS, BAMM, BMIC, CHIG, CLYP, FANC, FRAN, JIMK, MAYF, NATL, PERT, SACM, UCAP, VERT, VFIN, VNDM

Diluting MMs generally appear on the L2 as having 10,000 shares for trade. Countless Ask slaps hit the MM’s 10,000 but the count never changes.

Call or Email the Transfer Agent

Once you obtain the transfer agent contact info from the company or a specific website service then contact them. Ask about the a/s, o/s, restricted shares, and float share counts. Track the values and see how the numbers are changing. This method is the most evidential and accurate IMO. For TAs that are gagged, that is refer you to the company for SS info, be afraid. Most company management will give you the SS info IF you can get a hold of someone…

I’ll use BBDA, a favorite sub Pink Current I like to watch, as my example.

OTCMarkets ticker search for BBDA showed the following TA info:

Madison Stock Transfer
Info@madisonstocktransfer.com
718-627-4453

I contacted Michael Ajzenman with Madison Stock Transfer and he confirmed the following share structure info at various dates:

– 2/27/14 a/s 9.8b and o/s 4,519,976,772

– 3/11/14 a/s 9.8b and o/s 4,702,424,673
– 4/8/14 a/s 9.8b and o/s 5,385,698,072

You can see in a little over a month that BBDA’s o/s changed by 865.7 million shares. The pps continued to fall as a result. The chart shows the dilution clearly and the L2 shows VFIN as the primary MM each day sitting and leading the Ask at 10,000 shares.

Read Filings

This option is last because it’s the slowest, and at times never even occurs as the ticker can delist through the various OTC levels with no filings. The info you do see usually isn’t all encompassing and leaves you drawing your own conclusions.

I’ll use TALK, a QB ticker, as my example for filings research.

You can view TALK’s filings at OTCMarkets here.

You can see a 10-Q (quarterly financial filing), 10-Q NT (late financial filing request), Form 4 (changes in ownership), and SC 13G (5% or greater acquisition reporting) filings in the past three months.

The 10-Q as of 2/28/14 shows a SS of 500 million a/s, as of 2/28/14 and 8/31/13, and an o/s of 74.5 million and 46.3 million, as of 2/28/14 and 8/31/13 respectively. That means about 28 million new shares were issued in 6 months with plenty of room to issue more to 500 million.

The Form 4 shows a director purchasing 23,000 shares at $.026 per share which is higher than the current pps. This could be signaling management confidence in company improvement prior to the next filings should more shares be acquired.

Form SC 13G shows 9.99% shares being issued to IBC Funds LLC and two individuals.

No other specifics are given such as the cost or why shares were issued. Sometimes management may divulge this info to shareholders prior to the next financial filing. IBC Funds could be a toxic financier receiving shares for a debt settlement with the company.

Conclusion

Dilution is best to be avoided once identified with entry to be considered once dilution has been proven to have ceased. Traders can use charts to see large volume spikes generally signaling new shares entering the market, volume spikes not explained by possible prior trading volume. The L2 can show common MMs appearance at 10,000 shares with no share change on the L2 as transactions go through. Calling the TA can help confirm chart and L2 theories of dilution. Company filings can give specifics of why, how much, when, and who is receiving shares.

Lucky 7 Penny

Leave a reply

March 28, 2014

I began OTC (Over the Counter) penny stock trading 4/23/13. I had practiced my strategy for a year using virtual trading and recording results in Excel before making my first penny trade. My first month of trading saw three ticker losses in a row in VPIG, MDBX, and MJNA. I almost gave up but after a week of soul searching, and with a strategy tweak, I saw the following 7 ticker gain streak:

$NORX +40%
OTCQB oil exploration
Buy $.81 5/22/13 Sell $1.13 6/10/13

$BKYI +30%
OTCQB bio-authentication
Buy $.28 6/10/13 Sell $.365 7/1/13

$NTEK +69%
Pink Current entertainment
Buy $.0755 7/1/13 Sell $.1279 7/8/13

$SCRC +52%

OTCQB pharmaceuticals

Buy $.656 7/9/13 Sell $1.00 7/11/13

$SGLB +80%
OTCQB laboratory services
Buy $.065 7/12/13 Sell $.117 7/18/13

$BNLB now $FTLF +19%
OTCQB fitness products
Buy $.1805 7/25/13 Sell $.215 8/7/13

$FLST +127%
OTCQB fuel
Buy $.13 8/2/13 Sell $.295 8/7/13

In the course of three months I had turned $1,500 into $13,500. The last two trades, FTLF and FLST, is when I decided to stop going all in and to start trading 2-3 at a time. You’ll notice my holds were mainly QB and for less than a month.

Duplicating these results of 7 gains in a row has been tough. Most haven’t seen the highs I sold at. NTEK has been a great flipper stock, as I have traded 4 times for gains since the first trade.

My goal has been to identify why I haven’t been able to be on a new 7+ gain streak. I’ve tried identifying why and will be making personal changes.

Here’s what I did back then:

+ 2-3 day uptrend
+ Recent PRs
+ TA with high volume and 30 ADX with +DM above -DM
+ Positive ticker board presence on iHub

My strategy was simpler then. I didn’t care about promotions, whether a company had Revenue, what the shorting volume was, or if dilution was occurring. The UPtrend strategy I use now includes the above due to my GLCO trade that ended my lucky 7 gain streak. I lost 40-80% by the time I sold GLCO, and it was due to dilution, no company Revenue, promotions, and failed company promises in PRs.

My strategy evolved into (I know many have wanted me to change long ago):

+ A chart uptrend of 2-3 days.
+ High volume trending over 2 weeks-> If news from the company is coming out then this will be a given.
+ Regular OTC/SEC filings with Revenue-> Revenue doesn’t mean the company will succeed and having regular filings doesn’t seem to aid in my trading gains, though QBs seem to provide more reliable gains.
+ Momentum and other TA indicators pointing to buy-> Need to decrease number of indicators looked at.
+ No or little dilution-> If I’m in a ticker this long to be worried about dilution then in heading for losses anyway.
+ News or PRs signaling company progress
+ No paid promos recently-> With quick trades this won’t matter.

