RMHB - Climbing the stairs - Higher highs and higher lows

This will be my last post about Rocky Mountain High Brands, a fully reporting OTC penny stock engaged in the production of Hemp Infused energy drinks and High Alkaline spring water.  I've done two previous posts on RMHB starting when the stock was trading at just over .03 cents, it closed this past Friday at .0548

There are some people who contend that when it comes to penny stocks, that charts are useless. I do not share that view.  Charts are simply a reflection of buy side demand and sell side pressure, nothing more and nothing less.  Charts simply reflect the trading and are not prejudiced for or against any stock based on price, industry or exchange.

And RMHB's chart is looking very bullish.

After bouncing in and around 3 cents for the better part of 3 months the stock started making strides on October 11th after announcing its graduation from the non reporting gray pink sheet market, to the fully reporting OTCQB.  That news seemed to act as a catalyst that pushed the PPS up to .05 cents on October 12th with volumes getting up around 10 million. 

The stock then pulled back as volumes cooled off and the PPS drifted lower over the next 5 or 6 sessions, settling in an around .035 cents.  This is significant because it established a new and higher base of support.  

The next move up started on October 20th when news of a distribution agreement was released. That was the start of a 5 day run that saw volumes soar back over 10 million with the PPS hitting .07 cents interday on the 26th.  Then, as before, volumes trading dropped back to less than 10 million over the next 2 trading days with the PPS settling at its current level around 5.5 cents.  Again, this is significant because it establishes yet again another higher base of support.

Those looking to time an entry into RMHB, I would suggest watching to see if support is established in and around the area of 4.5 to 5.5 cents.  On the first run up from 3 to 5 cents investors had 4 days where the stock based around 3.5 cents before the climb to 7 cents.  If the same pattern plays out again there would be another 3 or 4 days in the 4.5 to 5.5 cent area.

This is a chart pattern that you'll hear discussed frequently, its a bullish technical pattern where the PPS climbs to new and higher highs and then settles back to new and higher bases of support. Some will refer to it as  "climbing the stairs".

The wild card with RMHB seems to be news.  Those perhaps watching and waiting to enter could find themselves on the sidelines when news comes out.  And if the pattern continues and volumes go back to 10+ million trading over several days, that's when greed can take over and get people chasing. Those who buy in just as a surge cools off are then left to wait in hope and expectation of another price/volume surge.

Those who jumped in on the first spike to 5 cents, some I am sure bailed out when the stock pulled back to the 3.5 cent area, and then they watched it climb to 7.  The stock market is never easy, and sometimes its not a question of timing, but rather of "time in".  Even the most experienced market player can get caught buying in on a spike and then watching an investment turn from positive to negative.  

That's why I think its vital to play within one's tolerance for risk.  When people play with money they can't afford to lose they tend to act more on emotion than on rational thinking.  If you're overall "big picture" analysis of a stock is accurate, then it can just be a matter of patience.

Given the low price I don't think volume of even 20 million is that significant, and I am confident in my opinion that this stock will see volumes hitting 50 to 100 million on a daily basis before this year closes out. 

Good luck all, and again comments are always welcome so long as they are written in a respectful tone and are absent any profanity.

The importance of staying within your tolerance for risk.....

Investors could lose some or all of their investment.

How often have you gone onto a website promoting an investment vehicle and found a disclaiming statement like the one above?  If the answer is never, then you're probably not looking very hard, its pretty much standard boiler plate.  You see this type of disclaimer all the time on promotional sites for companies in the development stage, selling shares to finance business operations while they attempt to achieve sufficient revenue to fund the business.  Of course its usually in a small font, and often requires hitting an embedded link to find it.  

Risk tolerance is of vital importance when investing.

How often have you looked at a stock that's gone from 10 cents to $1.00 and thought:  "If I'd put $10,000 into that stock at a dime I'd have $100,000 now".  But how many people have $10,000 lying around that they can afford to lose?  Would losing $10,000 put you in danger of missing a mortgage or rent payment?  Would the family vacation have to be canceled?  

These are important questions to ask.  

