Easiest Ways To Trade Cheap Hot Stocks This Week As Per Current Market Capitalization
Tue, Apr 2, 2013
Trading Cheap Hot stocks successfully is much simpler than most people make it out to be.
You see, most investors confuse trading and investing.
One of the easiest ways to trade I’ve learned is to simply buy new all-time highs, put a 10% trailing stop-loss order on it, and let it work itself out.
Investing is grueling. Searching for great companies at great prices takes a long time. Piecing together the next big trend early on takes months of thought and the discipline to reject your own ideas. And for Contrarian Investors, it’s stressful betting against the rest of the world.
Over time this trading strategy makes excellent returns. It works especially well in a bull market like the one we’re currently in.
And now, due to a few recent events, your editor believes one stock is poised to make a great trade for the current market.
That stock is Parametric Sound Corp (NASDAQ:PAMT).
PAMT has all the attributes of a low-risk/high-reward trade.
It’s tiny. The current market capitalization of the company is just over $100 million. So it doesn’t take much buying to keep its share price up or to push it higher.
Trading, on the other hand, is the exact opposite. To trade successfully in the short-term you have to jump on a trend. You’re just going along for the ride. You don’t worry about the valuation of a Hot Stock and, in many cases, even look at the fundamentals. A trade is simply buying a paper asset and hoping to sell it later for more than you paid for it.
Volume is increasing. The average trading volume increased from 30,000 shares per day in December to 70,000 shares per day in January. And in March it has leapt to an average of 223,000 shares per day.
And it’s consistently setting new highs. It just hit a new all-time high today. When that happens, the sky is really the limit for how high the shares can rise.
Now, here’s the difference between your editor who has learned to make money trading stocks who have never made any money with any consistency trading stocks.
The way I look at it, PAMT has almost no fundamental value.
It’s a company with a speaker technology it calls HyperSound.
We could say this is going to revolutionize the speaker industry or it’s on its way to becoming the next Bose Sound System or Dre Beats headphones which both makes millions of dollars each year and have loyal customer bases.
Yes, the company has a few marketing deals. It most recently booked one with China. And it has promised to deliver deals with McDonald’s.
The much more likely ending to this story is the Hypersound technology never catches on and it ends up in the dustbin of history with so many other “better mousetraps” which have come and gone over the years.
Who knows really?
And as traders looking for a quick score, it doesn’t matter.
We’re not investing on the fundamentals here. We’re looking for the trade.
Right now PAMT has everything that makes a great trade. It’s tiny, volume is increasing, and it set a new all-time high.
You editor has bought and has a 10% trailing stop loss on. The upside of the trade is about 50% from here and with a trailing stop set at 10% that keeps our capital at risk pretty low.
In the end, frankly there are lot worse moves to make where you can risk $1 to make $5 in potential profit. And it’s that kind of risk/reward profile which make for great trades.
So even though they all will NOT work out, keeping the odds heavily stacked in your favor like they are now with PAMT will deliver trading profits over the long run.
Executive Editor, Contrarian Insights
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