Occasionally when the markets are slow, like they’ve been recently, I mess around with a penny stock trade to try to make a little extra cash. The risks of complete loss are fairly high with these stocks compared to my normal trades so I don’t “play” with much. This is much more a game to play than a true investing strategy. I don’t have a true penny stock trading system. So, I’m not suggesting anyone else follow my lead on these trades, but since I like to post all my trades I’m following suit here, but don’t confuse this with a how to guide. I don’t do much if any research on the companies. I typically just use the chart and try to pick usual lows and highs and use those as my entry and exit points until I get bored, it stops working or I lose.
I started doing this in the mid-90s when I was brokering electronic components. One of our vendors was All American Semiconductor (Now listed on the pink sheets as SEMIQ.PK). At the time it wavered between $5 and $10 and moved along with the price of DRAM which we tracked carefully. I’d try to get in to make $50-$100 with a small trade that I could turn over in a week or less. A couple of jobs later I worked for a company named COMFORCE (CFS). Most of the stock was held by the owner who I knew wouldn’t sell and what was left to the market bounced around close to $1.00. I’d enter limit orders for $1.00 and then as soon as it hit I’d enter another order to sell at $1.10 or $1.15. I’d make $100-150 per trade and could flip it in a day usually and rarely more than three days. I stopped messing with them after it dipped to the $0.50 range before coming back up high enough for me to break even on that lot. A few months later it was worth more than $3.00 and I missed out. Now it’s back down again.
My play of this time around is SNRV. A friend of mine has been picking some up for months and thinks they’ll do well. I think he’s basing it more on hope than anything else. I missed out on getting any when he first suggested it when it was less than $0.50. It made it up above $2.50, but has come down since then. Yesterday I entered a limit order and it hit this morning just after the markets opened. I bought 1,500 shares for $1.46 and paid $2,197.50 with commissions. The $1.45 seems to be a descent floor for it, so I simply went a penny above it to make sure I got some on a dip. I had planned to put in a sell order for around $1.58 immediately which marked the descending trend line of lower highs, but decided to wait a half day to see how it did since I’m still somewhat new to following it. Instead of capping out in the upper $1.50s like I expected SNRV is currently trading at $1.71. Just under $1.70 was a regular stopping point for a while and today is likely a fluke. I should probably get out here, but now I’m curious if I might end up with a little better gain by waiting. Remember, I’m not recommending this penny stock. It’s just for fun. It’s a shorter trip to my keyboard than to Vegas…
The average volume for this one is just over 5,000 shares per day. In my limited experience with penny stocks I’ve found the thinly traded stocks are easier to bounce in and out of, especially when the bid/ask spread is 10 cents or more. I can see why people get into penny stocks. It can be addictive to watch the things. I can imagine if I had three or four of these going at the same time that I could do alright some days and would think my losses would be made up by the gains on the other ones. That’s too time-consuming for my schedule right now, but it’s still fun to mess around with occasionally.
I do not plan to document each trade I do with this one since it’s fairly off topic for this blog, but I’ll plan to write up a synopsis of all my trades after I move on. I thought it deserved one post to kick it off though. Let me know if you recommend any other penny stocks to watch that are worth $1-2k of a day trade.