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  • Information Is The Most Valuable Commodity When Trading Stocks

    Written by: Dana Salvo

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    So you want to get into the game of day trading stocks? Whether you’re a rookie or veteran of the stock market, The Stock Wizards encourages traders and investors to look for stocks with forward-looking events. What is a forward-looking event? A forward-looking event is when a company announces publicly through a press release that there will be some kind material event that will affect the company in the future. Another way of looking at it is using the term Catalyst.

    How do we find such companies? We gather as much information about a company as we can before investing our hard earned money. Information is the key word here. Remember Michael Douglas’s famous quote from the movie Wall Street? “The most valuable commodity I know of is information, wouldn’t you agree?” And let’s not forget the high tech society we live in today. Information is right at our fingertips so there are no excuses for not doing the research. A little research goes a long way when searching for companies with forward-looking events.

    There are different types of forward-Looking events, Some examples include, Quarterly Earnings, Product Release Dates, Conference Calls, Media Events. These can all be found in press releases put out by companies.

    The key to a forward-looking event is knowing the impact date. When a company puts out a press release you must pay attention to the impact date of which the event is going to occur.

    Let’s analyze some of the stocks that have had forward-looking events in the past.

    Technology and Biotech Companies. Stocks in these sectors have always had great forward-looking events. Let’s take a look at some examples on how you can profit from a catalyst or forward-looking event.

    Apple (NASDAQ: AAPL). Ever hear of this company? One of the greatest companies of all time in the technology sector. Let’s take a look at the most recent forward-looking event that just occurred with the stock. The launch of the iPAD. The iPAD was the catalyst or forward-looking event for Apple. The company makes a public announcement that sets up the forward-looking event. Here is the headline:

    “Apple Inc has announced that its much-awaited iPAD will be available in the markets on April 3rd for Wi-Fi models. For the Wi-Fi +3G models, the company has set the launch date for late April.”

    In reading the headline all you have to do is look for the impact date. In this instance April 3rd was the impact date for the iPAD.  Now that we have the impact date, let’s trade Apple Computer and make money. On March 1st when the news was announced, the stock was trading at $209.00 at the close of trading. By April 3rd AAPL hit an intraday high of $239.00. As you can see the stock rallied into the forward-looking event and was a no-brainer to make money.

    Some traders and investors had no problem buying the stock at these levels. However, if you’re new to trading and have limited capital, you might want to consider buying Call Options. A Call Option is essentially a contract that gives one party the right to purchase a stated number of shares of a stock at a specified price. The price at which the shares may be purchased is known as the strike or exercise price. The right to exercise lasts for a stated period of time, which may be months or years, until the expiration date. If not exercised on or before the expiration date, the option expires. You can control more shares with less money by purchasing call options. Options are a great way to play forward-looking events.

    Biotechnology Companies (FDA Approvals) can be another great catalyst for a nice short-term trade in a stock. For example, a company that announces they are seeking FDA approval on a certain date.

    On April 29th, Dendreon Corporation, a biotech company that trades on the NASDAQ under the symbol DNDN, received drug approval for their product, Provenge. Read the news below:

    Dendreon Corporation (NASDAQ: DNDN) today announced that the U.S. Food and Drug Administration (FDA) has approved PROVENGE(R) (sipuleucel-T), an autologous cellular immunotherapy for the treatment of asymptomatic or minimally symptomatic metastatic, castrate-resistant (hormone-refractory) prostate cancer (CRPC). PROVENGE is designed to induce an immune response against prostatic acid phosphatase (PAP); an antigen expressed in most prostate cancers, and is the first in a new therapeutic class known as autologous cellular immunotherapies.

    Right before the announcement DNDN was trading at around 40.00 per share. As soon as the news hit that they received approval, the stock shot up 14.00 to close the day at 50.00. The following day it hit an intraday high of 58.00. DNDN made an 18.00-dollar move in just 2 days.

    Traders and Investors had 2 choices in the situation; you can buy the stock or you can buy the Call options, or both.

    The Stock Wizards have made fortunes over the years trading forward-looking events on Penny Stocks that had impact dates.

    For Traders and Investors that have limited capital, penny stocks are a great way to build up your account. Finding a penny stock that has a forward-looking event can be very profitable. You could make huge money if played right. We love Penny stocks because you can invest $500.00 and turn it into $5,000.00 in a short period of time. The forward-looking event strategy is a great way to do this.

    Let’s take a look at Lecere Corporation (LCRE). Here is a recent example of a press release that we look for when it comes to forward-looking events and catalysts for a penny stock.

    PORTLAND, Ore., Apr 12, 2010 Software start-up Lecere(TM) Corporation (Pink Sheets: LCRE) (www.lecere.com) has announced that it will begin a pilot project on April 30, 2010 to evaluate its initial SaaS Point of Sales offering. Lecere also has announced its support for the just-released Apple iPad, which will be used as the primary order entry device in the pilot project to start on April 30.

    We highlighted and underlined 2 key points of the press release. The impacted date was April 30th and the event was the Apple Ipad. The iPad is a hot subject and is going to get the attention of any penny stock trader. What was the end result? LCRE went from .0004 to .002 cents for a 400% gain in roughly 2 weeks. This is just one type of forward-looking event or catalyst you will see when playing penny stocks. You can profit handsomely off of these types of situations if played correctly.


    Another Penny Stock that our subscribers made a nice trade on was Nutra Pharma (OTC BB: NPHC).

    This was a very successful forward-looking event play as the company announced their blockbuster over-the-counter pain reliever, Cobroxin. Here is the headline on August 20th 2009:

    Nutra Pharma Announces Launch of Cobroxin, an Over-The-Counter (OTC) Treatment for Stage 2 (Moderate to Severe) Chronic Pain.

    Here is the very last paragraph of the press release and the forward-looking event clue.

    “In preparation for commercializing Cobroxin, Nutra Pharma recently announced that ReceptoPharm had filed a patent application for a novel composition and method for oral delivery of cobra venom for the treatment of pain. The company plans to begin marketing and selling Cobroxin upon successful submission of final packaging and labeling to the FDA.”

    The word on the street was that NPHC would have FDA approval by the end of September, 30 days after this press release was announced. NPHC took off from basically .01 cent, and 30 days later the stock hit .99 cents. It was a monster gain. There were a lot of people that made a killing on this one including The Stock Wizards.

    The last example we will use is a smart phone maker called PALM.

    PALM (NASDAQ) made an announcement in 2009 that they had a new smart phone that would crush the IPHONE. Some of you remember this. Their new smart phone was called the Palm PRE. This was going to revolutionize the smart phone industry and give Apple’s iPhone a run for their money.

    PALM’s stock went from  $1.00 and hit a high of $18.00 in 2009. From one product they created a forward-looking event gave investors a gain of 800% in a 4-month time span.

    The Stock Wizards feels Forward-Looking event plays are the safest and most profitable trades you can make with higher accuracy for profitability most of the time. There are many trading strategies in the stock market, but this type of trade is our favorite and makes the most sense, especially for new traders. However, The Stock Wizards encourages traders to make sure to sell a portion of your position right before the impact date. Most of the time the stock will sell off after the event. Happy trading!

    May 4, 2010 @ 4:32 am Trackback URL Posted in Articles/Opinions, Trader's Corner and tagged with , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , .