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Why traded volume is important in penny shares

Well it’s important in any type of share, but the question was raised this morning in a mail from reader CR, who basically asked me why I mentioned volume traded so much in the updates and stuff. It’s one of those more basic principals that plenty out there have incorporated, but all the same it’s important to get the idea. So to illustrate in a simple manner, here’s the chart of Condor Resources (CN.v) over the last five days to today.
CN.v isn’t a bad company as such, but it has been unlucky in drilling dusters at two copper projects (one in Peru, one in Chile). The share price has suffered greatly due to this and a lack of cash at bank, so here it is now in the penny-range. It should also be pointed out that the company itself is highly repeat highly unlikely to be involved in any short-term PPS movements. This is just an example of some 3rd party speculator having a pop at an easily moveable stock.

And moveable it is: Because of the light volumes and low price some dude is able to scoop up maybe $12,000 worth of shares (it traded 167k shares yesterday) and then pop the stock a full 50% by buying the next ask offered at 13c. Cut to today and the price drops like a stone, but not before some of those cheaper shares are offloaded at a profit.

It should be added that it remains to be seen whether speculator X will be able to unload the rest at a profit, but the idea is clear; buy into low volume pennystocks and you run the risk of being on board a real rollercoaster ride and also being thrown around by a single smalltime player. This is why volume traded (preferably between several different hands) is doubly important in the microdot share price world. Be careful out there.

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