If you want to make a lot of money in penny stocks, you will need to find the best penny stocks. In my method, the best penny stocks are penny stocks that are about to move. Most of the time they turn out to be hot penny stocks… But, that isn’t always true.
Here’s what I think that you can do to narrow down the list of candidates for your “penny stocks to watch” list.
Figuring out which are the best penny stocks to trade both is and isn’t a hard thing to do. With today’s computer technology and brokerage platforms, not to mention products designed to do just that, it really isn’t too hard to figure out what is about to or is already moving.
You just need to know what to do and what not to do.
Best Penny Stocks Movement Flags
When you select penny stocks to trade, what you want to do is find company’s whose stock is showing classical signs of interest by investors and traders (i.e. speculators). There are just two items that tell you a stock may be about to put on a move:
- The daily volume on several successive days is increasing; and,
- The stock’s price is increasing.
It May Not Qualify as a Best Penny Stock
You need to be careful when you select which penny stocks to watch. If the stock’s price is increasing with no significant increase in volume, it may mean that a company executive or other insider/representative is acquiring because of insider information and that they don’t want to be noticed. However, if there is no news or rumor stay away. You may miss one occasionally but not getting “creamed” will be worth it.
Anytime you see a price movement in any stock, not just penny stocks, without a corresponding increase in volume, don’t buy it. That is a classic signal of a price reversal. And, even if there is news pending, the movement may indicate that there is a “whisper number or rumor” floating around and the price will drop as soon as the announcement is made. I can’t tell you how many times that I’ve been burned by that one.
Best Penny Stocks Research
The really hard thing is to research the company to find out what’s happening to the stocks that are moving or are showing volume increases. I have several rules that should protect anyone who is trying to trade penny stocks. But, as always, it is your responsibility to make sure that any stock you buy is a good value.
Please note that most Penny Stocks are not fraudulent, “pump and dumps” or other types of scams. The people that say they are are just ignorant, immature or have an ax to grind. All stocks are inherently risky and buying them may lead to financial loss, not just penny stocks (also called micro-cap stocks).
But, just like their big brothers on the listed exchanges, there are many of them that are financially unsound. You must do research to find out about the company and its condition and prospects.
Research is what ultimately protects you from “catching your lunch.” Here are 5 rules that I like to follow:
- If you can’t easily find information about the company, DO NOT BUY THE STOCK!!!
- If their published telephone number doesn’t work or Google Earth shows an empty lot at the published address or the only address you can find is a P.O. Box, DO NOT BUY THE STOCK!
- If their balance sheets don’t seem right or don’t correlate to their corresponding P&Ls or if their reporting is late or non-existent, DO NOT BUY THE STOCK!
- If research indicates that the prospects for the company are not positive DO NOT BUY THE STOCK! Notice that I said “are not positive.” I did not say “are negative.”
- If there is anything unusual that you discover while you are researching the company that is not a positive, DO NOT BUY THE STOCK!
What If You Can’t Research the Best Penny Stocks Properly?
There are always traders and investors that don’t have either the time or the knowledge to research their list of potentially best penny stocks properly. I suggest you outsource the job. I have two relationships that I recommend highly. They are:
- James Connelly’s Penny Stock Prophet; and,
- Timothy Sykes’ News Letters.
Both companies have “trial or downgraded free” signup options. And, both are guaranteed if you decide to buy a membership or subscription.
I have memberships with both services.
