How to adjust in a dead market
stockhaven Newsletter
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Hi everyone, we hope you`re enjoying this extended weekend (remember the markets are closed Monday in observence of Memorial Day).
Links:
1. http://us2.campaign-archive2.com/u562f71d8f3e63a0f3d11c06&idedfa3d8b&e109ef23d If you`ve been following the penny stock market over the last month or so there`s no denying that it hasn`t been too exciting. The liquidity in the penny market that we saw to start the year simply isn`t there at the moment.
When the penny market slows down like it has, there are certain strategies that will work better than other ones. Let us create a common scenario that a lot of you might be seeing play out in this dead market and talk about how we adjust our strategies to still make good trades.
Scenario:
What you perceive to be good news comes out on a stock, so you pull up a level 2 and a chart and think it looks good, it just needs volume.
You stare at the level 2, waiting for volume to show up, knowing that as soon as it does you`re going to jump in and make your trade.
There`s just one problem, everyone else who saw the news is doing the exact same thing as you: waiting. What happens when everyone is waiting for volume to come in before buying Volume never comes in, and therefore no one plays the stock even though it had a potential catalyst (good news).
We`re seeing this a lot in the penny market right now. Why Because there is no sense of urgency because there haven`t been many movers lately. A month or two ago when news came out on a penny stock, you just jumped in right away because they were running left and right.
There was no waiting for volume, because you were afraid if you waited you would miss out on the move, but that is not the case right now. How can we adjust so we`re not just wasting our days staring at the computer Go where you know.
What we mean by this is that everyone likes playing a stock they have played in the past. There`s a psychological comfort level that comes with the familiarity of trading a stock you have traded before. What does this mean for your strategy Play stocks that have recently ran.
The reason we do this is because if there was a lot of liquidity in that stock recently and it ran, that means a lot of traders played it, and that means they`re more likely to play it again. Here let us provide another scenario.
Scenario:
Stock ABC puts out news and stock XYZ puts out news. Both stock ABC & XYZ are in downtrends that look like they could bounce but have not had much recent liquidity. The difference though is that stock XYZ was recently a heavily promoted stock that many traders are familiar with and made money off of where ABC just seems like an ordinary stock with no recent promotion.
Knowing that the penny market is illiquid right now, we`d rather buy stock XYZ because we know its one that many traders have a good association with because they made money off of it. Therefore, they`ll be more likely to buy it for round 2.
For example, there were a good amount of big budget promotions during the March and April months (think STVF, SEFE, LUXR, OREO etc..) that have since fallen well off their highs. In our experience, these types of stocks typically get promoted again and again in the months that follow the “meat” of the promotion, and there is good money to be made off of these additional promotions.
Obviously the “recycled” promotions (as they`re referred to in the industry) do not do as well as the first promotion, but that`s fine.
We`re more than happy to make 20% on a bounce play when the market is as bad as it is right now.
Take a stock like SEFE for example, which was promoted heavily from $1 to $2.80 before dumping to its current price of $0.59. About a week ago though, SEFE bounced from around $0.50 to over $0.80. There`s also SNPK, which recently bounced from $0.10 to $0.18. Those are great bounce plays! So take a moment to look at some recently promoted stocks and look for ones that seem to offer clear support levels below their current prices. Those are the ones that are going to make the best bounces if news comes out or additional promotion takes place.
Look, we`re not saying that any stock that has been promoted before is good for a bounce play. Being in the industry though, we know that the people behind promotions don`t like starting new ones when the penny market is dead.
Instead what these people like to do is recycle old promotions because of what we just talked about in this email while they wait for the market to get better to start new ones. If you have any stocks you think look good for a bounce, send us an email to info@stockhaven.com.
We`re determined to bring some life back to this market and we think there could be a lot of past promotion stocks in play as traders start to consider the strategy we`ve talked about in this email. We`ll have another email out before the week resumes on Tuesday so keep an eye on those inboxes.
Lastly, we`d like to thank all of our veterans and current military personel who we especially remember during this Memorial Day holiday.
We thank all of you for your service.
Sincerely, Your [2]stockhaven.com team 
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