Since it is still summer there haven’t been many true promoted penny stocks with high volume so I have been scanner for other low priced penny setups. While Knight Capital Group (KCG) isn’t exactly a penny considering it is one of the largest market makers in OTCBB and Pinksheet stocks and in the pat earned a profit unlike most penny stock, this week the stock dropped into penny stock territory below $5.00 per share. The drop was due to some trading glitch and resulted in a $440 million loss for the company. The stock dropped from $7.20 to $1.80 in two days. I traded the stock on the second day of the sell-off. I bought it on the open at $3.30 when my technical trading system gave me a buy signal which told me that the stock was in the buy zone and ready for a mean reversion trade. I sold the stock at $3.95. Patterns like this setup any time a stock gets very overextended you just have to know how to determine bottoming price action because buying the first panic sell-off in a stock, can usually end up resulting in a big drawdown or a loss.
