Feeling For the Heat

  October 6, 2011  
XIII, Issue 91

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Feeling For the Heat

So- where’s the heat? Where are we going to find something hot that everyone is piling into.

Well, Sunday before last I broke my streak. After having 4 nice profitable Sunday ideas in a row, it was inevitable we would have one that didn’t go our way.

Sagebrush Gold (SAGE), picked at $1.03 two Sundays ago, September 25- headed South in pretty short order.

I’m going to keep reminding everyone about the SSLs- in case you were wondering or didn’t get it, SSL is an acronym for Suggested Stop Loss. Every time I publish a new idea, it includes the following:

  • The Entry Level
  • The Target Price
  • The SSL (Suggested Stop Loss)

Of those three, the SSL is probably the most important. I’ve proven I can find great trading wins in penny stocks time and time again. But, just like every market participant, there are going to be time when it simply goes against you.

The key to making money is minimizing the losses. That’s why you need to adhere to the SSLs. In the case of SAGE, the entry level was $1.03. The Target price was $1.50. The SSL was $.90. It’s now almost 2 weeks later, and the stock is trading at $.54.

Prior to SAGE, I covered NYXO, AAGC, TKDN, and GCLL- all of which were great trading wins.

So, if you had traded into SAGE under $1.10, and you sold when it went the other way down to $.90, you’ve taken a small loss, and you’re living to trade another day.

On the Entry Level- Entry levels reasonably close to the original price are fine. On the entry, the key is to avoid big gaps. If I’ve suggested a certain stock when the market is closed, if it gaps up 10% or more from its closing price, wait for it to come back down. They almost always do.

On the Target Price- Sometimes they trade up nicely, but don’t get all the way to the target. Don’t be afraid to lock in some or all profits when the stock is 70% to 80% of the way there.

On the SSL- following this discipline is the key to surviving, making a good total return, and living to trade another day.

So, SAGE was a bust, but I made up for it last Sunday with another feature on Midas Medici (MMED)- the company no one knows about, but will deliver $130 million in revs over the next year.

MMED, which I first featured some time ago at $2.50, made a new all time high of $4 on Monday, albeit on very light volume. When I first covered this stock it had never traded, and no one knew about it. So far, going back a couple of months, we’re up 60% at the all time high. MMED is not your typical stock. On very light volume it could move $.50 to $1 in price very easily. The price is like the weather in Montana- if you don’t like it, wait an hour. It’s happening slowly, but the volume is picking up in MMED.

So, feeling around for the heat, here’s a couple of stocks to watch:

  • I still like MMED for much higher levels. Keep an eye on that one and accumulate on pullbacks. The completion of a major project was announced today.
  • Keep an eye on one of ideas from last spring: Vringo (AMEX: VRNG) looks like it wants to get perky. Announced a deal today with Verizon.
  • Also, keep an eye on SAGE- it sold off so violently in last week’s market drubbing that it might actually end North from here.

I’m going to take this Sunday off, but stay tuned for some very exciting updates next week.

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