otcbb stocks and message boards
Trading and Investing Ideas for 2001
By Giando Argentina
Published by OTCBB News Network
The NASDAQ started the year in familiar form, shedding almost 180 points and hitting a new 52-week low intra day, followed by an incredible 324 point gain on the FED announcement lowering the fed funds rate by fifty basis points. The direction of the markets for 2001 is on everyone’s mind but most market participants are more focused on whether earning a living trading stocks is still a possibility. At the beginning of 2000 it really was not that hard and looking back, I think many traders now realize this point. During the first half of last year traders and investors were leaving their traditional jobs to find their riches in the NASDAQ and OTCBB. Unfortunately many are now back at their regular jobs. So what went wrong?
The obvious is that the NASDAQ lost over 50% of its value from the March highs and the OTCBB followed suit. Not so obvious is the fact that while the majority of traders and investors failed to realize that the market was changing a few market participants realized that their trading style had to change. During the summer and winter months the bulk of OTCBB participants placed blame on the usual scapegoats. The Market Makers, the FED or more importantly Alan Greenspan and of course the shorters and bashers.
While the usual cries of Market Maker manipulation and the all too familiar “hold on to your shares, the market makers are trying to shake out the weak hands” could be read on just about any financial message board, the more experienced participants realized that with the changing market conditions, mainly less money willing to chase stocks, the greed factor had to be reigned in and trading for just a few ticks and capital preservation was of the essence. Gone were the days of chasing OTCBB stocks to get a fill as they up ticked. These times were different and it was painfully obvious to see that on a rebound stocks many times had only a slight percentage gain before the sellers drove it back down. The buy and hold strategy was a liability this time around.
The FED and Alan Greenspan are the target for much of the blame for this market downturn, but it should be remembered that the FED is not responsible for the equity markets, what it is responsible for is to make certain that prices and economic growth are stable. Economic growth during the last couple of years was arguably not stable and in the eyes of the FED unsustainable. In other words, while last winter was a nice bonus, the citizens of this country are not guaranteed ever-increasing gains in the equity markets.
Now for the New Year and what it may have in store for us. Trading stocks and more particularly OTCBB stocks will still be profitable for some. Profitable enough to generate all or the majority of someone’s income. The difference again will be in my opinion, how the market participants view what they do. In the OTCBB market uncovering the next Microsoft is most probably not going to happen. While it was not unusual for a stock to climb from a few pennies to multiple dollars in a matter of days or weeks last winter, it is now a different ball game, the hype will still be around as always but investors have to get away from the message board hype and actually read a company quarterly report. Granted it is not nearly as fun as reading “XYZ is going to the moon, party in Vegas when it hits a dollar” over and over but chances are, applying common sense to investments and looking at the boring stuff could save many portfolios in the coming year.
There are market participants that focus strictly on very short term trading, usually holding stocks a few minutes to possibly overnight. Those are the participants that usually rely on the market as their source of income for day to day living. The short-term trader capitalizes on very small price fluctuations while at all times protecting the capital. Capital preservation should in my opinion come before profit. The day trader will usually not get caught up in the hype of a particular stock, but will be able to identify and capitalize on the hype for personal gain. The successful short-term trader will also realize that while market makers may at times manipulate the price of a stock for a short period of time, the market makers can also be exploited. They tend to move in certain patterns and when one learns and is able to anticipate those patterns and keeps the greed factor in check profitable trading opportunities materialize. In addition, the short-term trader does not place blame on the lack of success for a trade. Placing blame serves no purpose and the experienced traders know that the market is always right, even if the price movement does not seem to make sense.
The easy money is gone for now, but the trader will continue to be able to profit in the market because of discipline, adhering to a plan of action and most importantly understanding why OTCBB stocks act the way they do and capitalizing on the movement but not letting greed interfere with a profitable trade. The OTCBB market will continue to be a minefield for the longer-term investor in my opinion. Dilution will be the major pitfall. Most OTCBB companies will continue to issue new shares to fund operations in lieu of revenues and profits. At the currently depressed share prices dilution is much more of a factor then it was last winter. For the longer term investor deciding which company has a real business model and which is strictly a share printing business to benefit the majority shareholders is not a difficult endeavor but again reading the filing and conducting a little investigative work is a must. This kind of information is usually not found on message boards and if it is found there the board gurus will quickly dismiss it.
The New Year will undoubtedly hold many surprises for traders and investors alike and as always some will fail and some will succeed. The difference ultimately will be which market participants will assume responsibility for their success and failures and which participants will blame a number of outside forces for their failures. The OTCBB world is definitely not for the novice investor but ironically is comprised mostly of novice investors. It is far from a fair playing field and between some questionable companies, promoters, market makers and individual investors with hidden agendas it can be down right treacherous. The most powerful tool the investor and trader have at their disposal is common sense. If used it can make investing and trading in the OTCBB very financially rewarding as well as entertaining.
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