Characteristics of The Markets Best Penny Stocks
Finding great penny stocks isnt rocket science, especially with the number of websites that explain how to spot and trade them. If you want to handpick your stocks, use all of your available resources.
Trading penny stocks on your own can be risky even with direction from online resources. Any top trader will tell you in order to be as profitable as possible, you have to go beyond looking for solid companies and using technical analysis to enter and exit trades.
Here are four higher-level concepts to help you screen out the mediocre or low-odds penny stock trades you might have otherwise taken.
Determine Who Owns the Lions Share of the Company
Not that this is guaranteed to prevent a stock from collapsing, but management of a company can be highly motivated when theyre also significant investors of their company. If instead theyre selling some or all of their stock (without a clear reason), it may be a stock other investors should avoid. After all, insiders are more familiar with a company than any ordinary investor could be.
Most publicly-traded companies are required to report their management teams beneficial ownership " or changes in ownership - in any of that companys stock. This is typically disclosed in an 8K and/or a Form 4 filed with the SEC.
Consistent PR Effort " Does the company at least realize their stocks price is as much a result of publicity and presence as it is about fiscal success? This is especially true of penny stocks.
This isnt to imply an organization needs to post a news release every single day to garner constant attention. However, a company can only excite potential buyers by letting them know whats going on. And, it cant be a one-time event.
Volume Matters " If a penny stock you buy doesnt have a steady volume of buyers, you may not be able to exit the position at a reasonable price.
You never know what the volume on a penny stock will be day-to-day. It matters a whole lot, though, when you try to take profits off the table.
That said, high-volume breakouts are how new uptrends start, and dont necessarily need to be avoided. Quite the contrary, actually. A penny stock doesnt have to maintain volume levels seen during a breakout effort just to be considered liquid; the pre-surge volume just has to be respectable.
If you buy a penny stock without doing a little research, you just might find yourself on the losing end of a loser company. It may have been started on a whim, without a plan for growth, or a long-term patent may be close to expiring.
Most penny stocks are going to be of young, growth-stage companies, so a trader shouldnt expect a textbook example of a perfect investment. On the other hand, a company should be able to demonstrate that it will sooner than later bring a product to the market or turn a profit. (The same is also true with penny stocks of older, established companies though.)
Likewise, more than half of all stocks trade at a value under their IPO price within twelve months after their public offering sale. Thats not a problem for a true long-term investor, but it can make things challenging for a penny stock trader who wants to get in early shortly after an IPO. It can take a while for a new stock to settle in and start trading predictably.
You shouldnt buy a penny stock if it has little or no history of trading. That just spells trouble.
With these four concepts, you can begin trading penny stock right now.
By accentuating your solid trading discipline with the above four elements, youll be capable of making vast improvement in your results and bottom line.
The SmallCapNetwork.com site offers additional trading advice and specific stock picks using the criteria mentioned above. The easiest and fastest way to access the sites comments is by subscribing to the complementary newsletter. - 23218
Trading penny stocks on your own can be risky even with direction from online resources. Any top trader will tell you in order to be as profitable as possible, you have to go beyond looking for solid companies and using technical analysis to enter and exit trades.
Here are four higher-level concepts to help you screen out the mediocre or low-odds penny stock trades you might have otherwise taken.
Determine Who Owns the Lions Share of the Company
Not that this is guaranteed to prevent a stock from collapsing, but management of a company can be highly motivated when theyre also significant investors of their company. If instead theyre selling some or all of their stock (without a clear reason), it may be a stock other investors should avoid. After all, insiders are more familiar with a company than any ordinary investor could be.
Most publicly-traded companies are required to report their management teams beneficial ownership " or changes in ownership - in any of that companys stock. This is typically disclosed in an 8K and/or a Form 4 filed with the SEC.
Consistent PR Effort " Does the company at least realize their stocks price is as much a result of publicity and presence as it is about fiscal success? This is especially true of penny stocks.
This isnt to imply an organization needs to post a news release every single day to garner constant attention. However, a company can only excite potential buyers by letting them know whats going on. And, it cant be a one-time event.
Volume Matters " If a penny stock you buy doesnt have a steady volume of buyers, you may not be able to exit the position at a reasonable price.
You never know what the volume on a penny stock will be day-to-day. It matters a whole lot, though, when you try to take profits off the table.
That said, high-volume breakouts are how new uptrends start, and dont necessarily need to be avoided. Quite the contrary, actually. A penny stock doesnt have to maintain volume levels seen during a breakout effort just to be considered liquid; the pre-surge volume just has to be respectable.
If you buy a penny stock without doing a little research, you just might find yourself on the losing end of a loser company. It may have been started on a whim, without a plan for growth, or a long-term patent may be close to expiring.
Most penny stocks are going to be of young, growth-stage companies, so a trader shouldnt expect a textbook example of a perfect investment. On the other hand, a company should be able to demonstrate that it will sooner than later bring a product to the market or turn a profit. (The same is also true with penny stocks of older, established companies though.)
Likewise, more than half of all stocks trade at a value under their IPO price within twelve months after their public offering sale. Thats not a problem for a true long-term investor, but it can make things challenging for a penny stock trader who wants to get in early shortly after an IPO. It can take a while for a new stock to settle in and start trading predictably.
You shouldnt buy a penny stock if it has little or no history of trading. That just spells trouble.
With these four concepts, you can begin trading penny stock right now.
By accentuating your solid trading discipline with the above four elements, youll be capable of making vast improvement in your results and bottom line.
The SmallCapNetwork.com site offers additional trading advice and specific stock picks using the criteria mentioned above. The easiest and fastest way to access the sites comments is by subscribing to the complementary newsletter. - 23218
About the Author:
James Brumley is an expert on Penny Stocks with over 10 years of covering and identifying undervalued Penny Stocks. In order to receive Jamey Brumley's ideas on which stocks to buy or avoid in the penny stock space, sign up for his free newsletter located at SmallCapNetwork.com
posted by X - Men @ 4:07 AM
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