Even though there’s no magic trick to it, there are ways to figure out a list of penny stocks to watch; and possibly buy. These volatile, cheap stocks are plentiful and so are the big gains that come from some of them. One of the main things to understand is what drives penny stock prices. This can be boiled down into a few different categories:
How To Look At Penny Stocks
- Penny Stock News – Events broadcast by the company that signify a meaningful material event for a company that could set it up for success
- Penny Stock Disclosures – These are forms like 8-K, 13F, 4, and even 10K/Q. These will be the things that show important company information that is mandated by the SEC to report. They don’t need to be accompanied by a news release so sometimes you won’t see why a penny stock is moving until you look deeper into its filings.
- Industry News – Typically we see industry news trigger certain moves for penny stocks. These can be things like legalization when it comes to marijuana penny stocks or oil rig count when it comes to certain energy penny stocks. Other things like global economic news may impact other sectors. Needless to say, if a penny stock is moving and there aren’t any filings or company news, see what’s happening in the industry
- Technical Trading – This is the one that may not make sense to some. Technical levels or indicators for certain stocks may trigger a directional move. This is simply based on momentum and trend indicators from a chart. More times than not, a trader buying penny stocks on technicals alone may not even know any more about a company than its 2, 3, 4, or 5 -letter symbol.
No matter the case, it’s important to understand the risks that penny stock traders take. Within the blink of an eye, you could hit the jackpot but the same holds true for losing it all.
That’s why it’s important to understand the basics of penny stocks and learn how to enact them in your trading strategy. For those who bought some of the penny stocks in this next article, they are likely up, handsomely. But can the trend continue or is it time to sell? You decide: