An epic example is the day Bank of America
I was waiting for it to close under $5 and this would trigger a massive computerized selloff by these funds; and I would profit huge from this. As the stock closed that day at $5.01, I switched to a long position instead, because they weren't able to close it under $5; the stock soared the next day and following weeks to the $7's, as the bottom had been put in.
Apparently, millions of other traders agreed with me that day; now the stock trades at $12 to $13. Not a bad return just knowing how "penny stocks" and institutional money flow works.
Another example of a legit "penny stock" is Zynga
- Zynga could be a potential buyout target for big social networks.
- Management at Zynga are laying off hundreds of employees and closing offices and games
that don't do as well, and are trimming overhead and expenses.
- The stock is consolidating, momentum had changed to
the upside, possible move back to the $6's or higher.
Typically there are disclosures at the bottom of PR releases for these stocks indicating that the companies are being rewarded, via cash and equity, to promote the shares. Also you will see disclosure mentioning "forward looking statements." Next the stock rises, and they sell their millions of shares into the upward move, leaving sucker retail traders holding the bag.
An example of a hot pump and dump that is soaring, and will get crushed very soon is Goff
Trading these types of solid companies and profiting in a huge way is just being smarter than the average "Joe" who is trading from his iPhone at work and is easily distracted, or than your neighbor who is a finicky daytrader who "dabbles" every now and then in the stock market.
If you follow a specific strategy, such as the ones offered through mentorships at www.csquaredtrading.com, then you can learn to narrow your universe of stocks and stack the probabilities in your favor as you fight the "Retail Joe" trader, and not the institutional money.
--Written by Ben Brinneman in Charlotte, NC
At the time of publication, the author was long ZNGA, although positions may change at any time.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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