Candlestick Trading Blog
April 18, 2008
List of Penny Stocks
Compile a List of Penny Stocks to Play the Stock Market Penny stock investing is an investment method that is somewhat controversial depending on your investment philosophy for playing the stock market. Before you can begin to invest in this type of stock, you must first compile a list of penny stocks to meet your criteria. On reason this type of investing is controversial is due to the high volatility of trading penny stocks on the OTCBB and the Pink Sheets and the extreme due diligence required when building a list of penny stocks. The general definition of a penny stock according to the SEC is stock that is priced below five dollars per share. Penny stocks typically don’t contain much of a history and the company as a whole is valued at about four million dollars or less. Other issues that investors have with this form of trading include the statistic that only about five percent of small cap stocks are truly worth investing in. These statistics can be somewhat discouraging therefore contributing to the negative reputation of penny stock investing. The good news, however, is that with the right guidance and knowledge, you can make a significant profit in this market. Technical analysis can assist investors who need to build a list of penny stocks, and is often the only method successful in predicting penny stocks price movements. Stock technical analysis uses charts to identify price patterns and trends by examining the trading history of a stock and through observation of indicators. There is actually a major group of technical indicators, a few of which will be discussed in this article. The first indicator to discuss is gap analysis because in the case of penny stocks, the gap almost always fills. The gap is the open spot in the chart caused by an opening price and range that is greater than the previous period’s close. The analysis is done by finding gaps in the daily, weekly, and intraday charts. Another indicator that can assist you in building a list of penny stocks is range analysis. Range analysis is used to determine the best buy and selling points, as well as the potential breakout and breakdown levels. This analysis utilizes the price range, and the opening and closing prices to identify support and resistance levels. The last indicators that will be discussed in this article include the strength indicators and oscillators. These indicators compare the current price action to the history, therefore showing the relative strength or weakness of a stock. One of the most commonly used of these indicators in the RSI which stands for “relative strength indicator.” It can indicate oversold and overbought price conditions therefore providing tips for traders to buy stock or to sell stock. Compiling a list of penny stocks takes time and many hours of research and study. Once the list is built, however you can then begin to exclude stocks that don’t perform well and you can add others too as time passes. Continue to research potential stock market technical analysis tools to assist you as you begin to buy penny stocks. Remember as well that while penny stocks can bring about great fortune, the risk factor is extremely high. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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