Claytrader and I have non-trivial differences in our TA processes. I've been analyzing charts every day for over 10 years now and I even consult for a local hedge fund, so I've had some success with charting. I use TA very successfully to swing trade ETF's (e.g. GDX and SPY), but I would never attempt to do so on a penny stock. As I've posted before, TA works the best when applied to a highly liquid vehicle trading on a well-regulated exchange. Granted, you can trade on the pinks with TA, but only if you are dealing with small positions--again--because of the lack of liquidity and regulation. Not all of us have that luxury. ;)
Say, for example, you have 5M shares of SRSR. In order to sufficiently manage risk (and the associated short-term capital gains that you will have to pay every time you sell), you must be able to move at least 1/3 of your position every time you flip. Otherwise, statistically speaking, the potential reward simply isn't worth the associated risk. This is a well-known trading rule that has been well researched by much smarter traders than I. Thus, in order to play a spike in SRSR with your 5M share position, you must be able to sell at least 1.7M shares very near a highly probable short-term peak. That would be very difficult to do on a stock like SRSR.
Take the 4/30 spike that was caused by a large buy order that was entered pre-market. I watched L2 very closely that morning, and the MM's didn't give anyone else a chance to cash in on that move in a material way except themselves (and they sold short into the open to fill that order). The best you could have done (if you know what you are doing) is an average sell price of about $0.062 (and I'm being generous for the sake of argument) on those 1.7M shares of additional sell-side volume. What is your capital gains hit on that sale? Let's say you got in before the run with a cost average of about $0.01. Your net gain on that flip would be around $88K and your tax liability would be around $25K (depending on your tax bracket). That's $25K that won't be compounding for you anymore.
Ok, so you're already "in the hole" $25K on the trade. What re-entry point will make it worthwhile? If you are using TA correctly, you would have to wait until at least 5/6 to start buying. Go back and review the intraday price action during that session. There was very low volume as the stock began to stablize in the low $0.04's, and when buying pressure came back in, it spiked up to $0.05 on about 3M shares late in the day. So let's assume you get back in over 5/6 and 5/7. Buying back with your net gains from the flip would get you about 1.85M shares at a cost average of $0.048 over those two sessions (again, I'm being generous and assuming you know how to accumulate the right way). So, for all your trouble you were only able to net about 150K additional shares (value at time of purchase: $7K). But, wait! Don't forget you now owe the IRS $25K. Where will that money come from when it's time to pay up? Have you made $7K or lost $18K?
Anyway, sorry to ramble on, but the point is this whole idea of being able to jump in and out via TA and make piles of cash isn't as easy or simple as many posters would have you believe. You need to look at many different factors and crunch the numbers. If you are holding a large position in SRSR (or any pink, for the matter), flipping simply doesn't make much sense. All JMO, of course!
