on the OTC BB relate to blue chip stocks more than you may think. Try and find correlations between
leading penny stocks and the leading sectors of any specific time period. This will help you put a face on
some of these faceless stocks.
It is not important to follow the major market indices's although it is nice to know where the S&P and
NASDAQ are. We have not found a helpful and unbiased index for micro caps, so we follow the Russell
2000 as a kind of higher risk measurement. Over the long term penny stocks will follow the same pattern
as the overall market but on a day to day basis, they tend to lag a little behind. Watch for heavily traded OTC
BB stocks to rise when broader markets are selling off. We call this the dumb money effect, traders take
their profits to riskier issues in an attempt to push their luck.
Step back every now and then to look at very long term charts and data of the stock market. Look at
historical valuation levels incorporating earnings and dividends. This will give you an advantage over the
average day trader and give you a road map for your long term goals. Although there is no useful or
unbiased index for the OTC BB, one can formulate a historical birds eye view of tiny stocks using other
indices. Look at the AMEX to start and then mentally blend it into the NASDAQ of the seventies. Then blend
into the Russell 2000. Try and find historical micro cap valuations and compare them to the stocks you are
watching. Look at stocks that have grown from penny stocks to large caps and vi-ca versa. This will help
you gain perspective into the current bull market.
Don't forget to watch for the strongest and weakest groups in the overall market and relate them to the
OTC BB. Also, watch oil and gold prices to name a few that will certainly relate to companies we trade.
Always try to find why certain stocks may have moved on lower or higher oil prices for example, even if they
don't appear to be influenced by them. Closer examination can and a few extra steps can be rewarding. Is
the company's profits directly related to the production of plastics. Is it's expenses directly related to the
price of gasoline used in it's delivery trucks, etc. Stock prices always move for a reason and it is our job to
find out what that reason is and to anticipate future reactions.
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