Dont think penny stocks are one of the best markets to be in? Heard bad stories
about penny stocks? What if I told you that from October 26th, 2011 to Wednesday
November 11th, 2011 two sleeping NASDAQ stocks would wake up and run 340% on
massive volume?!!! Then would you consider thinking outside the box and playing
something other than blue chips? I bet youd be even more shocked when you find
out our chat room alerted PEIX before their earnings and several traders in this
same room loaded the boat before this massive move. You have to be in it to win
it, lets take a closer look. BioFuel Energy, Corp. (NASDAQ:BIOF) and Pacific
Ethanol, Inc. (NASDAQ:PEIX) are at the center of the penny stock universe. Of
the two, BioFuel Energy appears to be the sympathy stock following in the
footsteps once extremely popular Pacific Ethanol similar to when lithium stocks
ran back in May and when coffee stocks in July. An example of a sympathy stock
in that coffee run up we saw back in May would be Javalution Coffee, Co.
(OTCBB:JCOF) which for no reason other than following stocks like Coffee Holding
Company, Inc. (NASDAQ:JVA) ran from $.30 to $2.08 before fully retracing back to
where it started just a few months later. Sympathy aside, both BIOF and PEIX are
hot right now and can be cash cows to swing traders like myself who repeatedly
dip in and play the momentum welcome to the wild ride that is penny stocks. At
this point Im looking at both stocks as good short opportunities. Pacific
Ethanol, Inc. ( NASDAQ:PEIX ) produces and markets low carbon renewable fuels in
the western United States and was first to move back on October 26, 2011 after
reporting booming Q3 results. How booming? Try record net sales of $271.6
million compared to $46 million in the same period in 2010 selling 122.6 million
gallons of renewable fuel or a 22% increase over Q2. This helped PEIX log $4
million in net income compared to a loss of $12.9 million in they year-over
period. PEIX was alerted in my chat room just before earnings at $.30 cents and
swing traders have made boatloads off this 370% move. So whats the chart look
like moving forward youre wondering, lets take a closer look. One quick look at
the chart clearly shows you that PEIX is overbought. Stocks that are overbought
can remain that way but become more volatile as the days go on and eventually
the boat tips and people take profits. Tuesday PEIX etched almost 21,000 trades
or just under $35 million in dollar volume. Support on any pullback is light at
$1.31 and stronger at $1.12. Resistance moving forward is at $1.40, $1.90 and
$2.12 or the 200 Moving Average. BioFuel Energy, Corp. ( NASDAQ:BIOF ) engages
in the manufacture and sale of ethanol and its co-products in the United States.
BIOF started its run up right around when PEIX made its move and consolidated
near $.50 before its November 9th earnings report in which they reported $2.5
million in net income on revenues of $162.5 million. The increase in net income
was $4.3 million compared to the prior year period and helped shares build a
bull pennant formation on the chart before breaking out again Tuesday to the
high $.80s. Like PIEX, BIOF is clearly overbought and can remain that way so
long as volume continues to support these higher levels. Tuesday BIOF etched
over 17,000 trades on almost $10.5 million in dollar volume. Support on any
pullback is at $.66 with resistance ahead at $1.00. While riding these trains
can be fun while theyre hot, lithium plays last May and coffee stocks over the
summer should remind traders that pigs get slaughtered i.e. taking profits along
the way is never a bad strategy.
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