I started the $UPtrend Pennies$ board in June 2013 on iHub. I was on a trading euphoria from my first two ticker gains in a row after coming off my first three ticker losses in a row. I had made the board to document my future trading progress, how to use my strategy, and to make friends.

Much has been learned since then. I now follow many aspects of penny trading, have many friends, traded tickers I shouldn’t have, created a blog, and have a pretty complex strategy now. I also moderated 5 iHub boards.
I’ve dabbled in posting on ticker iHub boards. Mainly negative CTDT posts, April through December 2014, and positive BBDA posts, January through now 2014, as an experiment to see if posters would respond when threatened and if trading decisions are effected- they do and they are IMO. This posting can be seen as pumping or bashing, but am I a pumper or basher if I hold $0 position while posting? Conundrum eh?

Now, today, I feel the following had contributed to my lack of lucky 7 gains:

– Too much iHub posting: over 3,500 posts in a year.
– Moderating iHub boards: Why do I need to moderate outside UPtrend Pennies?
– Too complex of a strategy: Will I really find a REAL company to hold stock longer than 365 days?
– Listened to other trader alerts and traded too late: Resulted in losses or extending my estimated holding period unnecessarily.
– Researching too much: Again, will I find a real company to hold long-term?
– Diversiffied into too many tickers traded at once: This has been changed.
– Held contests that distracted from my time and pursuit of gains.

Another reason for my losses after a winning streak is the Gambler’s Fallacy. Read more about the Gambler Fallacy at Business Insider. This article offers a twist however with researchers from the University of London showing probability of winning in horse bets in London actually increasing as a hot streaked continued. I’ve read similar articles that point out that not all activities are truly gambling and focus becomes greater during a winning streak.

I’ve had a few trader mentors that I looked up to and defended. I approached them for stronger relationships and was denied. Those mentors warned me to avoid hot streaks and trade with no emotion. I’ve learned penny trading for many means having no transparency or trading for self. I believe in networking, helping others, and to pay it forward. And so my attempts of developing relationships around trust, transparency, and mutual benefit often is challenging during OTC networking.

It’s time to KISS (keep it simple smarty) away some of my trading complexities. I’m doing a disservice to myself and trading friends otherwise. Only one thing matters to traders: GAINS and PROFITS. If I’m not providing winning trade suggestions then I’m useless, even if I’m your friend along the way.

Here’s my latest OTC penny strategy:

+ 2-3 day uptrend
+ Recent PRs from company
+ TA with high volume, PSAR of buy signal, 30+ ADX with +DM above -DM, and CCI above 0 or oversold below -100.
+ Positive ticker board presence on iHub

I’ll probably trade mainly ANN (AMEX, NASDAQ, and NYSE) and QBs at this point. QBs are generally audited and have recent financial filings. I find QBs to have less risk of loss versus Pink Sheet tickers while still seeing quick results. Why QBs versus Pink Sheets? QBs have audit and $.01 requirements which causes the effects of dilution to be slower on these tickers’ pps. I’ll want to hold a ticker no longer than a month, because penny stock time sees results faster than with ANN tickers.

I thank you for your presence along my OTC penny trading journey and I hope you’ll continue with me. My trading now includes stock/ETF options since September 2014.

Stock Rules/Axioms

Leave a reply

March 8, 2015

I‘m attaching 25 stock rules from the popular stock trader Cramer from TheStreet, as well as 25 OTC axioms and 10 advance axioms from vantillian on iHub. These basic rules or axioms can aid a trader in avoiding common mistakes trading big board or OTC penny stocks.

General Stock Rules

Rule 1: Bulls, Bears Make Money, Pigs Get Slaughtered

It’s essential for all traders to know when to take some off the table. More

Rule 2: It’s OK to Pay the Taxes

Stop fearing the tax man and start fearing the loss man because gains can be fleeting. More

Rule 3: Don’t Buy All at Once

To maximize your profits, stage your buys, work your orders and try to get the best price over time. More

Rule 4: Buy Damaged Stocks, Not Damaged Companies

There are no refunds on Wall Street, so do your research and focus your trades on damaged stocks rather than companies.More

Rule 5: Diversify to Control Risk

If you control the downside and diversify your holdings, the upside will take care of itself. More

Rule 6: Do Your Stock Homework

Before you buy any stock, it’s important to research all aspects of the company. More

Rule 7: No One Made a Dime by Panicking

There will always be a better time to leave the table, so it is best to avoid the fleeing masses. More

Rule 8: Buy Best-of-Breed Companies

Investing in the more expensive stock is invariably worth it because you get piece of mind. More

Rule 9: Defend Some Stocks, Not All

When trading gets tough, pick your favorite stocks and defend only those. More

Rule 10: Bad Buys Won’t Become Takeovers

Bad companies never get bids, so it’s the good fundamentals you need to focus on. More

Rule 11: Don’t Own Too Many Names

It can be constraining, but it’s better to have a few positions you know well and like. More

Rule 12: Cash Is for Winners

If you don’t like the market or have anything compelling to buy, it’s never wrong to go with cash. More

Rule 13: No Woulda, Shoulda, Couldas

This damaging emotion is destructive to the positive mindset needed to make investment decisions. More

Rule 14: Expect, Don’t Fear Corrections

It is not always clear when a correction will strike, so expect and be prepared for one at all times. More

Rule 15: Don’t Forget Bonds

It’s important to watch more than stocks, and bonds are stocks’ direct competition. More

Rule 16: Never Subsidize Losers With Winners

Any trader stuck in this position would do well to sell sinking stocks and wait a day. More

Rule 17: Check Hope at the Door

Hope is emotion, pure and simple, and trading is not a game of emotion. More

Rule 18: Be Flexible

Recognize and be open to the unexpected shifts in the market because business, by nature, is dynamic, not static. More

Rule 19: When the Chiefs Retreat, So Should You

High-level executives don’t quit a company for personal reasons, so that is a sign something is wrong. More

Rule 20: Giving Up on Value Is a Sin

If you don’t have patience, think about letting someone who does run your money. More

Rule 21: Be a TV Critic

Accept that what you hear on television is probably right, but no more than that. More

Rule 22: Wait 30 Days After Preannouncements

Preannouncements signal ongoing weakness, wait 30 days to see if anything has gotten better before you pull the trigger to buy. More

