Over the last eight weeks [June, 2006] I've been spending a lot of time reading articles describing the current
market conditions...trying to figure if it really affects penny
stock investors.
Are we in a bull
market...are we wading into a bear
market. Or is the recent rally just a dead-cat bounce?
The dead cat bounce refers to a short-term recovery in a declining trend. There's a (relatively) old saying in investing: even a dead cat will bounce if it's dropped from high enough.
No matter how you slice it...I'm not sure it even matters to penny
stock investors like you and me.
For example...
stocks surged in Japan this week as reports showed growth in manufacturing and exports.
Markets rose across Asia as investors were encouraged by Wednesday's gains on Wall Street.
Strong earnings reports from two bellwether
stocks gave penny
stock investors hope that rising interest rates wouldn't kill profits. The recent sell-off, said one economist was "just turbulence."
The turbulence, it seems, is continuing on this side of the pond. U.S.
stocks traded flat to lower Thursday as the
market took a breather as higher oil prices and downbeat economic data curbed Wall Street's momentum. So, what are we to believe, is the
market heading up...or heading down?
How does the
market look in general terms? As far as
stocks are concerned, the S&P index is up just 0.3 percent for the year, the Dow is up 3.4 percent and the NASDAQ is down 2.9 percent. Not sparkling data.
But for penny
stock investors, the recent roller coaster ride that many seasoned blue chip investors are reeling over, is just par for the course. We know that a penny
stock is often volatile and just as unpredictable.
While a penny
stock may be more vibrant when the
market is upbeat, in general, a penny
stock marches to its own tune. Why? Few investors venture into the field of penny
stocks because they are either unwilling or unable to do the work required to accurately predict what these shares may do.
By their nature, it is nearly impossible to know what price a penny
stock share should be trading at, and conventional financial ratios and industry comparisons are rarely effective measures for realizing a penny
stock's value. Large one-day percentage gains and losses are not an uncommon occurrence for penny
stock investors.
So really, bull, bear or cat...it's just another day at the computer screen for penny
stock investors. The work may be fun...but it's not easy. Of the 14,000 public companies in the U.S., about 3,300 are considered penny
stocks that trade on the OTC Bulletin Board operated by the NASDAQ.
Their visibility is low, chances are you've never heard of their CEO and I doubt they have any institutional following. And while they're highly speculative, the more promising ones have a targeted business plans, and solid positions in niche
markets. And for now, they're flying under the radar of Wall Street
So what do you do in an unpredictable
market like the one we're in? Continue applying the same principles you've always used when searching for that untapped penny
stock. And enjoy the volatility.
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