VIPM’s Strong Run 04 May 2007

[Guapo]

Thursday 03 May, the day before VIPM’s strong run, someone mentioned VIPM in passing in one of the threads. I didn’t know a thing about the company or stock. I checked the latest price and saw it was .0001 and thought, “Well maybe it will show some activity”, so I stuck it on a watch list and forgot about it.

Then Friday morning a few minutes before the market opened, I saw where VIPM had a new PR.

http://biz.yahoo.com/iw/070504/0248184.html

I read it and thought the PR was perhaps sufficient to make the stock move some, so I started watching it. I was looking to jump-in if it gave signs of moving, ride it up a little and jump off – a quick flip. However at the open bell it took off like a rocket and soared almost straight up. I wasn’t going to chase the stock* so I sat back and watched. I wasn’t prepared for what I saw though.

The close the previous day, Thursday, 03 May 2007 was .0001. Friday morning the stock opened at .0030 and moved rapidly up from there. In less than nine minutes it had hit .0100 and in less than 11 minutes it hit .0150. Say what???? A 9900% gain in 9 minutes and a 14,900% gain in 11 minutes?

Of course, the chance I missed of getting rich off VIPM immediately popped into my head. “Oh, what’s wrong with me? Why didn’t I grab 9 million shares yesterday when it was still at .0001? Or even a measly 3 million shares? That would have cost me only $300. Let me see. 3 million shares at .0150 would have been a profit of $45,000 dollars!! 9 million shares at .0150 woulda been a profit of $135,000. A $135,000 profit in less than a day on a cost of $900! Oh heart, be still!!!!” $135K would have been a good start on the down payment on the 200-foot yacht I’ve been dreaming of for so long.

The stock bounced up and down between .0100 and .0150 until 9:50 AM and then fell for a few minutes when suddenly about 10:02 AM it jumped to .0150 again. It bounced up and down again for a while, hitting its HOD** of .0150 for the final time. The stock declined the rest of the day closing at .0050, a gain of 4900%.

On the surface, it appears I missed a great chance to put some heavy bread in my pocket, doesn’t it? Ah, but only if it were that easy.

The clue that something’s amiss is the large percent gains, 9900% in 9 minutes, 14,900% in 11 minutes and a closing gain of 4900%. Whoever’s heard of a penny stock making those kinds of gains so quickly in one day? Has one ever gained 14,900% in a full day? Perhaps there are a few but I’ve never heard of them.

A penny stock running to a 14,900% gain and closing up 4900% for the day is rarer than a dodo bird, so first we’ll explain the reasons why the stock showed such phenomenal behavior. Afterwards we’ll look at the charts*** and draw some conclusions from VIPM’s run.


If you think about it, the gains shown by VIPM are simply stunning. In fact, they are misleading. Here’s why.

The percent gain is calculated by subtracting the closing price of the previous day (Y = previous day’s close) from the current price (T = current price or closing price for the current day). This sum is then divided by the closing price of the previous day (Y) and multiplied by 100.

%Gain = (T-Y)/Y * 100

VIPM closed at .0050 (T) last Friday. The previous close the day before was .0001 (Y),

So: %Gain For the Day (Friday, 04 May 2007) = (.0050-.0001)/.0001 * 100 = 4900.


Here’s the rub. The closing price last Thursday, the day before VIPM’s run, was .0001.

I took a look at the time and sales data**** for VIPM for the period of 30 April - 03 May. That’s Monday through Thursday, the four days before VIPM’s run. The data wasn't complete but the lowest price where shares were bought or sold was .0028. There were two or three trades at .0028. There were more trades at .0030 however.

Additionally some HSM~ers that have been following VIPM posted that the stock hasn’t been available at .0001 for months. The last trade last Thursday was a small block of 100 shares at .0001. As someone pointed out, this was probably MM~s moving shares around. Nevertheless, this .0001 figure is the closing price of the previous day and is what was used in everybody’s software calculating the percent gains for VIPM last Friday.

So it appears the cheapest anybody could have bought VIPM last week, and perhaps for months, was .0028 or .0030. So if you had spotted VIPM last Thursday and had decided to buy some shares, you would have probably paid .0028 or .0030 per share.

We’ll recalculate the percent gains with the more realistic number of .0030 as the closing price for last Thursday, the day before VIPM’s run.

HOD %Gain = (.0150 - .0030)/.0030 * 100
HOD %Gain = 400

%Gain For The Day = (.0050 - .0030)/.0030 *100
%Gain For The Day = 67

These figures are much more reasonable and in-line with what we expect penny stocks might do in strong runs.

[Guapo]

The stock opened at .0030. According to the time and sales data used for this article, the first trade was actually executed at .0055 with the next order executed at .0065. When the market opened there was one order at .0028. It’s not shown in the time and sales data. I don’t know whether the .0028 trade were the MM~s moving shares around or not. If you’d had an order placed at the opening bell and were lucky, perhaps you could have gotten shares at .0028. Probably you would have paid .0055 for them however.

Let’s assume .0055 was the cheapest you could have picked up shares Friday morning. We’ll use it as the close for the previous day.