Rule 23: Beware of Wall Street Hype

Never underestimate the promotion machine because analysts get behind stocks and can keep them propelled in an up direction well beyond reason. More

Rule 24: Explain Your Picks

Buying stocks is a solitary event, too solitary in fact, so always make sure you can articulate your reasoning to someone else.More

Rule 25: There’s Always a Bull Market

It’s OK if you have to work hard to find it, just don’t default to what’s in bear mode because you are time-constrained or intellectually lazy. More

Source: TheStreet Cramer’s 25 Rules of Investing

Top 25 Axioms Of OTC Investing

Understand These And You Might Have A Shot At Surviving The OTC Marketplace

Author: vantillian

INTRO
I am calling these 25 points “axioms” in that they are propositions that are not necessarily proved or demonstrated but rather are self-evident to those who trade/invest on the OTC. In other words, these truths should be taken for granted and serve as a starting point or a foundation when deducing or inferring other propositions about OTC investing. I will not seek to prove these axioms to you…they just simply ARE. An axiom appeals to no other authority for verification…it stands on its own as the truth. Therefore, with these axioms we are dealing more with beliefs and less with facts. But without fundamental beliefs, you will have nothing whereby to interpret the facts. So sit up and pay attention because the following are very important ideas that could keep you from losing your shirt and help you to win nicely at playing the OTC market.

1. The Center Stage Axiom
The longer an issue stays in the spotlight…the worse. There’s always one or more good reasons as to WHY a company is trading on the OTC…especially if it is a sub-penny company. There have been many times in the past couple years I thought I had found that “true gem” that was going to be another Yahoo. I believed in it big time. I bought into it big time! But after the initial run and a dead-cat bounce or two…things began surfacing that were completely damaging to the demand for the stock. Simply put, the higher a stock climbs in the investing world, the more its rear end shows…and OTC butts ain’t pretty. Are there the occasional rule breakers here? Yes (usually they are reverse merger plays). But those stocks are few and far between and they generally uplist very quickly to a higher exchange. As a general rule, the longer a company stays in the limelight, the more enemies it will attract. Bashers. Shorters. Bidwhackers. Apathy. New shares from various and sundry places (especially DILUTION and restricted shares coming off restriction). It’s always a war to make the PPS (read: Price Per Share) go up on any issue. Don’t stay too long at the war. Fight as long as you are advancing and retreat the moment you see the enemy reinforcements gathering. Or possibly better yet…retreat before you think you even heard the enemy reinforcements. Remember, it’s not your job to make a stock PPS go up, it’s your job to make your portfolio grow. OTC valor is much different than armed forces valor.

2. The Carpe Diem Axiom
Always take *some* profit when you’re sitting on significant gains 50% or higher. Unless you are already independently wealthy and view OTC investing *only* as gambling for FUN (which isn’t an altogether bad thing to view it as), take profit. The way to accumulate wealth playing OTC issues is to always exit too soon. Furthermore, it leaves one feeling pretty dern good when he left some on the table for the next guy and was not the chucklehead that singlehandedly killed the run. If it does make you feel good that you were the chucklehead that killed the run, shame on you. Always remember…you do not know the next time buying pressure will allow you to leak out of shares without injuring a stock and/or your portfolio! Seize the day. Seize the opportunity strong buying pressure provides.

3. The Itchy Trigger-Finger Axiom
Someone always has shares to sell to ruin a run. Read it again: Someone ALWAYS has shares to sell to ruin a run. Make this statement your computer desktop and/or screensaver. Say it to yourself ten times whenever you start your trading day. Paint it on the ceiling above your bed so it’s the first thing you see in the morning. Please understand that someone owns a whole lot of whatever stock you’re jazzed about at much lower average than you — and often times they own it for NUTHIN’ (i.e. compensated promoters, debtors, relatives of CEO, etc.). Also, if you think that YOU are the ONE that is holding all the shares that could potentially ruin a run…think again. Only God knows where all the shares are or will be coming from…because who knows what kind of shorts will attach themselves to your play and sell you nothing but VAPOR.

4. The Domino Effect Axiom
Almost everyone that loses money playing the OTC looks to point a finger somewhere. They want someone or some entity to blame for their loss. Forget that the CEO sold 100M shares into the open market, they’d rather lash out at the popular poster that promoted, endorsed, and otherwise “pumped” the stock. Here’s what folks like that should understand…there is a domino effect of people getting screwed. Here’s an illustration: the CEO legitimately plans NOT to sell shares but some emergency comes up…and believe me…”emergencies” almost always come up for these guys! Selling shares is the easiest way for him to raise the money and “After all,” the CEO justifies to himself, “the reason I went public in the first place was to raise money.” The problem here is that the CEO failed to tell his promoters and/or closest investors about his need to raise funds and that group of people is living under the assumption that the share structure is stable (i.e the supply will remain the same). So the CEO got screwed by somebody and had to pay up. He screws the promoters and his closest investors and they had to pay up. Now the promoters and close investors will probably screw another batch of investors. Scenarios like this have happened more times than I can count! When something goes wrong and you’re holding several thousand dollars worth of stock, you’re not going to be looking to inform the world about things that will negatively affect the stock’s PPS! You’re looking for ways to bring in buying pressure, not decrease it! Folks love pumpers/promoters when they are helping the stock they are in go up. Folks hate those same pumpers/promoters when their stock is going down. Heroes and zeroes in the microcap world are one and the same…it just depends on the day. Remember this though…if the guy at the top decides to take advantage of people…he most certainly will succeed. What you need to know is your place in the food chain. And friends, if you’re a rookie to the OTC world…you are a bottom feeder that gets caught eating the crap of all the other fish in the ocean when the “Domino Effect Axiom” kicks into high gear.

