To OTC Journal Members:
 
 

The Bigger Picture

Mr. Toad's wild ride has decided to plague the market after months of a slow and steady incline back to pre-crash levels. As I write, the major indices are doing everything they can to stop the bleeding from Friday's perceived Egyptian meltdown.

I received a few emails from readers over the weekend asking for my opinion on the markets going forward, so I want to take this opportunity to share my thoughts on the major markets near-term outlook and provide readers with updates on some of the recent trading ideas I've put out there.

First, let's not try and dissect what Friday's action is attributed to because honestly, it doesn't really matter. On the surface, most would think it was Egypt, but let's face it... this market is due for a correction regardless of what's going on in the Middle East. Nothing goes up in a straight line and when it does, there's usually a cause for concern.

Although I'm absolutely a long-term bull, I think Friday was a strong signal we're in for a nice little pullback. Nobody (other than short sellers) generally welcomes a pullback, but I'm confident that this will end up being very healthy, allowing the market to consolidate for another leg up in the latter month of this year.

If this pullback can get a little steam, I think the S&P 500 could shed enough to bring itself back to the 1200 level. This would be around the 200 Day Moving Average and from there, we'll see how it goes. That could prove to be a great entry for those who have not participated much in the market of late. For now, let's stick with trading ideas and shy away from entries into longer-term investing ideas.
 

Thoughts on Trading vs. Investing

Let me begin by saying trading ideas are NOT investing ideas. I can't tell you how many times I've put a trading idea out there for my readers to make some money on and I inevitably end up getting emails weeks and months later asking what they should do with the stock!

It's extremely important to discern the difference between trading and investing. When I'm trading something, I'm not always concerned with the fundamentals of the company or the long-term growth prospects of the company in question. I'm more concerned about other factors like supply and demand for the stock, recent events, sector interest and other near-term external forces that can affect the stock's price action in the coming days ahead.

When I tag an idea as a trading idea, it's a short-term opportunity to shave some decent profits and move on. Set a pre-determined stop loss AND profit % you're comfortable with and stick to it. Let's face it, when it comes to the market there's an old adage... Bulls make money, bears make money, but pigs get slaughtered. Translated into Layman's terms, when you're up in a trade take your profits and get out. Don't get greedy. And, conversely, when a stock ends up going in the wrong direction, don't be stubborn, take your lumps and live to trade another day. If you find yourself worried and nervous about a particular trade you're in, then your gut is probably telling you it's not a very good idea for you to be in it.

With all of this being said, let's move into updates on our recent trading ideas.
 

Recent Trading Updates

On deck first is Aultra Gold (AGDI). This was the first idea of the New Year and it proved to be an excellent one. I put Aultra Gold out to readers after the close Monday January 3^rd. Over the next three days, the stock continued to run providing OTC Journal Members with roughly a 20% profit to kick off the New Year. Not too shabby for those willing to accept a 20% gain in a few short days.

The stock has since pulled back to around $.45 cents and has recently been hovering around this level on light volume. If you're a fan of gold reversing its recent downtrend, then AGDI is one to keep an eye on.

International Development and Environmental Holdings (IDEH)

Our next trading idea, International Development and Environmental Holdings (IDEH), I suggested to readers post close January 5^th on the heels of our AGDI win.  The stock opened the next morning just under $.06 cents allowing OTC Journal Members to jump in and carve out a 14% gain over a two day period before reversing trend and literally falling apart. Here's a perfect example of taking what you can on a trade and moving on. Some investors spend all year to amass a 14% gain, while we did it in 48 hours.

However, if you were one of the traders left holding the bag due to poor trading discipline on this one, then this idea should have been a big lesson learned. I can't even tell you at this point where I think this one is headed in the coming months ahead because its recent decline is about as ugly as ugly can get. I'd stay away from IDEH until the dust settles.

TurkPower Corporation (TRKP)

We published on TurkPower Corporation (TRKP) post close January 11^th and to be quite honest, this idea just didn't pan out. Although shares of TRKP did jump a little after the open the following morning, the sell side volume on TRKP proved too much for the bulls to manage gathering of any steam. If you stayed in this trade for a day or so, you likely experienced not much in the way of gains or losses on this one but you lived to trade another day, which is what's most important here.

Shares of TRKP appear to be on the mend now, so this idea's future doesn't look too bad if you enjoy the risk/reward of penny plays.

Here Enterprises (HRTE)

I would consider Here Enterprises (HRTE) to be our first real penny stock trading loser of the year. What can I say? I was wrong on this one. I published on HRTE post close January 18^th. The stock gapped way up on the open the following morning and sold off from there, never allowing readers to pick up any sort of a gain. Depending on where you got out, I would guess you lost roughly 20% on the trade IF you're a fairly disciplined trader.

HRTE gives me an opportunity to share one very critical rule when trading penny stocks. PLEASE READ this carefully... NEVER BUY A PENNY STOCK THAT GAPS WAY UP ON THE OPEN. If you don't know what a gap up means, then you probably shouldn't be trading anything.

However, if you believe HRTE has a future, the four cent level on this one appears attractive right now. I've always said when it comes to investing longer-term in penny stocks, it's best to buy them when nobody cares. Right now, nobody seems to care about HRTE.

Diamant Art Corporation (DIAAF)

Last but not least, Diamant Art Corporation (DIAAF). I put this idea out there to my readers post close last Tuesday. Shares of DIAAF opening the following morning around $.12 cents and ran for a 20% gain by the close of market that day. I then published a profit alert that afternoon suggesting that there's nothing wrong with a 20% gain! A perfect example of everything I've been saying all along today.

If you weren't happy with a 20% gain the next day then you were probably punished on shares of DIAAF since then.

The bottom line is this. Remember these two rules:

1. When trading penny stocks, lock in decent gains. 
2. When a penny stock gaps way up on the open, stay away.