Penny stocks, the tiny treasures of companies that can provide astonishingly high returns regardless of what their larger market competitors perform, have performed extraordinarily well in recent years.
Yes, 2007 might still be in its early days If the first month is anything to go by that the markets are set for a thrilling trip.
Typically, investors keep track of January’s numbers with a keen eye, since there is a definite relationship between the performance of markets during the first five days of January as well as the direction of markets throughout the year. The connection has been aptly named The January Effect.
In the event that the S&P 500 increases in over the first five days in January The market in general generally is positive for the year – or at minimum in 85.7 percent of cases.
Five days of the year resulted in the S&P 500 index closing down by just 4 points. What can we expect to see in a year that is flat or down? Will the 2007 ‘January effect’ be able to buck the trend? If you’re a penny-stock investor and you’re used to bucking the trend. and you’ll continue doing the same.
It appears that the majority of investors are shifting their focus away from the January effect, at least, for the time being. Wall Street vaulted higher mid-week after the release of profit figures by Yahoo Inc and Sun Microsystems brought back confidence for investors in the tech industry.
Investors in penny stocks have been keeping an eye on the recent quarterly earnings closely and hoping that the ongoing profits growth will propel stocks higher after the sharp increase.
The Dow increased on Wednesday to 12,621.77 and surpassed a record high of 12,582.59 that was set on the 16th of January. The Dow’s 26th-highest closing ever since its blue-chip average started its climb at the beginning of October. The Dow also hit an intraday record peak of 12,623.45.
It’s not just small-cap shares in the U.S. that are performing very well too. Small caps are performing very well in other countries as well. The London Business School/ABN AMRO review of the performance of small caps shows that small-cap stocks have been on an incredible performance, at the very least, since the close during the early 1990s.
The report states that there’s never been such a long-lasting streak of success prior to, at least in the context of the data which dates back to 1955.
This was the fourth year in a row that the small-cap stocks which the HGSC index tracks have grown in value by over 20 percent, and have outperformed the entire market by 5 percent. The HGSC index monitors how the lowest 10 percent of stock on the principal UK market, is determined by market capitalization.
If you take a close look at penny stocks it’s easy to observe that penny stocks have been on a roll since the beginning of November. On the 9th of November, the penny stock index reached an all-time low of 10,880, and on the 19th of January, the index made an all-time record high of 12,109. This is a gain of three months of 11.29 percent.
The penny stocks have also been doing very well from the beginning of the calendar year. 2007 is just four weeks older and the index of penny stocks has already gained 384 points equivalent to 3.2 percent.
However, if there’s a thing that the stock market has taught us it’s that the festivities can’t continue for a long time. However, we also know this party is likely to turn back.
The trick is to determine the time when the peak point and reversal start. Not starting on time could cost you a significant amount of dollars. At the wrong time (read “greedy”) could cost you as much as, if not more. Have you ever thought about selling an item just as everybody else is?
The bottom line is that you won’t make money trading too soon. But, then again, these are the nuanced aspects of making penny stocks enjoyable.