5. The Vapor Shares Axiom
If you see a poster battling the idea of shorting OTC issues with determination and vigil, sit up and pay attention…that poster is either a short himself or working on behalf of the shorts. People and/or groups with the right connections can and do short OTC issues…many times they short stock into oblivion with the full approval and consent of the leadership of the company. Contrary to popular belief, many OTC CEOs don’t give a flying fig newton what their stock price does…what they care about is getting their hands on YOUR MONEY. There is alot of money to be made when a stock goes up. There is even more money to be made when a stock goes down if you were selling vapor all the way down to .0001 and cover there. Microocap hedge funds exist. Microcap hedge funds manipulate stocks and steal the money of good people. Unless you are a microcap hedge fund yourself, you can almost never win a battle against a powerful microcap hedgie that is shorting the snot out of your beloved stock. Remember, this is an “axiom” that stands on its own. I will not seek to prove the validity of this point to you. You must simply either accept it or reject it.

6. The Glass-Half-Empty Axiom
Bashers on message boards are a very real force to contend with and it’s not a coincidence that I’ve put this axiom after the “Vapor Shares Axiom.” It is easier to get a person to sell a stock than it is to buy a stock…and they know this very well. If your stock’s message board becomes infested with bashers…be careful! Unless you believe the company has some incredible news that may force these guys to cover or unless you know of a group with mega-bank that is going to push the stock and perhaps force a cover…be careful when playing with shorty. Many of these bashers will try and convince you that they are there out of the kindness of their heart to try and rescue other investors from the perils of a diluting CEO or worse. Nope. Their motives are to bring the PPS down down down. Bashers, in the end, are almost always right eventually because they are bashing OTC issues. They know axioms like “The Center Stage Axiom” too!!!

7. The Supply IS Demand Axiom
I have seen several runs simply because a stock has a low share structure. A low supply creates demand. Know the share structure. On plays where the TA is gagged, plan to exit within hours of entering and play the momentum only unless you have STRONG and SOLID reason to believe the stock will go up. Call transfer agents. Learn what authorized shares, outstanding shares, and float mean. The share structure is the first thing I look for when making a new investment…it should be the first thing you look for too. If a company is not willing to be transparent in this area, you can bet there’s a hundred other areas they’re not willing to be transparent about. I have and continue to invest in plays where the transfer agents are gagged (unable to report to you what the current share structure is) but I don’t plan to stay invested for long.

8. The Don’t Click The Mouse Yet Axiom
Never buy a stock at the high of day after a significant run (good rule of thumb here may be 70-80%). Wait for a pullback. And while you’re waiting, do some due diligence. Check the company’s filings on pinksheets.com or otcbb.com. Read a few of their PRs. Check the history of the leadership there. Call the transfer agent (T/A) and ask for the share structure. And on stocks that are pulling back, buy at the bid. Remember that it takes both bid buyers and ask buyers to make a stock PPS go up.

9. The Morning Patience Axiom
The first hour of the market is “amateur hour.” With most first-hours on hot issues, it’ll either be extreme bid whackage which will cause some panic selling which will create some excellent buying opportunities later in the morning OR it will be extreme ask slappage which will lead to a pullback around lunchtime. I hardly ever buy during the first hour of the trading day, and I’d venture to say 80-90% of the time that decision has paid off. I’d rather watch a few missed opportunities than be stuck in a bunch of “apparent” ones.

10. The Bruised Knee Axiom
There are too many enemies against an OTC issue’s PPS going up to NEVER lose a battle. Know how to take a defeat. You lost. YOU made a mistake. Evaluate what went wrong. Evaluate why YOU lost money. It’s okay to lose money occasionally but it’s not okay to be just as dumb after as you were before! Think, think, THINK! Don’t make the error again. Get smarter. Listen, school is expensive…tuition rates are high! If you want to make money trading the OTC you had better plan to spend the first year in school.

11. The Show-Me-The-Money Axiom
I once asked a poster that was complaining about getting lied to on a message board: “Are you stupid in any other areas?” Seriously folks, everyone on a stock message board has an agenda…including ME. Including YOU. Consider how often your posts are seasoned with fiction and/or things that you simply DO NOT KNOW TO BE CERTAIN. Consider that you have most likely served up a poo-poo platter covered thickly with powdered sugar. Trusting stock message boards for accurate due diligence is like trusting the National Enquirer for accurate UFO sightings.

12. The I’m-Rubber-And-You’re-Glue Axiom
Develop thick skin if you plan to post on stock message boards much. ‘Nuff said.

13. The Know-Your-Anthropology Axiom
Understand the nature of man! For this axiom, you need to be somewhat of a Christian theologian. The Bible clearly teaches us that mankind is not naturally good…he is naturally evil (Psalm 14 is a good place to start). The word Christian theologians use to describe our condition is “depravity.” Because of the fall of man, we are morally corrupt in every part of our being and tend toward wickedness (i.e. greed, theft, lying). We stand in need of redemption from a Savior. So understand that you are playing amongst people (including yourself) that are not naturally good…they are naturally bad. In other words, you’re playing with fire. Lies, half-truths, and misrepresentations abound in the OTC world. You better take EVERYTHING with a grain-of-salt the size of Texas. Some posters require more salt than others to digest. Be an evaluator of people. Learn how to ask the right questions. Make sure your yellow flags and red flags are ALWAYS working.

14. The Early-To-The-Party Axiom
Be willing to buy lower what you bought higher. I have often arrived to a party early. By “party” I mean a gathering of people and people’s money that will result in a stock’s PPS going much higher. By “early” I mean I got there before the stock was sitting at a low. I am always somewhat discouraged when a purchase I made continues to go down. But if I have done solid due diligence in the company, I often take it as an opportunity to add more shares cheaper and lower my average. In other words, don’t look at your initial investment as dead money and hope that it goes back up again so you can get out. Average down, do the due, and then promote your stock to others and help jumpstart the party. Be a spark plug.

15. The Next! Axiom
Be looking to get out of an issue the moment you get in. Have an exit strategy in place. By buying a stock you are not entering into any kind of formal arrangement like matrimony. You are an investor and as such your goal is to make money. If your investment should go up within the first 20-30 minutes of purchase why is it any different taking some profit then as if it took 20-30 days for it to go up? Get in. Lock in profits. Ride freebies.

