Found this on the "Silver-Investor.com" website -
How To Identify Professional Accumulation Of Penny Stocks
If you are not yet aware, here are the 4 best indicators that a penny stock is being accumulated by professional buying looking to sell at much higher prices in the near future:
1. Share price flat over a long period of time. That is trading in a very narrow range. The longer the better.
2. Low volume.
3. Small market cap. The smaller the better.
4. Trading at or near yearly lows.
In my opinion the first three points are the most important but if you can also find a stock with #4 then that has the possibility of being a real home run.
Of course, even if you find a stock with these characteristics, it won't always explode like we think it will. However, I think that by buying stocks with these easy to find characteristics, we have a good chance of being on the right side of a break out.
Another thing to be aware of when speculating with stocks that are undergoing accumulation is that you never know when the stock will break out. Sometimes it takes months for the pros to accumulate all the shares they want before they decide to take the price to new highs. With this in mind, the longer the price has been flat lined, the better a chance that a break out soon.
One of the best accumulation charts I have seen so far is that of Wavefront many months ago. I was looking at the stock at that time but I was not then aware of the significance of the remarkably flat share price.
As you can see by the chart, WEE seems to have been under accumulation for about 6 months before it broke out and subsequently a high of about $4.99. This gave keen speculators returns of up to 1896%.
This may be a best case scenario but riding even one or two of these in your life could cause a significant impact on your financial situation I think.
Posted by Mike – July 8, 2006 – 11:51
Highest Regards,
Shab
