ECRY - I Like This Stock!

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A week ago, www.pennystockjockey.com profiled ECRY.OB. And it moved up nicely in the next two days.

Then something went horribly wrong, and it came crashing down to the same level it was when it was profiled.

Was this a bad thing? Perhaps. I mean everyone that bought on that alert had a chance to make money...good money, fast. (Isn't that the best type?) Should it have kept going up? Unequivocally, yes!

But it didn't. Reasons? Could be shorters, could be people that were holding from the last promotion and waiting for liquidity. Could be one shareholder with a big block that couldn't wait. Could be a number of things. Truth is, it doesn't matter why. A better question, is what should be done about it.

ECRY promoters, if you're listening, here's what you should do. First, let shareholders know that if they missed the first round of promotion, that this is a good time to get in...and for those who bought too high, this is a good time to average down.

Second, make damn sure there is Round 2 and preferably even Round 3 to the promotion. It makes no sense to do these hit and run shows. What makes sense is to continue the story once you start to tell it.

Shareholders, here's what you should do. First, call the investor relations line and let them know you're shareholders. Loud shareholders often prompt companies and promoters to get back to work enhancing shareholder value (that's what they're there for, remember?)

Second, if you own the stock, look at averaging down. I don't think this one is heading to the garbage heap. Its got too much going for it, including a kick butt technology whose time really has come, and a TV ad campaign.

Think on it.

Ok, thats my rant for the day.

The Sedate World of Penny Stocks

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On May 17, 2010, I witnessed one of the most sedate days I’ve ever experienced on the market. I operate in the world of penny stocks. Those stocks traded primarily in the Over the Counter Bulletin Board and Pink Sheets markets.

The volume had dried up and everyone kept saying it was due to Europe’s bailout package of the so called PIIGS nations (Portugal, Ireland, Italy, Greece and Spain). I really doubt that since your average penny stock speculator doesn’t play in the same realm as those funds destined for things like bailouts, or mutual funds or even treasuries.

So what do I think caused the dismal volume that day? Simple. The promoters were getting tired. I don’t mean they weren’t working…I mean they were using the same old, same old type of promoting to try to entice speculators into taking a shot on their particular deals.

Let me give you an example. On Friday May 14, 2010, one of the best known and followed email lists in the business profiled a little company that hadn’t traded all that much before. The company, ticker symbol ECRY.OB, shot up from around $0.50 to over $0.70 and traded almost 3 million shares on the day.
On Monday May 17, 2010, the same list put out an alert on another company FLPC.OB and traded about 400,000 shares up to $0.78.

Both are good companies, so what accounted for the difference in interest? I contend it is the promotion. ECRY.OB had, and still has 30 second commercial spots airing on CNBC. It also is an Alliance Partner with Research in Motion (NASDAQ:RIMM). In short, it is doing the right things to convey a sense of stability in a volatile world on an even more volatile trading exchange. In short, it is doing things differently, counting less on faith and more on substance.
No one in their right mind would advertise on television and invite that kind of scrutiny unless they knew they could stand up to the scrutiny and ensure their claims were genuine. I haven’t seen a penny stock advertise on TV for a very long time – years in fact.

So what kind of measurable impact did this have on speculators? On day one of the promotion, the stock traded huge volumes. On day two of the promotion, May 17, 2010, when other issues were struggling for any type of volume, the company managed to trade close to one million shares. Liquidity is the lifeblood of any exchange and promoters provide it on the penny stock exchanges.

Lets face it, liquidity is the name of the game. That’s the whole reason people invest in stocks rather than real estate. So they are liquid and can get in and out at their convenience. Put another way, what’s the point of being invested in anything, even a stock, if the price of that investment keeps going up, but you can never sell it or monetize it in any way? It is absolutely useless.

Penny stock promoters who provide that liquidity deserve our respect. They are the ones allowing efficient functioning of the market.