16. The Grow-Up Axiom
Somebody once said: “If somebody screws you once, shame on them. But if somebody screws you twice, shame on you.” In the OTC world I would modify it a bit to say: “If somebody screws you once, shame on you. If somebody screws you twice, you really are a moron.” Take responsibility for ALL your investment decisions. Almost nothing ever happens as planned or hoped here on the OTC. There are too many enemies against making a stock’s PPS go up. If you’re going to play the game down here…you better be ready to accept FULL and COMPLETE responsibility for EVERYTHING YOU DO IN THIS INVESTING REALM. Point the finger of blame at only one place: yourself.

17. The Ask-Yourself-Why Axiom
Understand that many of the people encouraging you to buy an issue are compensated promoters whether they disclaim it or not. Most times they do not have your best interest in mind, they have their best interest in mind cause they’re sitting on a mountain of stock and can’t wait to turn paper into cash. It has been said that “the man that can answer the question ‘what’ will always have a job but the man that can answer the question ‘why’ will always be his boss.” Be continually evaluating EVERYTHING by asking questions that begin with “WHY.”

18. The What-Was-That-Again? Axiom
Understand you are almost NEVER getting the whole story. The only way optimists will survive in the OTC is if they become compensated promoters. Pessimists can either become paid bashers or fast flippers. The OTC calls for realism. Be a realist. To be a true OTC realist you need to know and understand all that you are up against to make a stock’s PPS go up.

19. The Public-Versus-Private Posts Axiom
Many of the people pumping stocks are stuck in them and want to inspire a whole new wave of bagholders to come take their place. Often times what is being said on the public message boards is completely different than what those same posters are saying behind closed doors. Realize this. Digest this. Embrace this. Don’t be naive.

20. The Buy-The-Story-Not-The-Company Axiom
So you bought a stock because of a solid PR that came out. Cool. Why did you buy? Because of the story. Do you really know anything else about the company? Is it real? Do they have a big building? Do they have equipment? Are they producing? Forget all that. In many ways it is irrelevant. If you are going to invest in the OTC you had better learn to invest in STORIES. Now, ironically, one of the dictionary definitions for “story” is “a lie or fabrication.” Do you really think that you are investing in the same caliber of companies on the OTC as you would on the NASDAQ or NYSE? Don’t be naive! Do you think what your company outlined in that lovely PR is really going to happen? Two words for you my friend: SAFE HARBOR. In the OTC you are investing in POTENTIAL ALONE; therefore, be a discerner of the POTENTIAL OF THAT COMPANY’S STORY. What has great potential? Water to China? American Idol in a 3-D world? Gasoline replacement in a weed? Oh yeah baby! All those STORIES have great POTENTIAL. But there’s a monster “IF” involved in every one of those. After some time, the reality that the “IF” is gonna stay a big “IF” sinks in and the stock PPS encounters a slow death. Sadly, some of the really real OTC companies go unnoticed because they do not have a great story with potential. The term many investors use to refer to the story is “kool aid.” Does your stock have good “kool aid?” Well, does the potential of your company make you want to buy it? Does it make other want to buy it? I try to avoid investing in OTC issues that do not have good kool aid flowage or the potential for good kool aid flowage. Wow. What a concept. On the OTC sometimes you have to invest in the POTENTIAL POTENTIAL of a company. (That last sentence wasn’t a misprint. Read it twice if you need to.)

21. The Don’t-Gamble-Away-The-Mortgage Axiom
You *should* expect to lose your entire investment. You *should* expect to lose more money than you make playing OTC issues until you wise up, learn these axioms, and behave according to them. If you are playing the OTC to try and make some quick money to pay off a debt, good luck with that. Unless you are an experienced OTC Jedi Master that does this for a living (and I’m by no means saying that I am one or that I have arrived!), you better ONLY USE MONEY YOU CAN AFFORD TO LOSE.

22. The Dingleberry Axiom
This is the term I save for bidwhackers. Realize that the OTC market is unfortunately full of people that don’t understand the concept of selling at the offer. They are more than happy to whack out the bids on an issue for their lunch money. Realize that usually the longer an issue stays in the spotlight, the more problem it is gonna have with dingleberries, er, whackers.

23. The Bid And Offer Axiom
Level 2 is often the truest of truths in the OTC. It tells a very accurate story. If you cannot afford to spend your day glued to L2 watching the issues you’re trading…you shouldn’t expect winning trades on the OTC. I simply cannot stress enough the importance of having LIVE Level 2 and understanding it. Spend some time paper trading which watching L2s. Practice. Practice. Learn. You just gotta understand what the Level 2s are telling you. Some of my friends would also come in here at this point and say it is not only L2 it is also the chart. I would argue that it is MORE L2 and LESS the chart. By understanding and watching L2 I feel like I can identify dilution much faster than by simply looking at a chart and all its indicators.

24. The CEO Is A Scumbag Axiom
Now I know we’re all quick to defend our favorite CEO…but the truth is he or she is a scumbag. Now what level of scumbag she or he is I cannot say…but with confidence I can say that every OTC CEO is a scumbag. Deal with it.

25. The Know Your Friends And Enemies Axiom
You will have a hard time succeeding down here without friends. Any amount of public success will bring you more friends and new enemies. Understand which is which. Keep your nose clean. Loose lips sink ships. Know when its time to sever a relationship. Know when its time to repair a relationship. Know your associates.

Now, I must ask you, knowing all of the above, do you REALLY want to mess around with penny stocks? I mean…really???

Okay.

Those of you that have never traded in the OTC or are just beginning to trade down here and are right now shaking your head and thinking that you somehow transcend these axioms…you will have to learn the hard way. Traders like me will end up with your money. I want to thank you in advance for helping build my portfolio.

Those of you scared out of your gourd right now…GOOD. You should be. You should realize that you’re absolutely nuts to be risking money down here (and I use the term “down here” on purpose) in the OTC!!!

Investing in the OTC is very risky. It’s riskier than Alaskan King Crab fishing! But the rewards often outweigh the risk. The lure of monster profits is too much for many of us to say “no” to. The idea of finding that one true gem in a million that becomes the next Yahoo is too strong a draw for many of us to avoid. The surge of adrenalin that comes when profiting 100% on your money within the same hour you made the trade is addicting. The fun that comes from finding friends and having a successful trade with them is indeed AWESOME.

The OTC is a crazy world that attracts some pretty crazy people…and yet I have chosen to live in this world…I have accepted the consequences of investing in the OTC. I feel safer putting my money in an OTC issue than a NASDAQ or NYSE issue because I understand the OTC.

