SEX, LIES & THE OTC

I have strayed from time to time over to the OTC market to look at the latest and greatest thing. It's usually a company with a huge amount of posts the night before and a questionable outstanding share count. But this does not stop me from looking.

I am writing this today because I saw an advertisement on the Google News page that talked about how much money you can make on penny stocks. I clicked on because it looked like a news item not an advertisement but I was wrong. In short it wanted me to sign up for some penny stock promotion web site that touts huge returns in a short period of time.

I laughed for a moment and then I thought they are actually right in some ways. The penny stock market in the US that are listed on the OTC or Over The Counter Market can be very volatile and yield huge returns for some. Its almost like the game of musical chairs you played when you were a child. The music plays and people cheer but when the music stops you may find you don't have a chair and your out of the game. Then the music starts again and over and over the game is played. Its not rocket science and if you look for certain clues as to who is about to pop you will probably get in at the start of the run, but can you identify when to get out?

Lately some friends I have in the US have started watching for these certain patterns and have identified a few winners in a row and I watched the formula play out. It reminded me of some of the old grifter street games people used to play to reel in big fish to play along for big money. The lure of easy money is easy to bait out to the public. The American economy has left some traders desperate for a good story. All you need now is a low float company with a thin spread stock and even a large outstanding short position. These can be the ingredients for success.

So to recap you don't find cash on hand or large assets vs market cap situations or even imminent drill results. What you do have in my opinion is group of educated and well funded promoters who time a game right and present up a prize that lures in the fish big or small. The wake of all this is a massive sell off from the promoters who loaded in the days before the run.

When you stop to do some due diligence you find web sites under construction or just closed down. You find the float is much bigger than what has been recently reported and the news always talks of LOI' or MOU's. No real deals just smoke and mirrors for future deals or financing. I even read one company with a $200,000 USD market cap that released they were getting a $60 million loan for their project. Seriously in this economy who lends out money to failed OTC plays with micro caps?

If your going to play try to keep a few things in mind because I will be honest I like to gamble on some of these as well and here is what I do. Find the top 50 board mark stocks, then check the gainers and volume leaders. Check that against recent news and the company web site. Then check the 52 week high and low and if the stock is near the 52 week low and appears to be bouncing off the bottom then I dig a little deeper and take a small risk in the play. I call it the play of the day. I want in and out in 3-4 hours, win or lose. As well the current price for me to take an interest is about .002-.005 and the high should be over a dime with 100 or 200 million maximum shares in the float.
This is not a formula to guaranteed success but it has been the best I have seen and the one that has yielded the most success for me. So to recap you should be doing step one pre-market. Step 2 check who is moving volume off its low in the first 30 minutes of trading then check the latest news. These plays breath in and out as they move so in other words a small move up is usually followed by a modest retrace. When you get that timing down your golden. Once you hit the 3 hour trading mark you have to make a move one way or another.

Have some fun playing with virtual money and see how this technique works for you. I seem to hit a high number of positive outcomes but I don't second guess selling I just run. If news is out then it may only have a 72 hour shelf life anyway so profit is profit. I have seen some stocks trade at 5 cents one minute and 50 cents a couple hours later.

I am not a broker or an investment adviser. I am only offering my opinion on investing in the OTC market. The penny stock plays on any exchange are full of high risk stocks. Some trade on the OTC because they can't qualify to trade on better exchanges. Don't spend more money than you would going to Vegas for the weekend and you will be fine.

Also keep in mind that a lot of companies on the OTC are legitimate and are doing whats right for their share holders. Sometimes the stocks that pop are under total manipulation by traders only and the company has no idea why the price of their stock just jumped 200%. I don't want to paint all OTC stocks in a bad light but you should be aware that stocks that are running on 100% hype may not have any news coming and they count on traders to follow the action. If it just doesn't feel right then you should stay away.

THERE'S A MESSAGE IN THIS VIDEO, DON'T BE GREEDY

CONTENT POSTED ON THIS BLOG DOES NOT CONSTITUTE A BUY OR SELL RECOMMENDATION. MANY OF THE COMPANIES PROFILED HERE I AM NOT INVESTED IN AND DO NOT INTEND TO INVEST IN. THESE ARE MERELY MY THOUGHTS ON MARKET CONDITIONS AND STOCK VALUATIONS. INVESTING IN THE STOCK MARKET CAN BE VERY RISKY AND YOU SHOULD ALWAYS CONSULT AN INVESTMENT PROFESSIONAL BEFORE MAKING ANY DECISIONS. ULTIMATELY YOU ARE RESPONSIBLE FOR CONDUCTING YOUR OWN DUE DILIGENCE AND PROTECTING YOUR MONEY.