Will LEXG Lithium Corp Bounce ?
Many of you witnessed the company Lithium Corp. (LEXG.OB) make a monster run in April only to be smashed by short sellers, profit takers, and so called momentum players. We pointed LEXG out as a penny stock to watch on it’s way up but also pointed out that it was primarily a trading vehicle.
Will after a miserable May and two pieces of fairly negative news (One about a filing/stock sale, and another piece from Seeking Alpha regarding paid mailers.) this week, shares of Lithium Corp are down roughly 20% at the time of this entry.
Does this mean the run is completely over or does this present a buying opportunity for a quick day or swing trade? We are not sure. However, there is some chatter on the internet that shares of Lithium Corp could bounce from here. Let me explain how this can happen. First of all, there are groups of penny stock day traders who look for situations like this and they are not looking at fundamentals. Most know that Lithium Corp is not a value play based on earnings, revenues etc. These short term minded traders are hoping for one thing and one thing only. This is known as short covering. It would be naive to say that short selling hasn’t played at least a minor roll in Lithium Corp’s decline. Keep in mind that some of these short sale orders may have been placed on a naked basis and have to be covered in a shorter time frame than in a traditional short sale. Lithium Corp is very risky to play from here, but it should still be added to your penny stock list on a just in case basis and can be used as a learning opportunity for future trades.
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