More than anything else psychology rules the market from where I sit.  And when people put money at risk that they can't afford to lose, the results can be disastrous.  If you have say $1,000 that you don't need, that is to say that its money you could lose and not have it impact your life in any way, shape or form, that is what I call "risk capital".  Putting that money in play in a high risk, high reward penny stock, it could very well lead to some very nice gains.

$500 invested in a 10 cent penny stock that goes to $1.00 and is then sold will result in a gain of $4,500....a 900% return.  Turning $500 into $5,000 is nothing to sneeze at.  If someone walked up and handed you fifty $100 bills....Would you tell them to get lost?  I don't think so.

The problem is $5,000 in today's day and age....its not a lot of money.  And that's where people get into trouble, especially with speculative stocks.  And its not just OTC penny stocks either, it can happen with companies with shares listed on more senior exchanges as well.  There are plenty of Nasdaq and TSX listed stocks that have been around for ten or twenty years....and more, that have never achieved positive cash flow from business operations.  That's why they hire stock promoters to attract investors.  

Staying within your tolerance for risk, only investing money that you don't need, I would argue that it will lead to making better and less emotionally driven decisions.  

Let's say you have $1,000 in risk capital, we'll call it "mad money" and you decide to invest it in a 10 cent stock. If that stock goes to 20 cents...then you've turned it into $2,000 if you sell.  Maybe after you sell the stock will continue to climb to $1.00.  Oh well, too bad so sad....cry into the $1,000 you made in profits.  

But if you'd invested $10,000 and it was money that was needed for the mortgage, rent, vacation, or any other planned or required expense.  Now if you sell at 20 cents you've turned $10,000 into $20,000....But if the stock keeps climbing are you going to be able to leave it alone, or are you going to believe the forecasters touting a $2.00 price target and put it back at risk by buying back in.

Greed is a powerful emotion, perhaps even more powerful than fear.  Many people can control or stifle their fear, but are incapable of harnessing their greed.  Remember the movie "Wall Street" and the 'Greed is Good' speech?

Its the same old mantra I keep repeating over and over on this blog.  Nobody ever went broke by taking profits.  Remember that disclaimer right at the top.  If you're dealing with any stock, but especially with a speculative development stage company that has never achieved profits, then my advice is to be very careful and that any profit is good profit.  And if you're holding a stock that's moved up, but you haven't sold it...then your profit is $0.00 nada, nothing.  Just as a loss doesn't become real until you sell, the same holds true with profits.

Good luck and I hope this blog is helping retail investors make $$$.  



Rocky Mountain High Brands (RMHB) - Sometimes it doesn't pay to be a cynic....

One thing I've learned over the years is that cynics are often right.  I've found those who prefer to see the glass as being half empty, that they're usually more intelligent than those who see nothing but rainbows and unicorns. 

Usually, but not always.  

Sometimes, particularly with penny stocks, it pays to see the upside potential, to look beyond past failures and to latch onto an idea or a concept.  When it comes to investments, penny stocks will often attract the rainbow and unicorn crowd, and sometimes they are the ones who are right.  

Do note, my qualification for determining right and wrong relates specifically to a stock's PPS.  If someone thinks a company is a bad investment and the PPS drops, then they were right.  If however they think a company is a bad investment and the PPS climbs, then they were wrong...and there can be times when the cynics are spectacularly wrong.

I first wrote about RMHB on October 11th after taking out a long position the day before.  Judging from what the PPS has done I made the right choice.  Here's a link to that blog posting:  

Hemp Infused Beverages - An intriguing idea for Cannabis players (RMHB)

And here's what the 1 month chart shows.  

Not a bad climb, from just over 3 cents when I took out my position, to up near 6 cents as of the most recent closing price.  In percentage terms its hard to argue with a climb of nearly 100% in a little more than 2 weeks of trading.  And I think there is the potential for even more upside, a lot more.

That's not to say its a slam dunk, there's no such thing as a sure fire winner.  It doesn't matter whether you're dealing with a dividend paying NYSE listed stock, a high flying Biotech on the Nasdaq, and not with an OTC listed penny stock, even if its fully reporting like RMHB.  In my view this is a stock that is only suitable for those using "risk capital", that is to say money that one can afford to lose.  