The DOW’s Wild Ride

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Anyone who’s in the markets noticed that the DOW opened significantly lower on May 6th, 2010. That in itself isn’t a noteworthy anomaly. What is significant is that around 2:30pm EST, the DOW plunged almost 1000 points in about 15 minutes.
It’s the largest single drop in the history of the DOW.
Now its time to put on our CSI hats and try to figure out exactly what happened.
Four possible explanations have been put forward by the pundits. I intend to analyze each one of these explanations, in plain language so that readers who aren’t experts in world economics or fancy derivatives can also understand, in layman’s terms what’s going on.
First, there’s the fat finger trading rumor. Rumor has it that a trader working for CitiBank accidently pressed the wrong button when selling some Proctor and Gamble stock. The trader apparently typed in a “b” for billion, instead of an “m” for million when making the trade.
To this, I say, let’s get real. A seasoned trader isn’t going to make that mistake. And even if he did, as soon as his position was sold, he would’ve corrected for it immediately before he was short an extra few hundred million shares. So I would be really surprised if that’s what happened.
Second, everyone said that concerns over BP’s oil spill in the Gulf of Mexico had something to do with a coming market correction.
Right! BP stock was actually up after the spill?!?! WTF? Its true. Check it. BP has caused one of the largest environmental catastrophe’s of recent times – in Alaska, fishermen are still complaining about the effects of the Valdez spill 21 years ago – and its stock moved up. Either someone has a great insurer, or a great promoter. Either way, it cannot have affected the DOW.
Third, a lot of pundits have pointed the finger at Greece. A Greek default, they say will cause wide spread havoc in the markets and undoubtedly had something to do with the DOW’s fall.
Not a chance. Here’s why. Take a look at history. That’s the first thing that anyone who’s about to lend money, whether its to a friend, a business or a government, is history.
Greece has one of the worst histories of default in the world. Its as bad as Argentina when it comes to default. So no doubt that was already priced into the debt when it was underwritten.
Greece also was in no danger of not getting their bailout package. A unified Europe, the goal of the EU with the Euro, has been an idea that has been around thousands of years…Alexander, Napoleon, Hitler…all had the same dream, although some of those guys turned it into a nightmare.
And lets not forget…the bailout is coming from essentially the same people who are holding the bonds that were defaulted on in the first place…the European community. So they just gave a dying investment a shot in the arm in order to save money already sunk.
In other words, it has very little to do with America and the DOW. Greece doesn’t produce anything besides olive oil. So it imports almost everything it needs for a quality lifestyle. Unfortunately, America doesn’t produce much…so it won’t be hurt by a lack of imports from Greece.
The final reason postulated for the downturn is high frequency trading. High frequency trading is defined as computer trading programs that can execute up to 1000 trades per second! Here’s how it works. Once a lower limit is hit, and a sell order triggered, all these programs execute 1,000 trades per second to sell. This sends the market into a freefall. Until human heads finally notice and put a stop to it. This in my opinion is the only credible explanation.
In my mind this only highlights the dangers of buying and selling instruments and in ways you cannot comprehend. When markets contain so many derivatives that you require complex computer programs that are capable of executing a thousand trades per second, you’re at their mercy.
And its one more reason I prefer the OTC and Bulletin Board markets. There are no derivatives, and no automated software programs trading the market.

Want a Reason to Like Gold? How About Five?

This is the perfect time to get into gold.  Here are five reasons why:

1.       Hedge books close.  Most major gold producers have closed their hedge books.  This implies they believe spot prices to rise, and for those prices to remain stable, or on an uptrend.

2.       The record deficit in the USA has just been increased by $1.2 trillion dollars.  That’s not the deficit…that’s the INCREASE in the DEFICIT. And with four Euro economies on the verge of bankruptcy, there is little choice for investors to run to anything other than gold.

3.       Four more banks have just closed in the USA. That’s 26 bank closures since January!  Furthermore, the US Federal Deposit Insurance Corporation (FDIC) has warned that the pace of bank failures is likely to pick up in coming months.

4.       China’s stimulus package is working.  And China is hedging against the US dollar.  The higher income of Chinese citizens, along with an exploding middle class will increase demand for gold for industrial and consumer applications.  The lower investment in US dollars will leave investment dollars that must be deployed somewhere.  Since they’ve already invested in their own country and partnered with oil rich nations the US has alienated, and given the recent instability in the Euro, the only place China can place all its dollars is in gold.

5.       US investor opinion is bearish on gold at the moment.  Dr. Steve Sjuggerud, of DailyWealth, recently wrote:

“Back in December, the "sentiment surveys" showed investors were at highs for the year. Now that has changed. Two weeks ago, public opinion hit its lowest level since last April (when gold was at its lows for 2009, below $900. Now THAT was a time to buy). That's what we want to see.

Investors have also fled gold stocks since December. For example, the Rydex Precious Metals Fund saw its assets fall by more than half from December to today (from over $350 million to $177 million now). Traders like to use Rydex funds to chase trends. They were bullish on gold stocks in December. Now they've given up on gold stocks. That's what we want to see.

