Picking Winning Stocks Using Technical Analysis Part 2

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.

 

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Picking Winning Stocks Using Technical Analysis Part 1

I’ve decided to write this small report about the right strategies to pick good penny stocks because this subject is a bit controversial and confusing when a new trader start researching a company for potential high gain. And by the way, if you track the biggest gainers everyday, you’ll find those low cost stocks are always filling the top positions. Here is an image showing the top gainers at the time of writing & the market was down at that time.

Top Gainers Are Penny Stocks

Are you confused with penny stocks?

One day, you hear about a new stock trader who doubled his money overnight but at the same time a low priced stock went down 70%. It’s confusing only if you don’t know what to look for when picking a good low priced stock which you’ll learn now in this article…Penny stocks, peny stocks & pennies… Why they are called penny stocks?

Pennies and penny stocks

I like to call them low priced stocks, but lots of people think that penny stocks are priced under a dollar & are associated with small companies. Generally, any stock under 5 dollars is considered as penny stock, the main reason for this is the definition of SEC ( Securities & Exchange Commission) regarding penny stocks.

Without getting into too much details this five dollars level created restrictions for many brokers, traders & money managers to consider this level as highly speculative. However, this price level doesn’t make sense in some economies, specially the bad economy that we’ve seen recently. There are very large and stable companies that had a stock price under 5$ in addition all future large companies have to start small anyway.

Personally, I found there are many value stocks in the range $1 to $5 level and this is where you can make a decent fortune if you know how to play the stock picking game. What I like to do everyday is to scan the biggest stock winners and I always find the biggest percentage gain is in this low price range – I believe it’s because of the obvious fact that it’s an affordable level for many traders to get into the stock market. The other reason is because it’s a single digit and the perception is that it has too much room to move upwards. So I recommend to focus on the 1$ – 5$ range when thinking in penny stock investing as any range less than that needs a big amount of research.

What Are The Investment Rules For Penny Stocks?

When you start trading you’ll notice many recommendations and rules about trading stocks. But after a while, you’ll recognize that the market doesn’t respond  to the majority of rules most of the time. That is why you should use demo trading account to improve your skills. Think about this – if investment rules are accurate then every trader will win every time. But the fact is that many traders lose money and few lucky ones win most of the time. So making money from penny stocks doesn’t depend on investment rules such as earnings and market capital, however it doesn’t mean penny stocks trading is similar to gambling.

So what does this mean?… It means you have to do a thorough research and find small companies that have good management and excellent products which in turn will have good business to attract investors who’ll keep pushing the stock price higher.

The stock above gained over 200% in one day. The company is Hauppauge and their products are video turner that let customer watch live TV on the computer.

The news that shoot the stock price to the roof was their support for Apple products such as iPad, iPod touch and Mac system. With millions of products sold from Apple you can figure why the stock moved that high in one day.

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What Is Meant By Penny Stocks?

What Is Meant By Penny Stocks?

A lot of people are under the impression that penny stocks will only cost you one penny per share, but this is not the case.  The reason penny stocks have been given this name is because they have a low value and there therefore speculative in nature.  In order to determine whether a stock will be considered a penny stock, various criteria are used such as price of share being within 50p to £3 or having a market capitalizations of less than a £100 million.

Companies with penny stocks usually don’t have a very long history and they only have a small number of net tangible assets and this is what makes the penny stocks so volatile.  This volatility is what makes trading on penny stocks very exciting.  However, it also involves a certain amount of risk and for that reason a lot of traders tend to stay away from penny stocks.

 

What Is Meant By Penny Stocks?

Why Invest in Penny Stocks at all?

A lot of people who are new to the stock market might have read up on penny stocks and are wondering why anyone would choose to invest their hard earned cash in them considering the risky nature.  However, those with a bit of experience know that penny stocks are where big profits can be made.  A small increase of around 30 or 50 pence would not make a huge difference to your profits if you had shares in one of the blue chip companies. Portfolio diversification strategy should be used to lower risks. However, if you had invested in penny stocks that increased by this amount, you could see a huge increase in your profits.

In saying that, a lot of people would still prefer to stay away from the penny stocks because it is much harder to predict how these companies are going to perform.  And in the current economic climate, the chances of making profits from these companies are not very good.  However, you may have done your research about an emerging company and have a very strong feeling that it is going to do well; in this case it might be a good idea to invest a certain amount in the penny stocks.

Penny Stocks and the New Investor

To be perfectly honest, penny stocks should probably be avoided by those who are new to the stock market.  No matter how tempting it may be to make quick profits, the penny stocks are so volatile that you could end up losing all your investment.  They should also be avoided by those with limited funds to invest.  Anyone investing in penny stocks should have a lot of experience in the stock market and should be prepared to do a lot of research before taking the plunge.

What Is Meant By Penny Stocks?

Where Can You Find Penny Stocks?

A lot of investors will use the OFEX (Off Exchange) to trade in penny stocks and the AIM (Alternative Investment Market) also lists companies with penny stocks before they are listed on the LSE (London Stock Exchange).AIM, London Stock Exchange, OFEX, penny stocks←More from BlogWhat Are Stock Indexes?: There are hundreds of different companies listed on the New York Stock Exchange and there are new companies trying to get approval for membership each year.  So for investors, it How to Use Stock Market Trends: If you have decided that you would like to make some extra money because of how bad the interest rates are at the moment, then you may be thinking about Investing Pointers for Beginners: When someone has developed an interest in making their money work for them, they often turn to stocks as a great way to invest their savings.  Of course, it does A Summary of the Greek Government Debt Crisis: This is a crisis unfolding in front of our eyes, and it arguably is the most important financial crisis of the last decade.

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