Weekly Update Week Ending June 30, 2017

Micro-Caps

I will start this week's blog with a look at a chart of the Venture Exchange. It was back in March when the exchange topped out hitting resistance at the previous high set back in August of 2016 and thus began and slow grind lower, which seemed to affect the Marijuana related stocks more heavily than others in my observations.

The exchange is slowly working its way to support at around the 750 level set back in November of 2016. As the exchange approaches this level I have noticed support starting to come in for many of the Marijuana related stocks as well as stocks in other sectors and is something many of my fellow tweeters have commented on directly to me this week.

Two stocks in general ($MYM.ca and $MJJ.ca) have had major runs tacking on daily double digit gains before hitting resistance and pulling back to support levels. Both stocks generated huge returns for those that got in early and continue to generate big gains for the day traders.

Other stocks in the Marijuana sector that have seen decent short term pops include $NF.ca (which pulled back after running a bit), $N.ca (which showed renewed strength today) and $ISOL.ca joining the group late day.

I am some what encouraged with what I am seeing in the micro-cap sector this week and will be looking to see continued increased volume and trading activity. 

Favorite Trading Setups

This week provided two of my favorite trading setups that I would like to discuss. The first involves a stock that starts to grind lower on no news followed by one seller with a large position throwing in the towel and driving the stock lower.

The first company is $APP.ca (Global Cannabis Applications) and from this chart you can see the stock recently had moved up to the $.12 cent level before starting a descent lower causing one large share holder to throw in the towel on the forth day, dumping shares at $.075 cents. This was at the lower end of the range the stock had recently traded in and along with the volume provided an attractive entry point. I picked up 150K shares and was able to sell 100K shares the following day at $.10 and $.105 and still hold 50K shares at the time of this writing.

This set up works at least 90% of the time for me, but the signal to buy is only one seller driving the price down and multiple buyers stepping up to provide support.

 The second company is $TMD.ca (Titan Medical) and from the chart you can see the stock had a sudden drop due to the announcement of a private placement at $.15. There were multiple sellers driving the price lower than the PP price, keeping the stock price suppressed. This is not uncommon as often their is concern the PP will not be filled at the PP price and might have to be repriced lower. 

Yesterday the stock was selling off with an ask at $.13 when the company announced the PP was closed and filled at $.15. Given the stock was now $.02 below the PP price, the $.13 cent ask provided a very favorable entry point. I did enter the trade at the $.13 price and exited today at $.14 and $.145 as I had concern their might still be selling and did not want to hold going into the long weekend. Also the company did announce a consolidation was in the cards and I hate those situations. Having said all that, the chart looks favorable for more upside.

Company of Interest

With 3 minutes to go before closing, $GKX.ca (Gemini Corporation) put out a news release saying they had won $15 million in new business to be completed within 2017. I normally do not buy a stock late day on news, but with such a large dollar amount attached to the news and the stock trading well off recent highs I took a short term trading position at $.105 average. 

Stock Scan $.15 to $.30 - Jun, 28 2017

An analysis from last weeks' Scan of Stocks between $.05 and $.15 provided some decent returns from a few on the list, with one loser and the reminder pretty much flat.

Most of the stocks on the list provided decent day or swing trade opportunities for quick profits, if one was so inclined (guilty).

The major movers are listed below:

Gainers:

$EAT.ca went from $.09  to a high of $.135 for a 50% gain.
$FAT.ca went from $.095 to a high of $.15 for a 57% gain.
$MVN.ca went from $.15 to a high of $17 for a 13% gain.
$UMB.ca went from $.075 to a high of $.095 for a 26% gain.

Losers:
$PKK.ca went from $.065 to a low of $.085 for a 25% loss.

Note: $UMB.ca is currently halted, so I will be waiting like many others to hear the news regarding the halt as I still hold a position in this one.

This weeks scan was for stocks trading between $.15 and $.30 cents with at least 500K volume and 20 trades.

