Sectors & Industries
By penny stock type I mean the industry & sector that the business belong to. For instance, “financial” is a sector and “personal computers” is an industry. The business type is important when it comes to penny stocks trading because some industries have high volatility trading, such as biotechnology, and it should be traded very carefully.
I’ve seen bio-tech companies moved upwards of over 100% in a day because they found a new disease cure, however I’ve seen these type of stocks going down very quickly because of results failure at the final phase.
The whole industry also could be affected by trend, so a good company with solid product could be a bad trade in a bad time. For instance, during a flu epidemic a pharmaceutical stock could soar as opposed to a fast food stock because people avoid eating outside in this type of situation. By selecting the right industry at the right time, you increase your chance of trading a penny stock winner.
What is The Right Industry For a Low Cost Penny Stocks?
The right industry is something you know well and understand. It could be an industry related to your business, your hobby or a subject that you always like to read & talk about. Why this is important? When you know an industry very well, you’ll have strong knowledge about where the business is heading before many other traders who are just trading without any knowledge. Sometimes you’ll even predict the future news of the industry which in turn will move the stock price whether up for good news or down for bad news. For instance, before Apple even announced the launch of iPad, lots of fans from all over the world were producing sketches that were surprisingly so close to the real product without even seeing it. So, if you are able to predict the industry news based on your research and readings, then this is the perfect penny stock type for you.
So How To Pick A Company With a Good Stock?
Once you focus on an industry that you know well, you should gather a list of several related companies & begin comparing their financial data. Your research now is so powerful because you are comparing companies that are in the same industry and your comparison will have clear results by revealing the top ones. In contrary, if you do comparisons between different companies in different industries, the results won’t be accurate compared to when you focus on one type of industry. After the research & comparisons you should end up with few companies for your short term trading or long term investment.
What Should You Look For When Picking an individual Penny Stock?
There are some data that are available publicly at your favorite financial site as follows:
- Latest news, whether they are bad or good – They will definitely affect the stock price.
- Shares outstanding and any insider sales – Supply & demand will affect the stock price.
- Upgrades/downgrades by analysts – This will change the stock price almost instantly.
- Volumes including overbought & oversold data – It’s again about supply & demand.
- Institutional ownership – In stitutional don’t focus on low price stocks but it’s an indicator.
- Management plans & new product – This will affect the survival of the business.
All the above data & more are easily available online at financial sites or at the company website. You can even call the company and ask for the person who deal with investor’s relations to send you any financial document that you need for possible investment.