Case Study: A Winning Penny Stock Offering Trade

1. The Stock: GHI Inc.

• Symbol: GHI
• Price (pre-announcement): $8.50
• Float: 12M shares
• Average Volume: 1.2M shares

2. The Catalyst

• News: GHI announces a $20 million secondary offering priced at $6.00 per share after the market closes.

3. The Trade Plan

• Bias: Bearish. The offering is dilutive and priced significantly below the market price.
• Entry: Short on a break of the pre-market low.
• Stop Loss: High of the day.
• Profit Targets: $6.50 and $6.00.

4. The Execution

• Pre-Market: GHI is trading at $7.00.
• Open: The stock opens at $6.90 and pushes up to $7.20 before failing.
• Entry: Short 500 shares at $6.80 as it breaks the opening low.
• Stop Loss: Set at $7.25.

5. The Result

• Profit Target 1: The stock drops to $6.50. Cover 250 shares for a $0.30/share profit.
• Profit Target 2: The stock continues to fall and hits the offering price of $6.00. Cover the remaining 250 shares for a $0.80/share profit.
• Total Profit: ($0.30 * 250) + ($0.80 * 250) = $75 + $200 = $275.