So why do I think RMHB has significant upside potential?  

Ultimately stocks trade on supply and demand.  There are always buyers and sellers, but if more people are buying than selling then the PPS will climb.  There are always manipulative games that can be played in my opinion, but basic market dynamics 101 will win out in the end. 

A month or two back one of my readers sent me an email suggesting I look into Cannabis stocks, and I did.  What I found were a lot of speculative stocks that had already climbed several hundred percent, sometimes 1,000 percent and more.  And the biggest percentage gainers fell into that category called penny stocks.  When I came across Rocky Mountain High Brands at Investors Hangout, (where I participate with the user ID growacet) I noticed that it hadn't yet made those type of gains.  And the prospect of Hemp Infused energy drinks was more than a little intriguing.

And the fact that they had just graduated from the non-reporting Pink Sheet Gray Market to the fully reporting OTCQB was a big plus for me.  I will not touch a non-reporting Pink Stock.  

I quickly saw the potential for Rocky Mountain to attract the attention of investors.  Their products are being distributed and can also be purchased at Amazon.  The company is working at creating brand awareness and already has a YouTube video available, 

How high could RMHB go?  I don't have an answer to that question, I'll be watching social media and keeping an eye on the trading for signs of irrational exuberance, but I don't see evidence of that yet. With that being said a market capitalization of $50 or even $100 million wouldn't shock me. Penny stocks trade on emotion a lot of the time and I think we could see days of 50 million and more in volume coming.  

Good luck.

Reshuffling the deck - The dangers of marrying a stock

Opportunities come up every day on the stock markets.  Right now I bet there is a 1 cent stock poised to go to a dime, a 10 cent stock primed to hit a buck and a $1 stock that will be trading for more than $10 before too long.

Of course unless you have a bottomless bag of money at your disposal, then you're going to have to sell some stocks to take advantage of opportunities that arise, and hopefully you'll be taking profits. That's something I've been doing of late with a number of the stocks that I've written about here at Avoid The Bag.  

As disclosed yesterday (Oct 24, 2016) I closed out my position in Lithium Americas (LAC.TO) for a nice capital gain.  I also decided to reduce my position in Eguana (EGT.V) by half, realizing a 100% profit on the shares I sold, having bought them at 15 cents.  Xenith Bankshares (XBKS) is another I reduced by about one third, having a cost basis of $1.60 means a return in excess of 40% on the shares I sold.  With all those capital gains I also booked a capital loss on LED Medical (LMD.V), a penny stock I thought was a good prospect to get some attention, but it didn't pan out, at least not yet.

In my younger days selling would have been harder, but I've learned some valuable lessons over the years, both from my late great Father, as well as from a most invaluable teacher called Experience.

Too often I find investors fall head over heels in love with their stocks, and all too often just one. Putting all your eggs, as well as all your money, in just one basket is not only incredibly risky, its also incredibly stupid in my opinion, but people do it all the time.  Why?  Because they've fallen in love. Its something that's happened to me before, and something I try to avoid now.  

I still like EGT and XBKS which is why I didn't sell out entirely.  I'm still holding some LMD.V as well in hopes it will start to attract the attention of investors.  The only stock I sold off completely is LAC, although I still think they have a chance to make a go of their Lithium Mine with SQM's backing.  

So what are the opportunities I saw?  One is in another stock that trades in what I'll call the "New Energy" space.  Ideal Power Inc. trades on the Nasdaq with the symbol IPWR. Beside recent developments and potential for stocks in the Energy Storage market, I love the way the chart looks.

I'll be doing a specific blog post on Ideal Power in the days to come.

Good luck to all three of my loyal blog dawgs, and I hope you're making money....not just on paper though, but with real capital gains that come from turning shares into money.

Cheers.

Closed out my position in Lithium Americas (LAC.TO)

I had already sold off a large part of my position, but had kept a decent sized position in case LAC took off.  Now seeing other opportunities I've sold off the remainder.  