The reason for the number of trades is there might not be enough general interest on the stock creating a potential situation, if I bought I might not be able to sell, in other words I would be "holding the bag".

Each of the stock's chart are then visually viewed and the ones that are hitting new highs after gaping up for a couple of days or have just started to pull back after gaping up are removed.

What is left is stocks that are hitting new lows on large volume and are starting to firm up or stocks that have been slowly grinding higher and are starting to break out.

Today's scan turned up the following list. I have not done any DD on these stocks and have no idea if I will trade them or not, but I will be watching each of them, specifically the ones that had a lot of trades.

Of the list I did notice today $N.ca was getting some attention and did buy at $.215 and at $.25.

Furthermore I was already an owner of $RVV.ca buying in yesterday at $.22 as the stock had been firming up the last week or so.

If you decide to look into these names and find something interesting, please share in  the comment section.

Sym -Names	Bid - Ask			Last	Chg	%Ch	Vol	$Vol	#Tr
ADZ - V - ADAMERA MINERALS CORP	3	0.165 · 0.17	6	0.165	-0.025	-13.2	606.4	104	79
COT - V - CRITICAL OUTCOME TECHNOLOGIES	4	0.18 · 0.19	1	0.19	0.04	26.7	501.9	88	116
CUZ - V - CRUZ COBALT CORP	426	0.21 · 0.215	9	0.215			1,372.00	289	119
NXS - V - NEXUS GOLD CORP	140	0.15 · 0.16	75	0.15	-0.035	-18.9	1,897.20	310	215
RVV - V - REVIVE THERAPEUTICS LTD	10.5	0.23 · 0.235	75.5	0.23			1,050.80	232	29
PRK - T - POTASH RIDGE CORPORATION	253	0.225 · 0.23	15.5	0.23	0.005	2.2	5,401.70	1,222	183
TO - C - TOWER ONE WIRELESS CORP.	8.5	0.28 · 0.29	45.5	0.29	-0.01	-3.3	699.8	198	147
N - C - NAMASTE TECHNOLOGIES INC	21.1	0.25 · 0.26	52.5	0.25	0.06	31.6	2,382.20	553	420

Stick To Your Trading Rules

To be successful in the long term, investing/trading in penny stocks you must have a set of trading rules and you need to stick with them, if  not you will become the 90% of people who attempt to venture into this sector and never succeed.

I plan on series of blogs in the future regarding the various rules I apply at specific times of the investment cycle, but for now I want to emphasize the importance of having rules.

Having a set of rules means in the long term your returns will be consistent and you are less likely to be in the house of pain worrying all night if you are going to wake-up down another 10%. Its great to have a stock run 200%, but then then next 10 stocks go down 50% ... it sucks BIG TIME giving up all those gains and going from HERO to ZERO.

Having a set of rules means you avoid buying high and selling low ... the opposite of what you should be doing.

Anyone who has been in this game for a while knows what it feels like to wake up in the morning all excited like it is Christmas morning to see your present moving higher, but all to often this does not last long and soon enough you are waking-up to a bad hang over wishing you had not drank the Kool-Aid.

If you don't have rules, then sit down now and start writing them out giving thought to these points.

• Think about if you want to go for short term wins or home runs or both?
• How much do you want to "bet" on a trade?
• Will you average up or down on the trade?
• Do you want to relay on technical analysis to help guide you or fundamentals or both?
• Will you sell a bit at time on the way or down to reduce risk?
• How many hours will you spend learning about market dynamics?

The last couple of months for micro-caps investors have been pretty rough as sell in May and go away this year was not very nice, but it appear now that we are into summer, the selling is starting to subside and we are starting to see a few runners again.

I tweeted this out earlier in response to a tweet and I think it is fitting to end on.

Wealth is created from sticking to your rules and not letting a few exceptions throw you off your game. Be the TURTLE and win long term!

What's up with resistance and support

Stocks tend to follow a pattern, which Technical Analyst refer to as Support and Resistance.

For support, this is this is the price point where more buyers are willing to step in and buy the stock than sellers are willing to sell.