HOD %Gain = (.0150 - .0055)/.0055 * 100
HOD %Gain = 173

%Gain For The Day = (.0050 - .0055)/.0055 * 100
%Gain For The Day = -9

So while the numbers last Friday showed absolutely staggering gains, a HOD of 14,900% gain and a 4900% gain for the day, that wasn’t the real world case at all. If you weren’t holding shares at .0001, you wouldn’t have experienced these gains. In fact, if you had purchased shares at .0055 at the opening bell and held your shares all day, you’d actually be down 9%.

In Pennyland, things are not always as they seem.


Ok, onto the charts (shown in Part 4 of this article). Take a look at Chart 1. As you can see the PPS went almost straight up at the opening bell, reaching its high of the day (.0150) a second time about 9:21 AM (Point A on the chart). Regardless of what the percent gains show, that’s a great run.

The stock dropped to .0100 about 10 AM and then turned around and climbed to .0150 again (Point B). After Point B, the run was over. The stock declined overall the rest of the day, closing at .0050.

Take a look at the red down arrows. Those show areas where there was little or no trading. What happened here? Was nobody buying or selling? Regardless, if you had been holding shares the most opportune time to sell would have been in the first 15 minutes of the run and again when the PPS moved up to .0150 the last time (Point B).

If you’d tried to sell in the dead spots, you might have had problems getting rid of your stock, especially if you were trying to unload a large volume of shares. This is just my opinion based on experience with past stocks. I don’t know for sure however since I wasn’t holding any shares and therefore couldn’t sell any. BTW, if I had been holding shares that I’d picked up earlier at .0030 for example, I would have definitely sold in the run-up.*****

Oh, that’s great. You had some shares but how do you know when to sell? You can sell when you’re satisfied with your profit. You can establish specific percent gains or prices where you’re willing to sell at and when those gains or prices are reached, unload then.

Many folks use the charts with indicators to determine when to sell. While I’m not a great believer in charts predicting what a penny stock will do in the future, two hours from now or tomorrow for example, they are useful for determining exit points.

[Guapo]

Ok, what do the indicators show?

First a word of caution. If you’re going to use them, you need to understand what they show. Simply plugging-in a few indicators and making decisions based on what you think they are telling you can lead to serious mistakes. I recommend you devote some time learning TA if you're going to use it in your trading.

Take a look at Chart 2, with the Parabolic SAR indicator. This one is fairly easy to use and you can set it to actually show buy and sell points.

From the left side of the chart, note the first down red arrow. The indicator is telling you this is a sell point. If you had been holding shares you had bought previously, at .0030 for example and had sold here, you would have had a nice profit.

Note the next arrow from the left, an up green one. This is a buy point. If you had purchased shares here and sold at the third arrow from the left, another red one at .015, you would have had another profit.

One word of caution. With penny stocks, simply because an indicator shows you buy and sell points doesn’t mean you can always do so quickly at those spots.

Penny stocks are thinly traded. Even one that runs may not have many trades during the day, relatively speaking. VIPM had 361 trades last Friday. While that’s not bad, it’s not really a lot either. Consider too the majority of the 361 trades were executed in the first 20 minutes of the day. At the first red arrow on the chart, the run was basically over. People were selling then. It’s quite likely you would have had difficulty selling your shares exactly at the first red arrow. I’m not saying you couldn’t have because we don’t know for sure, but it’s a possibility you have to consider.

At the first green arrow, it may have also been difficult to buy shares. From the first green arrow to the 2nd red arrow, the stock moved from about .0100 to .0150 on about 4 trades only. However, if you had managed to get shares at the first green arrow, it appears from the chart you would have had more time to sell them once you got the sell signal at the 2nd red arrow, since the stock fell more slowly from this point, down to the 2nd green arrow.

Many folks prefer to use other indicators such as the MACD and RSI (There are dozens you can use). Chart 3 shows the additional indicators, MACD, MACD histogram and the RSI. You need to use larger more detailed charts if you are going to trade from them but all three indicate a downward trend at Point A, possible sell points.

I’m not a TA expert (technical Analysis – the charts) so anybody skilled with them is invited to post their comments here discussing the best way to have played VIPM last Friday using the charts.

So IMO, if you’d been holding shares you had purchased previously, you could have sold in the run-up last Friday morning. If you had managed to get shares early Friday morning right as the market opened, you could have sold quickly thereafter for a profit too. Picking up shares at the first green arrow on Chart 2 and flipping them may have been possible but difficult I think.

What will VIPM do this week? Another long article is required to address all the possibilities. Nobody knows for sure of course. If you want some ideas to help you estimate what a penny stock will do in the near future, take a look at the article below, especially Part 3.

How To Find And Evaluate Penny Stocks For Trading
Pages 16-17 Posts 157-167

Link to page 16: http://www.hotstockmarket.com/forums...=36435&page=16

Good luck to everyone in their trading.

Guapo

*Chase a stock – To buy a stock at an elevated price during a run.

**HOD – Highest PPS of the day

***Charts – All charts provided by the QuoteTracker program. www.quotetracker.com (The program can be downloaded and used for free)

****Time and sales data – Trades listed by time and volume. (Provided by the QuoteTracker program). You can download the data at: http://www.savefile.com/files/699910

***** - Assuming the philosophy is to trade the pennies, not hold them long-term.