Stock Picks for Penny Stocks
Stock picks for penny stocks arenít exactly easy to find. They are not for the novice investor because they are difficult to research and they are highly volatile stocks. Traders should probably begin with other forms of investing first, and then perhaps move onto penny stocks once they have a better understanding of trading in general. This article will discuss what every investor must do in order to find successful stock picks when penny stock trading.
Before investing in penny stocks, you must understand your investment goals. You must determine how much money you have to trade with, what you hope to make and what you can afford to lose. This first step is crucial to your success and without doing so you may end up losing a lot of money. Next, you must build a list of penny stocks that you will watch. How do you do this?
The first step for selecting your stock picks when penny stock investing, is to pick and industry to invest in. Some investors already have an idea which industry they would like to invest money in, but others are unsure. If you are unsure, pick a few industries that are of interest to you and begin researching them. You may find new products that are on the market that can point you in the right direction. You can also subscribe to magazines pertinent to the industry of interest that can tell you about potential companies. The idea is to find companies that are innovative and that have the potential for growth.
Second, you must do a lot of research. Many investors new to penny stocks donít realize that to find the best penny stocks, you have to do more research than you would normally do with other types of stock investing. You must learn as much as you possibly can about the companies of interest when making your stock picks. This is hard to do because companies that produce penny stocks do not have the same filing requirements as companies in larger markets. This makes it very difficult to find relevant information, but not impossible. You must also be sure that the company is not only innovative but is also solid financially and has real potential. It is very hard to select penny stocks because you need to find companies that are on the verge of producing products that consumers will buy. This is very hard to do and most people donít catch on until itís too late.
Once you have done your research you must now build your list of penny stocks that you plan to invest in. Keep these companies on your watch list for a few weeks and watch them every single day to see how they are performing. A trick to making your stock picks is to find companies that are leaders in their industry, and then find companies that are similar. You may have missed the boat with other companies, but there are always competing companies out there, that could potentially have a better product, or provide better services. This trick can help you decide how to invest money in penny stocks.
Additionally when you buy penny stocks you must be cautious of scams. Some investors fall for the email scams that promote hot penny stocks to investors. These scams work only for the people sending the email. These scammers will buy the so called hot penny stocks, and then hype them up in emails and similar means. Then once foolish investors begin to buy the stock, they sell the stock and make a quick profit. These foolish investors that take the bait soon find that they are unable to sell their stock and are left with a stock of little to no value. Donít fall for this! If you do your research and donít try and make a quick buck, you will avoid making foolish mistakes.
Market Direction: The market is moving absolutely sideways. That is exactly what the markets were telling us they were going to do! The Japanese Rice traders preach, " Let the markets tell you what the markets are going to do," based upon many decades/centuries of analyzing what investor sentiment was foretelling. Two weeks ago the signals are indicating the markets were in a sideways mode, it was time to go take a vacation. Fortunately, that is what we did. Otherwise, the analysis that the markets were in a sideways mode would have been repeated like a broken record during that time frame. You would have gotten sick of hearing it over and over. Candlestick analysis provides a clear format for one it is time to be long, time to be short, or time to be resting. The summer months are usually the time to be resting.
Today's close put the Dow at exactly the same level that it was trading on August 1 and July 1. Investing, just like any other activity, often requires a time to step back, rejuvenate, and then analyze what is going to occur in the future. Hopefully many of our readers have been able to take advantage of that situation. The nice thing about using candlestick analysis for establishing positions is that candlestick signals will always find strong potential trades no matter what the market conditions.
Although the market in general is a major influence on many individual stock prices, the signals and patterns overweigh the general market direction. As illustrated in the CSUN chart, a recent recommendation on the Candlestick Forum, the price pattern was showing possible strength in spite of the sideways movement of the markets. The Jay-hook pattern provided valuable information of what the underlying dynamics of this stocks price movement could be. Having the knowledge of what each signal and each pattern represents creates a powerful investment format. What might not be obvious to the general investor, the candlestick investor can easily detect potential pressures from the Bulls or the Bears.
CSUN was recommended based upon the simple rules incorporated into a Jay hook pattern. What should occur to confirm the pattern? Very simply, continued buying pressure at important levels. Note how the recommendation to buy occurred as a Jay hook pattern would be confirmed and a breach of potential major resistance level, the 50 day moving average. There is nothing difficult about analyzing what is going on in investors minds when using candlestick signals. The possibilities that can be visually analyzed become much easier to implement with simple visual analysis. The visual aspect of candlestick signals allows for the identification of a possible price move when the markets in general do not provide any major input. As the Dow has moved sideways, CSUN has produced a 30% profit over the past week.
Many investment techniques become too sophisticated to be effective. Candlestick signals merely indicate what investor sentiment is doing right now. The signals are the product of high probability situations that have been identified over and over. Do they work every time? Definitely not, but they work with such a high degree of probabilities, the investor that takes advantage of the information built into candlestick signals will always be in a position to take advantage of high potential profitable situations.
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