The LEXG Party is Over

LEXG Pulls Back

Today we saw of reversal of mass proportions on Lithium Exploration Group (LEXG.OB). The run that led penny stock traders to the promised land, and finally turned sour. Now, I will be the first to say that trading volatile penny stocks and microcaps is one thing, and owning them for the long term or even a mid-length swing trade is another. I will also admit that we add names like LEXG and other volatile names to our list of stocks all of the time. But, when is enough profit enough profit ? Why would somebody who bought at 3 or 4 not sell at 9 or 10 within a week ? In our stocks to watch pieces, we research names that will be newsy and volatile, often before the moves happen.

Yesterday’s trading action in LEXG showed us, in Alan Greenspan’s words, “Irrational Exuberance”. The point I am trying to drive home is that there is difference between holding Apple Computer (AAPL:NASDAQ) after it makes a 200% move and even the best penny stock. Common sense tells me, that if you have a double in a hot penny stock, you have to take something off the table. No matter what, the PR’s, or message boards say. This morning, LEXG was actually up fractionally in the pre-market and then an onslaught of selling followed. The stock tried to mount some support at the $9 level in the early AM, but once it broke this once massive gain became a falling knife. It hit a low of $3,50 and bounced and is now stuck in a quagmire between naked shorts covering, day traders scalping, and blown up longs throwing in the towel.

I will not go as far as to say that, LEXG is fake, but to invest long term in any company with this type of market cap and miniscule revenues, is usually insane. Especially after it’s run up.

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