Resistance on the other hand is where fewer buyers are willing to buy the stock at this price while more sellers are willing to sell.

Once a stock either breaks above resistance or below support these levels now become the new support or resistance levels.

For this specific stock during the month of April, $.76 proved to a point of resistance, the stock price failed twice to breach this point, but on the third try (supported by large volume) the stock was able to break out into unknown territory, eventually finding resistance around $.88. 

Often when a stock finds a new resistance level it will move back down to the new support level to test that level a few times before resuming the trend higher. In this case the stock tested the support twice before breaking the support and headed lower until it found the previous level of support. This stock once again appears to be heading back to $.76 to test the old resistance and if it breaks above it, then a move to $.88 is a really possibility.

The next stock to look at is extremely hard to predict where real resistance will come in and where the support will be when resistance is found, given it is being heavily promoted at this time.

After a long period of consolidation the stock had a nice break out to $.30 where it ran up against resistance, before breaking out for 3 days, with a slight pull back before resuming the uptrend for another 2 days. As mentioned the stock is being heavily prompted right now and even though it started to pull back after the initial 3 day run, more news was released helping to keep the momentum going.

Failing another round of news I would suspect the stock will start to consolidate and I have drawn some points where it may find support. Although $.50 is possible I would think a pull back to $.40 would be a more attractive entry point.

Given the whole marijuana industry seems to be heating up again, I would suspect this stock will take another run at the intraday high of $.66.

*Note: There are always exceptions when it comes Technical Analysis and this applies even more  to penny stocks, which can be easily manipulated and is why many professional Technical Analysts will discount using TA with penny stocks. 

Stock Scan $.05 to $.15 - Jun, 22 2017

Part of my routine for finding potential stocks to either day trade, swing trade or position trade is to do a scan for companies trading at various price points.

The scan displayed below was for stocks trading between $.05 and $.15 cents with at least 500K volume. I start by looking at the number of trades and those that only have a few trades I am not interested in as there is not enough general interest on the stock creating a potential situation, if I bought I might not be able to sell, in other words I would be "holding the bag".

Each of the stock's chart are then visually viewed and the ones that are hitting new highs after gaping up or have just started to pull back after gaping up I am not interested yet.

What I am looking for is stocks that are hitting new lows on large volume and are starting to firm up or stocks that have been slowly grinding higher and are starting to break out.

Today's scan turned up the following list. I have not done any DD on these stocks and have no idea if I will trade them or not, but I will be watching each of them, specifically the ones that had a lot of trades.

Of the list I did notice today $FAT.ca was getting some attention and did buy at $.09, selling at $.10 and re-bought late day at $.095, so that one I will be trading for sure :)

If you decide to look into these names and find something interesting, please share in  the comment section.

Sym -Names	Bid - Ask			Last	Chg	%Ch	Vol	#Tr	Open-Hi-Lo
CEA - V - CERUS ENERGY GROUP LTD	10	0.10 · 0.12	10	0.125	0.03	31.6	507.2	57	0.085  0.125  0.075
CPO - V - COBALT POWER GROUP INC	25	0.085 · 0.09	15	0.09	0.005	5.9	511.6	31	0.085  0.09  0.085
EAT - C - Nutritional High International Inc.	332.5	0.08 · 0.09	76.1	0.09	0.01	12.5	569.6	65	0.08  0.09  0.08
EPO - V - ENCANTO POTASH CORP.	2	0.065 · 0.07	133	0.07	0.005	7.7	848.5	56	0.065  0.07  0.065
FAT - C - Far Resources Ltd.	272	0.095 · 0.10	20.7	0.095	0.01	11.8	1,318.50	69	0.08  0.105  0.08
HI - V - HIGHLAND COPPER COMPANY INC	15	0.095 · 0.10	56	0.1	0.01	11.1	631	20	0.09  0.10  0.09
LIC - V - LICO ENERGY METALS INC	6	0.135 · 0.14	155.5	0.135	0.01	8	969	116	0.13  0.14  0.13
MQ - C - M Pharmaceutical Inc.	100	0.045 · 0.05	374	0.05	0.005	11.1	1,295.70	36	0.045  0.05  0.045
MRS - V - MISSION READY SERVICES INC	1103	0.065 · 0.07	132	0.07	0.01	16.7	2,308.10	123	0.06  0.075  0.06
MVN - V - MADALENA ENERGY INC	20	0.145 · 0.155	80	0.15	0.005	3.4	1,579.20	167	0.145  0.16  0.14
PKK - C - Peak Positioning Technologies Inc.	214.4	0.08 · 0.085	761.1	0.085	0.005	6.3	1,117.80	47	0.08  0.085  0.08
UAV - C - Global UAV Technologies Ltd.	501.6	0.09 · 0.095	48.6	0.09	0.005	5.9	780	24	0.09  0.095  0.09
UMB - C - Umbral Energy Corp.	217	0.07 · 0.075	361.6	0.075	0.02	36.4	3,239.30	105	0.055  0.075  0.055