I have written all of the above as a student, not a teacher. I will always be a student of the OTC…ever learning. I do believe that is a good attitude to have if you want to truly be a successful OTC trader/investor. I do hope that some of what I have said above will help you retain and/or build your bank!

If you want to quibble about something I’ve stated above or you’d like to tweak something to make it a little more accurate…please feel free to come and engage me on my Van Scan board here.

10 Advanced OTC Axioms (a work in progress)

by Vantillian

These new “advanced” axioms are another humble attempt to help folks that are crazy/daring/reckless/stupid enough to buy penny stocks. Why God made so many of us I’ll not know this side of heaven. wink

I still consider myself an OTC “student” as opposed to “master”. But I’ve got several years of OTC (think “penny stock” whenever you see “OTC”) experience under my belt, some scars, a few trophies, and I’ve diligently and consistently sought to approach OTC trading and investing philosophically where using fundamental, bedrock, axiomatic truth results in the best market decisions.

(I would exhort you to take a break if you think you’ve arrived.)

Remember, an “axiom” is a principle or truth that stands alone without the need for proof. They just are. Abraham Lincoln might use the phrase “self-evident” to describe axiomatic truth. So, I don’t seek to present a case with well-structured arguments to “prove” these axioms…they are designed to stand alone and to either be accepted or rejected. And, if accepted, to serve as the foundation of one’s thinking and decision making on the OTC. Build your structures upon the solid ground of correct and accurate truth! Consider these axioms as sunglasses with colored lenses that will filter/color/define everything you see across the OTC landscape. We all work from mostly the same pool of facts and data…how we interpret it all makes the crucial difference.

There will be some overlap between these axioms and the other axioms, but that’s okay.

1. The Pigs Can Fly Axiom. Anything can run! I have basically stopped “warning” people about scammy, scummy, crummy companies because there have been several times when my warnings inadvertently kept people from making dough as the stock went through the roof. Anything can fly! The nastiest wart-covered, fat, sloppy mess-of-a-hog can grow wings if some hedge fund or some promo or some inexplicable force gets behind it. This is part of the allure of the OTC, I guess. Sometimes things happen in pennyland that leave even the most seasoned veterans slack jawed. You will never master the OTC for this reason! The law of gravity sometimes vanishes for an indeterminate amount of time but it always returns with vigor at some point. Sometimes, the really scammy companies run like the wind because you’ve got a fearless, no-conscience CEO tossing out insane revenue projections and/or fictitious buyout offers and/or anything that keeps the shiny object attractive just a little bit longer. (Also, understand that many times those posters yelling the loudest against scammy companies are trading the stock too! Perhaps it makes them feel better about their profits. Who knows. Where there is volatility, there is money to be made.)

2. The Horse Apples Axiom. This axiom is closely related to the Pigs-Can-Fly Axiom. Realize that penny stocks are like dung. All of them. If you have chosen to buy a penny stock then you have chosen to purchase poo-poo. Now, sometimes crap can make people a lot of money (think fertilizer companies and/or Mad Max Beyond the Thunderdome), but when you position yourself to defend or support your favorite penny stock company what you have essentially chosen is to become an advocate for doo-doo. I know this is a troubling mental image but it is accurate. “Hey, it’s crap! Don’t buy it!” insists the do-good crusader. Yeah, we know. They *all* are. What matters is if it will MOVE. What matters is if there is POTENTIAL for gains/volatility there. What matters is what the masses BELIEVE. What are you going to do Captain-Save-The-Planet? Tell them how bad that poop smells compared to that not-so-bad smelling dung over yonder?

3. The Socrates Axiom. You can’t really be sure of anything. You will become a savvier trader when you embrace this. In the perception-driven world of the OTC, I would have to agree with Socrates that purported that: “the only true wisdom is in knowing you know nothing.” (Debating whether or not you can really know for sure that you know nothing is another matter. Just work with me on this.) You can’t be sure of the share structure. You can’t be sure of that large European holder that you just *know* is waiting to sell his eleven million shares until after the stock hits a dollar. You can’t be sure of the guy/gal that gave you the tip. You can’t be sure that the numbers in the press release are correct. You can’t be sure how much stock is going to hit the street next week. Understand that non-dilutive contracts often mean absolutely nothing to these penny CEOs. Should a marketplace like this actually exist? That’s a good question, too. But for now, it does, and there is money to be made on it for those that understand it by never understanding it.

4. The Share Swelling Axiom. Every stock gets diluted, period. If it’s not the company diluting, it’s ancient restricted shares coming off restriction. Or maybe it’s an escrow account that managed to stay hidden from the latest NOBO. Or maybe it’s an old cert some funder or accredited investor forgot about in his filing cabinet and he just found it. If it’s not one thing then it is another. There are many clever and creative means whereby the float on your cherished stock can GROW QUICKLY. Trusting that the stock’s float will remain stable is like having a tailgate party on a small lake that has quickly frozen over, inviting the entire town to come out, and trusting that the ice will hold up under the weight. Ain’t gonna happen. Sure, you’ll have a great time on the ice for awhile but something’s gonna give. When a stock is trading at a high price per share and there is liquidity at higher price ranges, the temptation is overwhelming for someone who has the power and ability to add shares to the float to do so. Oftentimes, stocks can and do go up when there is responsible dilution. And sometimes they even go up with irresponsible dilution (see Advanced Axiom #1). Penny stocks *all* dilute folks. Why would they be putting out press releases and hiring IR firms and shucking rumors if there wasn’t money to be made. And how do these companies make money? After all, they went public to raise money…and the way making money is done is through the *sale of more shares.* All of them dilute…even the ones that proclaim loudly that they are doing a share buyback. Think: how much of a buyback is it if they dilute twice as many as they buy? Maybe you’re a noobie to OTC investing and you’re thinking: “People would actually do that?” Yes, yes, YES they would do that (and they DO)! In fact, the louder the company and/or posters insist that the float is stable the more leery I become. Recently I got my butt handed to me because I neglected this axiom and boldly challenged a poster about the share structure of a stock I persisted remained unchanged. The very next day the transfer agent was called and we discovered that the scumbag CEO had diluted by about 5% of the outstanding. There’s always a reason why your favorite stock is getting buzzed about. Even if a stock’s run starts out as purely organic (which I believe can and does happen at times), understand there are forces out there that can add supply in amounts that will utterly cripple demand.