Looking at the chart I see a pattern of lower highs and lower lows possibly emerging.  Thankfully my cost average was less than 50 cents CDN so I won the game, selling for more than what I paid.  And if LAC takes off and makes big gains from here, then I will simply have to cry into the money I made.

Best of luck to those still holding, I do think LAC may still end up a long term winner.  

When is averaging down a good idea?

To my faithful horde of followers, yes  all three of you, I have neglected this blog of late while watching my beloved Blue Jays advance in the playoffs.  Alas now that they've been eliminated by a better (and I must say classier) team in the Cleveland Indians, I will once again get back to sharing my thoughts and ideas on a more regular basis.  

One last note on baseball, I am still a big fan of the Blue Jays, but my regard for one Jose Bautista has fallen considerably.  His remark about the young Cleveland starter Merritt, who pitched 4+ brilliant innings to start game 5....Bautista's comment was totally lacking in class.  Jose said the young lefty would be shaking in his boots at the prospect of facing Toronto's vaunted line up. Cleveland took the high road after taking the ALCS, they didn't rejoice in making Joey Bats eat his words, instead they wisely said they don't pay attention to that kind of stuff.  

That's what winners do, they let their actions do the talking and its why I'll be rooting for the Tribe.

But now onto the topic at hand, about averaging down and whether or not its a good idea.  As with so many things in life, it depends.  For anyone who might be unfamiliar with the concept of averaging down, sometimes called "dollar cost averaging", its really pretty simple.  Say you buy 1,000 shares of a stock trading for $15, costing you $15,000 total.  That same stock then falls all the way to $10. So you invest another $15,000 at $10, but now you buy 1,500 shares.  Now you own 2,500 total shares and your average cost is $12.50....if the stock makes it back to that $15 price you first bought in at, then you're making money...at least on paper.  

The devil though, as often happens, is in the details.

If you're going to average down on a stock I would suggest you better be very confident in the prospects for the PPS to recover.  Is it a profitable company?  Are you receiving dividends?  That's not to say that averaging down a speculative investment isn't a good idea, its something I've done successfully in the past myself, but it is something that requires staying on top of things in my opinion.

Firstly, did you buy the stock at a time of heightened excitement, with lots of news and heavier than usual volumes trading?  If that is the case, then averaging down might not be a good idea.  If a stock is falling in spite of bullish news and increased trading volume, it could be an indication that while the retail herd may be excited and buying, that there are other players who are obviously selling the shares being bought.  And those sellers might just have a better gauge on the future direction than the retail herd.

From where I sit there is no "one size fits all" solution to determine when averaging down makes sense, no ABC checklist to follow.  But as a general rule I do think its best to try and gauge how the market is affecting the psychology of retail players.  I am a contrarian at heart, and that means running in the opposite direction away from the retail herd.  If volumes are high and the news seems good, but the PPS of a stock is heading south, then I will ignore the advice of those who advocate averaging down.  

Now, to bring this back to baseball and tie it in.  I am a fan of the game of baseball, I loved playing the game and I love watching it.  But I'm mostly a fan of the Blue Jays, its the team I grew up with.  I know the players and their histories, with other teams not nearly as much.  But while I'm a big Jays fan I'm not blind to the negatives, like that crack Bautista made about Merritt, the young Cleveland pitcher.  

Some people will fall in love with a company and its stock, and anyone who disagrees is an enemy. The same as with sports teams. But keeping perspective will allow you to keep a discerning eye when a company you love does something that perhaps you shouldn't like.  Maybe its paying to get noticed by hiring stock promoters, or maybe its putting out fluffy PRs which are filled with hyperbole and future looking promise but nothing of material importance in the here and now.

Enjoy the World Series folks, and whether its Cleveland or Chicago it will be nice to see a futility streak end.  

Hemp Infused Beverages - An intriguing idea for Cannabis players (RMHB)

Alright, full disclaimer right up front.  I took out a long position on RMHB on Monday October 10th 2016, so the opinions I am about to express are obviously biased, I eat my own cooking in other words.  