Meanwhile, gold's "price action" is just great right now. The dollar has soared in recent weeks. But gold is soaring more. Also, investors who didn't want dollars now don't want euros either. They don't want paper currencies at all. They're buying gold. New highs are part of bull markets, and gold is now hitting all-time highs in terms of euros. That's what we want to see.

The bull market in gold is back!

Typically, I'll try to find a crafty way to get into an attractive asset. I try to find a way that has extraordinary upside with little downside risk.”

For all the reasons above, I agree with Dr. Sjuggerud.

It’s definitely time to pick up gold stocks.  But why not have an extra layer of protection? When buying gold stocks, the best stocks to buy are penny stocks.  And the best bet in pennystocks are those that will soon be promoted.

A favorite in the running is Source Gold Corp. (SRGL.OB).  It’s got great assay results, is in the right location and has recently come off in price along with investor sentiment in gold.  But as stated the penny stock jockey website, www.pennystockjockey.com, a site that prides itself on choosing stocks it believes are about to be promoted, SRGL has a long way to grow.

“We had a great run on SRGL.  Especially for those of us who got in early.  It’s still up 29% from our entry point.  And it’s got room to go.  A lot of room.  As you know, a stock can’t just keep going up.  It has to go back and fill in the gaps.  That’s what it’s doing today, and maybe tomorrow.  In the next month, I still believe a double is possible from this level.  The research report, available at the Rimini Investments website, www.RiminiInvestments.com, is estimating a short term Estimated Price Per Share Projection (EPPSP) of $1.64, and a two year EPPSP of $2.73.  I’m bidding the stock again at $0.78.”

The stock is trading today near historic lows and just may represent a great entry price into a great stock in an uptrending industry.  

 Definitely a crafty way to enter the market.

Penny Stock Jockey Math

It’s time to make cents of penny stock math.

The one characteristic of all millionaires, no matter what field, is their ability to know when they’re making money and when they’re not. They ensure they’re not being “penny wise and pound foolish.” Unfortunately, most penny stock investors don’t think that way.

Lets do the math. Sure penny stocks are cheap. But only if you buy right and then sell right. So lets review the rules of penny stock math.

Rule 1: Buy right. By this, I don’t mean you have to buy at the bottom (although that helps!). It means buy the right quantity. And its important to use the right broker.

Rule 2: Sell right. By this, I don’t mean you have to sell at the top (although that helps!). It means sell at the right time, and for the right price.

Let me explain further.

A lot of people make the mistake of buying the wrong number of shares. If the penny stock is really cheap, they buy way too many shares. This is not a problem if the promoter is able and brings in huge volume. However, if he’s not able, no matter how cheap the stock is, without volume, you will not be able to sell your position and make a profit.

By the same token, a lot of people make the mistake of buying too few shares. If the penny stock is priced closer to a dollar or higher, a lot of speculators will buy about 1,000 shares or less. This limits your ability to profit in two ways. If the promoter brings in volume, 1000 shares need to rise in price much higher in order for you to make a decent profit. And the small amount of shares all need to rise in price much higher in order for you to cover your commissions.

And that leads to the second part of buying right. Since most brokers/analysts don’t bother with penny stocks, why use a full service firm? A full service firm is fine for your blue chip retirement funds, but for penny stocks use an online firm that charges a low price per trade and has no minimum dollar or share order. This will ensure more of your profits stay in your account.

The ideal number of shares you should buy is determined by your risk profile. If you’re a beginner, you need to balance carefully. Just as a business has to keep a close eye on cash reserves vs. investments for growth, so do you. I don’t recommend beginners put more than $5,000 into a penny stock that’s priced above $0.50, and not more than $3,000 into a stock priced under. This will give you enough shares that a commission isn’t a problem, enough shares to make a profit, but not too many that you’ll be stuck if volume doesn’t come in.

Just as important as buying right, is selling right. Greed is dangerous, but necessary, and naturally comes into play. After all, if you weren’t a little greedy, you wouldn’t be investing in penny stocks. So the best time to decide your exit price is right when you buy. Pre-determine for yourself the kind of return you’re looking for, and the amount of time you’re prepared to wait. For example, if you said to yourself I’d like 20% in one month. Then stick to it. As soon as you’re up 20%, whether its in an hour or a month, get out. If it hasn’t hit your target in the time you’ve allotted, re-evaluate. Remember, its not the last deal you’ll ever be in and every dollar you have tied up is a dollar you can’t invest elsewhere.

When a stock is rising quickly its tempting to stay in, but remember, they can reverse direction just as fast. Its not something you control. The only thing you control is the amount of return you want and the time you’re prepared to wait.

