Just following the methodology of this thread ————————————————————————— Also if for example I see a company full of Europeans or Asians then I’mnot interested,
There was a time, once upon a time in la la land, I used to have a contrarian trading opinion. In a way you need to be contrarian, other ways it pays not to be and to trade with the crowd. My contrarian trading opinion then was to look for undiscovered stocks. Looking for small caps but just by viewing the charts, not from studying more about the company. The contrarian part was looking at small turnover stocks, stuff that was off the beaten track. There's often a plethora of media news releases on companies and often I would buy something which appealed regarding news. Also often I would get lured by breakouts only to suffer loss as the share price tanked. Overall the results were hit and miss. You probably already know that as the capitalization of stocks increases, in aggregate turnover also increases. Turnover being dollars traded. You probably already know that fund managers etc usually avoid small cap stocks. You probably know that retail traders do not trade size like professionals do. Adding one plus one, we can deduce that small cap stocks will trade small size in terms short term turnover and longer term turnover due to cap and predominant retail involvement. What happens if a penny stock has huge turnover relative to past events and relative to all other small caps? We can assume three things, stock manipulation by lone wolf, pump and dump by media, or institutional involvement because they are drawn in by merit of some particular sort or other. Now comes the part to decipher which is which because if it’s institutional we may want to take the stock more seriously as a trading contender. If it's a lone wolf manipulator, chances are it’s a dummy move and will head opposite. If it's P&D then sometime in the future expect all hell to break loose. If you’re a day trader, fine chase everything but you need to sit at your computer with a beady eye on things and be prepared to move fast. So with penny stocks the first place to look is very high turnover relative to everything else, then filter out the duds. For me entry level is $3mil per day minimum. US stocks would be higher I assume. More later.....
Have a question regarding institutional involvement. For a penny stock to have huge turnover, there must be some public event(news, offering, etc) to trigger it, right? Otherwise, where would the shares come from? So I don't see how institutions can get into penny stock prior to some publicly disclosed announcement (position or negative). It would take them years to accumulate shares. So pumps and dumps must be used to generate enough liquidity for them to either enter or get out. Agree?
Correct. Sellers. I've never mentioned that. Instos for the most part are not getting in early, they are getting in on the announcement and later. What needs to be determined which I have yet to discuss, on an announcement is it mostly retail / daytraders / dumb money / P&D's / instos. No. No.
Remember penny stocks don't necessarily carry more shares than any other stock including large caps, they just have shares cheap as chips, like sub 1c at times. Anyone with clout can buy millions of shares at a time (I have) and its nothing much of value.
The best penny stock primer you can find is a book by Alexander Tadich (Ex stock broker from Calgary Alberta) called Raging Bulls "Outfox promoters at their own game on any Penny Stock Market LOL! I think you got that dead-wrong. The title is RAMPAGING BULLS. Raging Bulls was a scam company which was aimed at rope & doping in newbies to trading during the fad. Their trading methods were bogus, and all their traders actually LOST money. Yet, they charged 4K a year subscriptions, etc. It is reasons like this that I do NOT believe markets are efficient. As has been seen in the last two years as the retailer-hobby-fad has grown, the amount of foolishness (dare I say insanity at times), basically disproves efficient-market-theory.
And by the way, did we mention yet what the definition of a penny-stock is? Because a lot of people don't realize that generally they include any equity-security that is priced at $5 (or lower). At our rate of inflation, don't be surprised when in a few years that definition also includes $10 stocks.