RMHB is a penny stock trading for less than one single American nickel.  I view stocks at this level to be the ultimate risk reward plays.  Get in early and there is potential for explosive gains, come late to the party after a huge jump and you might have a long wait, and quite possibly losses if you buy in at a peak that's brought on by irrational exuberance.

But at less than 4 cents as of Tuesday's close I don't think RMHB is anywhere near the point of "huge gains", but I can definitely see the potential for that to happen.

So what's the story here.

Rocky Mountain High Brands came on to my radar in the usual way, via some chatter on a message board at the site Investors-Hangout where I participate with the username "growacet".  I am an admitted social media junkie, and truth be told something of an attention whore.  I often see penny stocks being talked about bullishly on stock boards, and usually I'll check the chart and find they've already jumped 500 or 1,000 percent.  When that happens I move on, but RMHB is trading near its 52 week low.  

So what did I find so interesting about Rocky Mountain High Brands?  A picture is worth a thousand words, and a picture posted with a message sent my wheels spinning.

Energy and health drinks infused with Hemp?  WoW!!!  I'd never even considered that as being possible.  Time to do some research.  Is drinking something infused with hemp seed extract healthy? Turns out it is, which is hardly surprising given all the articles coming out about the health benefits of Cannabis.  Here's an article on such things as Omega 3 and Omega 6 benefits from Hemp Seed Extract:

https://authoritynutrition.com/6-health-benefits-of-hemp-seeds/

I'm not going to go in depth on explaining the relationship between Cannabis, Hemp and Marijuana, those sufficiently intrigued can do further research if they want.  Suffice to say they're all from the same family, however do note that the active ingredient in Marijuana that creates the "high" is called THC, and it is not present in this drink.  

Still reading?  Okay....regular readers of this pathetic and miserable little blog (all 3 of you) know my style.  I'm not gonna start pounding the table screaming GET IN NOW THIS IS GONNA EXPLODE!!! That's not my style, all stocks are risky and penny stocks are the riskiest.  They also have the potential to make the biggest % gains of course, its the old risk reward dynamic.  

Regulars also know I'm not big on fundamentals, I consider them as being already "baked into" the PPS.  And obviously with a stock trading for less than 5 cents, you're not going to see a robust balance sheet and a history of big profits.  Hemp infused drinks are something new however, so there isn't a 20 year history here.  

The chances for a $0.03 cent stock hitting $1.00 are slim, but they're better than the odds of a $3.00 stock going to $100.00...I've seen many OTC penny stocks go from pennies to dollars, I can only recall one stock trading in and around $3 going to $100+ without having to adjust for forward splits. 

The company's latest PR came out on October 11th 2016.  The most significant development from my perspective is RMHB moving off the Pink Sheeted Gray Market and onto the OTCQB.  I consider this hugely significant because there's no filing requirements on the pinks, while the OTCQB requires that SEC filings like 10Q's and 10K's be up to date.  There are traders and investors who won't touch the Pink Sheets and I'm one of them.  In Canada I draw the line at the Venture Exchange and in the US with the OTCQB.  I won't touch Pink or CSE stocks.  

http://finance.yahoo.com/news/rocky-mountain-high-brands-moves-130000972.html

Note that the company has a stated intention of moving off the OTC altogether and onto the AMEX exchange.  Yes I know its no longer called that but I'm old and will always refer to it as the AMEX. If you're reading this and thinking of RMHB as a possible long term play then I would advise you to expect a Reverse Split.  In my opinion if they're going to up-list the shares to a senior exchange, a share consolidation is an almost certainty to meet more stringent bid price requirements.  

I've identified a number of stocks on here over the past four months that have made some big jumps in a short period of time and I very much like the chances for RMHB to do the same.  If it does I will remind everyone of my favourite little bromide:  Nobody ever went broke taking profits.  

I'll leave you with the chart.  If the PPS gets over the 200 DMA I don't see it hitting resistance until the .06 to .07 cent area.  Assuming that happens then a 50/200 DMA Golden Cross would be in the cards and could signal a potential blue sky breakout.

Comments are welcome so long as they're respectful and without profanity, even bearish opinions are okay.  A market requires both buyers and sellers after all.  

Cheers and good luck.