5. The Friends and Family Axiom. Sometimes the pre-promo *IS* the promo. Do you understand what I mean by “pre-promo?” Here’s an example of what I mean: “Hey bud, head’s up on XYZX. Hearing massive push coming next week with loads of overseas money coming into it.” If you’ve been online for any amount of time you’ve likely received a private or public message similar to this! Understand that sometimes the friends and family (i.e. “pre-promo” or “pre-push”) program IS the program. In other words, sometimes YOU are the promo without knowing that you are the promo. Your dollars. Your money. Your stupidity. You bought in on the hype and hope of a promo but you were the promo. The push that is coming is happening right now. Today! By YOU. When some friendly tipster tells you they know a push is coming on some ticker, it’s time to start asking A LOT of questions before you buy unless the rumor originates from a semi-trustworthy source. Which, when considered carefully, the idea of a semi-trustworthy source is a misnomer because he/she is likely trusting an altogether un-proven, un-trustworthy source for their information. Remember, the information you receive is likely two or three steps removed from the origin. And many times the people that are the origins of information would make the devil blush. Digest this. I’m trying to help you here. This is not a friendly world.

6. The Profit Axiom. If you’re not selling, you’re not making money. This axiom is not original with me but it is so good and true! Evaluate your trading activity over the last 2-3 months. How many bags are you holding because you were holding out for more profit? If you are holding bags that could’ve been sold for a profit, shame on you. Seriously, that’s just not good investing. The future is now. What are you waiting for? If the stock went up 300% over a period of years what would you do at the end of that time? Take profits. So why is it different for you to take profits a few days (or perhaps even hours) after you purchase a stock? Think in percentages. All pigs eventually get slaughtered. Good rule of thumb is to take some profit at 50% and some at 100% and then ride freebies. Be a disciplined person in an undisciplined world. You will win.

7. The Matrix Axiom. Discipline your mind to think *reality* though you invest in a realm almost exclusively dominated by *perception.* Why? Because “perception” can only take you so far. It’s Wonderland! But it sure seems real for a time! It’s like the guy that married a beauty queen. His perception of her was that she was staggeringly gorgeous! But the morning after his wedding night he woke up to reality in his bed. She didn’t wake up a beauty queen! It took a lot of work! Think of the OTC as “The Matrix.” Remember when Neo would get plugged in to the Matrix and visit a world that was total perception? You need to discipline yourself to view OTC life through that mindset. It’s. Not. Real. But it feels so real to so many that perception does impact aspects of reality. What is real? Money. Numbers. People. The OTC is a world of perception that greatly impacts the real world of money and numbers. Understand which is which. Don’t confuse the two. Don’t lose yourself. Swallow the blue pill. Remember, perception eventually comes crashing down and reality wins every time.

8. The Ebb and Flow Axiom. Think of each stock, each trend, each fad as having a window of time. Once the hub is seriously buzzing with the latest trend (such as “Q” stocks or “D” stocks) it’s time to start looking for the next “hot” thing. The essence of life is motion and change. Without motion and change there is no excitement, no buzz. Novelty rules the world. Most of these things tend to cycle.

9. The Hero to Zero Axiom. Nobody stays hot forever (or for very long). If you think that you have found that guy who never makes a mistake, that guru, that golden goose…you have deceived yourself. If your “big gun” is currently blazing hot…ride the wave but don’t be left holding the bag. The most undisciplined investors stay dumb on purpose. Most investors are lazy. They are some of the laziest people I’ve ever met. They want to turn $1,000 into $10,000 by doing nothing but waiting a bit. And they want to find the next Jim Cramer to tell them where to put their initial $1,000. That’s lazy. But it’s not going to change. Some of the truths of these axioms rub me the wrong way as I type it, but I can’t change reality. The more that I can embrace these truths, remember them, and act by them…the better investor I will be.

10. The Teamwork Shmeamwork Axiom. Teamwork on the OTC only works when there are positive vibes and the stock is uptrending. Why? Because those smart enough to realize the value of networking with other investors are also smart enough to realize those very same investors cannot be trusted. Private Ryan never gets searched for in the OTC war. Anyone that is pitching ideas of “nobody gets left behind” or “I will be the last one out” or “none of us are selling until $X amount” should not be trusted for long. I know this is harsh and will step on some toes. You, like me, have probably bought stock based on claims like this. But sometimes the truth hurts. I do not trade and invest to make buddies and friends. I trade and invest to make money. And as such, looking out for my own portfolio is the most significant factor when buying and selling securities. What is your most significant factor? Some of you may recoil a bit at this axiom and look for friendlier words from more cheery places. That’s okay, but please know this: The OTC is a battleground. People are fighting for money. Some people *kill* for money…so, deceiving you through kindness, notions of teamwork, or guilt-for-selling is STANDARD OPERATING PROCEDURE for more “leaders” here than you ever dared dream. Bottom line: Don’t get your need-to-belong and relational itch scratched here. Instead, find a good Bible teaching local church.

Penny Stocks Scam or Misunderstood

Leave a reply

December 15, 2014

Do you feel most penny stocks are scams? You’re not alone as most penny stock traders agree that 99.9% of OTC penny stocks are destined to fail or go to no Bid. Notice the OTC emphasis on the statement. The OTC isn’t the only place to find penny stocks however in my opinion!

Most traders can’t agree as to what is a penny stock. For example, the SEC has stated its thoughts on what constitutes a penny stock in the various stock boards or exchanges of which a company can trade on here. But I consider a penny stock as $10 or less, and take the word “generally” in the SEC’s definition to not be confined to $5 or less, opening up all US boards and exchanges as a trading ground. Some well known traders feel $5, $1, or even $.01 or less are penny stocks. You decide for yourself because it’s your trading style.

Trading choices among the OTC, with its 3 tiers, NASDAQ, or the NYSE opens up many trading possibilities but also the need to get acclimated to the various environments, traders, liquidity, and tactics employed. The point of this post is that some penny stocks can uplist and improve long-term. It takes hard work and research to find long-term penny stock targets so many traders turn to promoters who may offer quick gains (or tremendous losses).

