As you can see from the Nasdaq chart above, the premarket action told the story, and the Nasdaq did indeed gap up. Many times the cheapies don't act in a rational manner in tune with the market. They have been running up from the open lately, regardless of the action of the general market. The risk has been minimal -- by buying the first upticks just after the open, the downside has been minimal. Here is an example.

I was watching Acxiom (ACXM:Nasdaq - news - commentary), more out of curiosity and tracking than with an intent to trade, due to a recent significant earnings warning. The premarket action for some reason showed an increase in upward momentum just prior to the open. For a split second I considered buying on the first uptick due to this action and the positive premarket action of the overall market, but elected to not enter the trade because of the earning news.

In spite of this news, as you can see from the chart, Acxiom still climbed from the opening price of $10.51 to a high of $11.86, representing a 1.35-point climb, which I missed. This is a perfect example of the low-risk factor built into these types of plays recently. Even on bad news, the downside has been minimal just after the first low at the open. Had the news been any less damaging, it would have climbed even more and I would have played it.

Level 3 (LVLT:Nasdaq - news - commentary), is another example of a cheapie stock going against the normal trend. The premarket action looked weak the morning of June 26.

As you can see, again the premarket action told the correct story, at least for the open, gapping down for the day.

I was watching Level 3 intently, due to great news released the day before concerning a new agreement to provide its CrossRoads broadband Internet access service to EarthLink (ELNK:Nasdaq - news - commentary). This is the kind of news I like, and because of this, combined with the trend of cheapies with news running up from the open, I decided to play.

As you can see from the Level 3 chart above, it opened at $5.04, dipped to $4.90, then sprang to a high of $5.60. I exited on the first peak at 9:46 EDT, when it hit $5.50, for a bit less than a half-point profit. Again, this was contrary to the general movement of the market, which gapped down.

At the same time, I was watching Exodus (EXDS:Nasdaq - news - commentary), which was also showing positive premarket action. This time, there was no great news, just that it was recovering from a previous earnings release. Apparently, traders thought it had suffered enough the last week. Keeping in mind the trend of cheapies not dropping too much on the first swing down, I decided to play it along with Level 3.

As you can see from the Exodus chart above, all these factors came together. After opening at $2.11, Exodus dipped to a low of $2.04, then climbed to a high of $2.42 for a quick 0.30-point gain. Not much of a gain, but considering 1000 shares is my minimum on these kinds of stocks, not a bad profit.

These are three great examples of how traders who are not familiar with playing the cheapies can misinterpret them. By tracking and knowing what they will do a good percentage of the time, I was able to exploit these stocks to the fullest, while many other traders were slightly behind the power curve.