Trading This "GAP UP"

I thought I would do a post on what Technical Analysts refer to as “Filling The Gap”. In a nut shell this is when  a stock will have a sudden spike in price along with an abnormal large increase in volume. Typically this occurs with a stock that has been building a base for a while (a base meaning trading in a very tight range), driven by a recent news event (or the expectation of news).

There are various types of gaps with some being up with no trades in between, some being down and some being like the chart depicted below, which is the type of gap I am going to discuss in this post and how I traded it.

This specific stock broke out in early October moving up for a couple of days, before resting then exploding to the up side with above average volume for  the next 3 days. I missed the initial run, but watched it closely waiting for an expected pull back.

Once the stock had topped out (after 3 days) it pulled back for the next two days creating a decent entry point for the expected move up which occurred and created a level of support at the first line drawn on the chart around $.23 range. This move up how ever did not break above the recent high, which was an indication the stock was going to move lower and time to exit the trade.

From my perspective money could still me made on the stock, but only as a day trade; meaning buying on the bid, selling quickly on the ask and exiting the position at the end of the day even if it meant selling a losing position.

The next point of entry to get long was the first level of support line established during the previous move off this level and proved to be a successful swing trade 3 times in a row before breaking down and once again becoming a day trade until the second line of support was reached. 

Big volume moved in and created an opportunity to go long and generate big gains, but because the stock price again failed to breach the previous high it was time to take profits and once again the stock became a day trade. 

The stock was heading to test the first line of support in the previous run and one should use a tight stop loss to avoid getting caught in a sudden break below this level.

*Note: If a stock breaks support after previously bouncing off it, it normally will not be gentle and if I get caught in this situation I will take losses on any bounce back, which often happens before the stock starts to trend lower.

Once the stock broke this support it was now a day trade, but with good volume, so decent money could be made buying and selling 25K blocks for a penny gain (that was my comfort level for position size and price gain). As the volume started to dry up and the price kept falling I put the stock on the watch list as the risk/reward was not favorable for trading.

The stock is now at the first level of support, but the volume is very light, so I am watching closely for either a big increase in volume to go long or for a big volume break down to fill the gap originally created back in early October, which again I will go long, but this in case I will be backing up the truck.

*Note: Backing up the truck means the company has good fundamentals and is not some moose pasture ;) 

A third option for this stock, which is something else I will be watching for is to start a slow grind higher, which I would not go long on, but would start trading a small position.

PS: If you think you know what stock I am talking about, please share in the comment section ... I assume some of the readers will recognize the chart right away. Also if you are watching other stocks that are developing similar patterns at the various stages of the chart, please share in the comment section as these ones are always fun to trade as long as you don't fall in love.

PPS: An analysis from  http://bioequity.org found that when a stock price gap is observed, by a chance of 91.4% it will get filled in the future. In layman’s word, 9 in 10 gaps get filled; not always, but pretty close.