Stocks that fell to the verge of bankruptcy to penny status but came back:

MSN Money: 9 Penny Stocks That Didn’t Stay That Way

Most of the stocks listed in this article, such as Monster Beverage and Pier 1, fell from dollar land to penny status, on the verge of bankruptcy, to only come back to their prior pps levels.

MarketWatch: 2 Penny Stocks That Could Have Made You Rich

This article discusses Concur Technologies and General Growth Properties decline and recovery.

A quick approach to finding a penny stock gem:

Forbes: Fear Not Every Penny Stock

Jordan Terry, with Forbes, starts with the fact that the nature of penny stocks is very risky due to liquidity and pps allowing unscrupulous actions to occur to manipulate the pps. He suggests limiting one’s risk through stop losses and limiting the size of investment according to trading volume.

Jordan switches gears quickly to evaluating companies from a bottom up approach to sift through penny stock targets to find a possible gem:

Utilize Porter’s Five Forces Analysis.

+ Competive rivalry in industry
+ Bargaining power of suppliers
+ Bargaining power of customers
+ Threat of new entrants
+ Threat of substitute products

Nuvilex was analyzed by Jordan and he found overall the company was an 8 out of 10 for the forces analysis. What stood out to Jordan was Nuvilex’s technology that seemed above competitors capabilities. I’d recommend brushing up on doing a Porter’s forces analysis as Jordan doesn’t go into many details. Jordan ends quickly and leaves out a few due diligence tips I would perform such as:

Basic Due Diligence Points

+ Is a product or service being sold and do customers like it
+ Who is management
+ How is Management communication with stakeholders
+ What is the share structure
+ What is the split history and share structure changes history
+ Are filings on time and audited
+ Perform quick financial statement analysis using ratios and compare to other penny stock in the industry
+ Debt info and shares issued so far

Many traders skip fundamental analysis because some of the basic items above are missing. Some traders just use chart analysis and level 2 service to estimate whether buyers or sellers are in control of the pps.

How to find recent uplisters and IPOs:

Now that we’ve gone over some penny stock possibilities for long-term success and some basic due diligence points how do we find these penny stocks to begin analysis? The answer is at the source of where penny stocks reside and by using stock screeners.

iHub: Superstar Uplister board

The Superstar Uplister board was very active from 2010 to 2013 and gave weekly updates of OTC penny stocks that either uplisted or were in ten news as about to do so. Moderators of the board have perused projects elsewhere in 2013 but I like to check in occassionally to see what’s new. Trading OTC penny stocks that are about to uplist is a strategy on itself.

Here are a few ticker examples with pps past and current:

GLOW 12/15/11 $2.10-> $1.38 (high $3.70)
RLGT 1/11/12 $1.50-> $3.08 (high $3.50)
HKAC 2/1/12 $9.70-> $9.93 no volume
CUI 2/17/12 $6.10-> $7.00 (high $11.34)

OTCBB: Daily Graduation List

Here are some penny tickers I followed on the OTC before their uplisting:

PFIE 3/27/14 $3.50-> $3.85 (high $5.97)
ENSV 3/10/14 $2.45-> $3.70 (high $3.70)
LBMH 11/20/13 $2.30-> $3.46 (high $6.00)

This OTCBB list is confirmation of an OTC penny’s actual uplisting.

NASDAQ: IPOs

NYSE: IPO Index

The initial public offerings can be good sources of new stocks trading on the NASDAQ or NYSE stock exchanges. The chances of being $10 or less are small but do occur.

So how can you find penny stock that are $10 or less? The answer lies with a stock screener. Stock screeners can be found online, through your broker, or via smart phone apps. These screeners also offer a great deal of screening capability besides just stock price so feel free to experiment with them to meet your needs. Here’s a list of sources I use for stock screeners:

+ Barcharts.com and the app
+ stockcharts.com predefined scans
+ FINVIZ.com stock screener
+ Stock Station and Stocks + Options Stocks Live apps by Mobile Interactions LLC (big board tickers only)
+ Stocks Live apps by Cinnamon Mobile stock screens called “activities” (all penny stocks available)
+ Follow a trading group, such as mine via GroupMe by e-mailing me your interest

So, are you beginning to get a feeling that not all penny stocks are scams? That some OTC companies can do better and move forward to the big board exchanges, or existing big board companies can stumble only to return to former glory?

Penny stock trading offers many trading strategies with many traders working to provide info or to deceive you. When group think starts to set in I generally begin to question my existence. Not all penny stocks are scams and it is a challenge to be accepted to find the diamonds in the rough that will aid in garnering trading gains.

toohightoolo

Trading journey to financial freedom

Tag Archives: pennystocks

OTC QBs and Scanning

OTC QB UPtrend & TA Cheat Sheet

Spotting Dilution

Lucky 7 Penny

Stock Rules/Axioms

Rule 2: It’s OK to Pay the Taxes

Rule 3: Don’t Buy All at Once

Rule 4: Buy Damaged Stocks, Not Damaged Companies

Rule 5: Diversify to Control Risk

Rule 6: Do Your Stock Homework

Rule 7: No One Made a Dime by Panicking

Rule 8: Buy Best-of-Breed Companies

Rule 9: Defend Some Stocks, Not All

Rule 10: Bad Buys Won’t Become Takeovers

Rule 11: Don’t Own Too Many Names

Rule 12: Cash Is for Winners

Rule 13: No Woulda, Shoulda, Couldas

Rule 14: Expect, Don’t Fear Corrections

Rule 15: Don’t Forget Bonds

Rule 16: Never Subsidize Losers With Winners

Rule 17: Check Hope at the Door

Rule 18: Be Flexible

Rule 19: When the Chiefs Retreat, So Should You

Rule 20: Giving Up on Value Is a Sin

Rule 21: Be a TV Critic

Rule 22: Wait 30 Days After Preannouncements

Rule 23: Beware of Wall Street Hype

Rule 24: Explain Your Picks

Rule 25: There’s Always a Bull Market

Penny Stocks Scam or Misunderstood