Profiting with Penny Stocks - A Case Study

This case study looks at the dramatic effects of a stock promotion that increased the price of a penny stock by over 400% in a short period of time. While most investors rely on traditional analysis to make investment choices, stock promotions are little-known indicators of 100%+ price gains. For penny stock and small cap investors, having good information on stock promotions is essential to making huge profits on these stocks. One of the secrets of Penny Stock investing is that of all the stocks that rise 100% or more in a short time frame, 7 out of ten of them are driven by something that you can't identify with technical analysis or by doing company research. That "something" is a coordinated, well-funded stock promotion. And this is the key that you need to understand in order to make the best penny stock picks. You may not have heard about the effect of stock promotions and how they can drive an inexpensive stock price higher in a matter of weeks or even days. But it works. And a penny stock promotion is a smart investment for a company wanting to drive their market cap up. So let's look at one case study of a stock promotion from early in 2008 and you'll see why having information on stock promotions is critical to your success at Penny Stock investing. The stock is CVSC, Cardiovascular Sciences, Inc. Throughout the latter part of 2007, this stock was flat with volume in the 0 to 5,000 shares per day range. The stock price was also flat and predictable. But in January, 2008, the company would begin a stock promotion in order to build volume and move the stock price higher. Essentially, the goal of a stock promotion is to increase the awareness of the stock and its growth prospects. If done successfully, this will expand the market of buyers, increasing the demand for the stock, which increases its sales price over time. For this stock promotion, the company hired an outside firm that specializes in this type of campaign. While every promotional campaign for a penny stock will have a unique combination of activities, in general, a promotional campaign can include mass communication tactics such as direct mail to peoples' homes, fax blasts, email newsletters, press releases, ads on financial websites. Some may even include TV commercials. Looking at CVSC during the promotional period beginning January 1is an example of a successful stock promotion. More importantly, it is an example of a stock that investors would do well to invest in when the promotion is in its early stages. On Jan. 2, 2008 when the stock promotional campaign kicked off, CVSC opened at $0.51, had a high and a low of $0.5. It closed at $0.51 on a volume of 800 shares. Not very interesting. Obviously, this stock was desperately in need of a promotion or anything to generate a buzz about why an investor should give it a second glance. On Feb. 1, after nearly one month of running promotional activities, CVSC opened at $0.76 and closed at $0.75 on volume of 17,400 shares. Over this time, the stock had risen $0.24, or a gain of 47% and with substantially more shares traded. On Feb.12, the stock broke through resistance at $0.81 and began a sharp climb lasting several weeks. On March 3rd, with the stock promotion still in full swing, CVSC closed the day at $1.77 on volume of 245,400 shares. This is a remarkable change from the stock we saw at the beginning of the year. For the lucky investor who bought the stock on January 2, he would have netted a gain of $1.26 per share, or 247%. The stock finally peaked on March 11 at $2.70 a share on volume of 1.53 million shares! Over the period, the stock price rose $2.19 from $0.51, for an overall gain of 429%. All in all, this dramatic rise occurred in less than two and a half months. This stock is just one example of one successful stock promotion. But if you are trying to make money with Penny Stocks by picking the best small cap stocks, you must be aware of the effects of stock promotions. You might be very good at technical analysis or researching the fundamentals, yet miss the huge opportunities that a stock like CVSC presents. Every day, there are stocks that are undergoing this same kind of price driving activity. It is worth any investor's time to learn about these stock promotions and find the sources that you can use to get information on stock promotions in time for you to make smart investments and show a consistent, highly profitable return. Daniel B. Johnson is vice-president of a wireless company based in Dallas. He successfully trades penny stocks and other small cap stocks on a part-time basis. For information sources on identifying stock promotions that drive large increases in the price of penny stocks, visit his web site at http://www.PennyStocksRising.com Article Source: http://EzineArticles.com/?expert=Daniel_B._Johnson