Syndicate
Pre and Post Graduation Method
Naturally, by trading stocks in this pre and post graduation method, there is a small probability that you could miss out on a big winner. For example, Cuisine Solutions (AMEX: FZN), rose 73% in the six months after its graduation from the OTCBB and never fell below its jump price. in case you were wondering, FZN was not one of the thirty stocks included the analysis. On the other hand, you could make out like a brigand! Sinovac Biotech Ltd. (AMEX: SVA) rose 22% in the six week pre-jump period only to fall 58% after graduation. By six months after graduation, SVA had risen back to nearly 60% above its pre-graduation price! As expected calling tops and bottoms in the market is virtually impossible, so it would be sensible to set your own personal entry and exit points for these stocks. We have shown you the averages. We have given you the timeframes in which these stocks characteristically rise, fall, and then rise again. Once more, remember that these were averages for thirty graduated OTCBB stocks during a one year timeframe. Not all stocks are going to perform this way.
a typical situation for a graduating OTCBB stock is the Transmeridian Exploration (AMEX: TMY) which graduated from the OTCBB to the AMEX on March 21, 2005.
Notice that beginning in February, approximately six weeks preceding to graduation day, Transmeridian stock started to increase in value. On March 21, 2005, the first circle on the left of the chart, the stock graduated from the OTCBB to the AMEX. Note that in the initial six weeks after graduating, TMY experienced a stable decline and dropped even further after that. TMY hit its low point about two months after graduating from the OTCBB. From this point, TMY had a slow and steady recovery. TMY as a final point regained its graduation price nearly six months after making its move from the OTCBB to the AMEX. After reaching this break even point, TMY stock has taken off like a rocket!
Not all stocks follow the pattern that we mentioned in this chapter. Remember that what we described were averages. We used the TMY chart because it is very close to the averages that we described. Even as the chart is close to the averages, it does not fit them perfectly. What we do like about this chart is that it without a doubt shows the pre graduation run-up and the two phase price drop subsequent to the graduation. TMY hit its low point a little early at two months after graduation. Most other graduated stocks hit their low points two to four months after graduating from the OTCBB. As described in this section, more or less six months after graduating, TMY finally eclipsed its graduation price.