Do the math and you’ll profit more times than not.

Become a member of the Penny Stock Jockey Winners Circle and start trading penny stocks for profits today.

www.PennyStockJockey.com

The Case for Gold

Gold. Everyone’s talking about it, and a lot of people are investing in gold and gold stocks. Even gold penny stocks are doing well. But is gold really a golden opportunity?

I think it is, and here’s why.

You have countries like India and Sri Lanka and China buying gold from the IMF like it is going out of style – it is not really, but much better than holding the alternative – the US dollar. India actually started the buying rally and is being hailed as a visionary as the price of gold has risen spectacularly since its initial buy.

Which brings me to my second point: the Fed. The US Fed is printing greenbacks like they’re free – which they might soon be – leaving gold as the only viable investment option for the conservative investor.

And lets face it, by historic, inflation adjusted prices, the price of gold is nowhere near its 1980’s high. Adjusted for inflation, the price of gold would have to hit $2300 per ounce to match it.

Also several major companies like Barrick and Newmont are eliminating their hedge positions in gold – a huge economic endorsement for the price of gold since it essentially means that the price of their stock will now reflect the price of gold. (No more hedging, get it?). For example, in the very recent past, Barrick was known as having the largest book on gold hedging. It did this to protect its cashflow from unseen fluctuations (read decreases) in the price of gold. So with a hedge, if the price of gold were to decrease, Barrick would already have received a higher profit by pre-selling. With a price increase, it would have lost extra profit, but the hedge would have ensured its profitability.

Now with no hedge, Barrick essentially is betting that the price of gold will rise. Without a hedge, as the price of gold rises, Barrick will capture higher profits since its expenses to mine gold are essentially unchanged. However, if the price of gold drops, it risks cutting into its margins and in a severe case could see losses.

In my opinion, however, large cap stocks are already priced with reserves and revenues fairly stable and estimates readily available. Further, they are followed by so many investors and institutions, that any new demand for their stock is likely to only have a negligible effect on stock price. A small discovery would also have a small effect on stock price due to the number of shares outstanding. They therefore provide no further opportunity to make outsized profits.

So while the world is buying gold, the Fed is printing money and ironically worried about inflation at the same time, the price of gold keeps rising.

The gold market is essentially just that, a market. And as a market, the price of gold is determined by supply and demand.

Gold production world-wide has decreased by nearly 8% since 2001, while the price of gold and gold producers has risen as much as 46% in 2009 alone.

The case for investing in gold stocks, naturally follows the same logic.

To find the current price of gold at any time, just visit www.kitco.com.

And to get our first penny stock pick for 2010, a gold pick no less, subscribe at www.pennystockjockey.com.

Penny Stocks - The Good, the Bad, the Ugly

Most Penny Stock companies start out the same way: An entrepreneur lists a company on a (usually) junior exchange to raise financing for a new venture. If they're competent, they know they'll want to promote the share price so that the stock is worth more than the company. In this way, management can sell its shares to investors and maintain as much control over the company as possible. Then using the capital, and incentivizing themselves with cheap options, management attempts to develop a profitable company whose share price is eventually worth the promoted share price…and hopefully much more.

Most actively traded Penny Stock companies also share most of the following characteristics:

• Marginal or no sales
  
• Marginal or no cash
  
• Non recourse debt owed to "friendly" shareholders without recourse or time for repayment
  
• Little or negative shareholders equity
  
• Few or no assets
  
• Some form of intangible debt or "goodwill"
  
• Few or no employees
  
• An "incredible story with insane potential" to either become massively profitable quickly or to change the world as we know it
  
• Sometimes, a talented CEO or other executive that has a reputation or blue chip experience
  

Before we ask how they can be categorized, we may want to ask...why should we? Because there are significant differences that allow the astute investor or speculator to determine which penny stocks to invest in, and which ones to stay away from.

Since they all look alike, you may ask how they can be classified. Most penny stock investors have been taught to look at management and structure of the company. The truth is, it always, always, always, depends on the promoter. The best company in the world without a competent promoter will not make a dime for anyone, including management and early shareholders.

So it logically follows that the companies we're looking at investing in can be categorized by categorizing the promoters. And these promoters fall into atleast five classes that I'm going to introduce you to in the next series of blog posts. Stay tuned. This will not only be informative and entertaining, but if you get it right, very profitable for you.

Or you can let me do all the work for you and subscribe to my stock picks at http://www.pennystockjockey.com/