*Note: There are always exceptions when it comes Technical Analysis and this applies even more  to penny stocks, which can be easily manipulated and is why many professional Technical Analysts will discount using TA with penny stocks. 

Follow the 3/2 rule to avoid buying high.

Many years ago, when I first started investing in penny stocks I bought a company called Carmanah at $.75 cents as they were a local company and I thought Solar Energy was something to invest in.

A few days later I bought a company called Diamond Fields. Everyone was talking about how they were collecting diamonds off the sea floor and the share price was moving up quickly.  I was determined to get in on the action as everyone on the stock forum I was following said this was just the start, so I jumped in at $.39 cents.

A few days later Carmanah's share price jumped up to $.85 cents, bounced around a bit and stayed above $.80. Diamond Field's share price on the other hand dropped for 2 days in a row, bounced a bit up then fell again, settling below $.30 cents.

I hung onto both stocks and after a month sold Carmanah for around $1; six months later I sold Diamond Fields at $.41 cents. I made money on both, but one took only a month to return a great gain while the other took six months to return an ok gain.

Although there are many factors that go into why the difference in time it took to realize a profit the overriding factor was the timing of when I bought.

After researching and studying Technical Analysis and Candle Stick Charting I came to realize the Carmanah stock price was building a base and was starting to trend higher where as the Diamond Fields stock price was overbought. (The Red Line indicates where I purchased the shares)

Diamond Fields	Carmanah

Before buying any stock now I look for the chart pattern on the right as odds are the chart pattern on the left will end up looking like the chart pattern on the right in a few days. There are always exceptions to the rule, but statically it has been proven after 3 days of increasing volume and strong stock price movement higher, the stock price will pull back for 2 days allowing for a better entry point.

Have a look at stocks tomorrow that have been running for 3 days and have a similar chart pattern to the one on the left, then check back 3 days later and see if the chart pattern now looks like the one on the right.

Note: Often as not a stock will run for 3 days, with a slight pull back before moving another couple of days, so it not uncommon to see a move last more than 3 days.

*Note: There are always exceptions when it comes Technical Analysis and this applies even more  to penny stocks, which can be easily manipulated and is why many professional Technical Analysts will discount using TA with penny stocks. 

June 18th Update

Looking at a chart of the TSX Venture the overall trend continues to look down for micro-cap stocks, but Friday's sell off was followed with higher volume, so I will be watching for a bit of bounce over the next few sessions, which should support higher prices for the micro-cap sector in general.

The dividend portfolio closed higher due to the collection of dividends on Friday and would have closed even higher if not for Medical Facilities (DR.to) selling off due to the recent leaving of the CEO. Many analyst have downgraded the stock price, but average target prices are still above $18. I continue to hold my position here, but will not be adding.

I added to my Crius Energy ($KWU.UN) position at $10.13. The stock has been a decent gainer for me of over the past couple of years with steady dividend increases. Readers should take note on June 20th, the subscription receipts will start trading and were issued at a discount to the share price, but will be convertible into one common share once the recent acquisition is closed.

The trading portfolio had a decent weak mainly due to the bounce back in KALY.V and some decent trades in VONE.V.

 KALY dropped hard again this week due to one seller from CIBC that wanted out and the seller took the shares all the way down to $.14 cents. The company is a clinical-stage pharmaceutical company developing cannabinoid therapeutics and since listing the share price has been on a steady down hill slide. The company does have $3+ million in cash or cash equivalents, so there is plenty of time for the story to develop, but given the recent weakness it is hard to say if $.14 was the bottom or not. I doubled by position at $.14 and sold it at $.17 to reduce my risk, but still hold 150K shares and see a move back above $.20 unless another large seller shows up.

Vanadium One Energy Corp (VONE.V) seems to be riding the recent interest in the Vanadium sector as well as bouncing hard off a recent low. VONE recently announced it will be starting a work program on its Mont Sorcier vanadium project. The float is reported as being under 20 million shares OS, which is something I like to look for. I successfully traded this stock multiple times last week and went into the weekend holding 20K shares at $.13 cents.