Trading Down Trend Penny Stocks
I am going to give you an easy strategy for trading Trading oversold Penny Stocks. These stocks hold more risk since they are usually associated with manipulation. However, Penny Stocks do offer investors the opportunity to make huge returns in a short period of time. The easiest way to trade the strategy I am going to tell you about is to focus on Penny Stocks that are trading above $1.00 but less than $5.00. Remember in America Penny Stocks are priced less than $5.00.
First Find Stocks selling off hard.
To do this you will either have to have some software or hit up the daily gainers on the nasdaq. I use Equity feed and basically just run tons and tons of charts to get a great list of Penny Stocks To Watch. Once I do this I will make a list of penny stocks that are close to breaking, which means they have 5 or more days in the red. Once I do this I will set an alert 1 cent above the down trend line. Then check the following requirements below before taking a position.
Second – Look for volume to be drying up.
Next I will look for volume to be drying out. You want to see a big spike on the first red day and then you want to see the volume slowly drying up. The day before it breaks the down trend line it should be under %50 of the average 30 day volume. Once you see this day you will know there is a good probability that this stock will hit. Once stock you can look at if you want to know what a good candidate looks like is QTM. Check it out and look around August 12th. I have had this stock on my list of penny stocks to watch since the 8th and I think it is going to be huge.
Third – Wait for the trend line to break.
Finally you would look to take a position when the down trend line breaks. You will take a position if you get a volume spike. I usually wait for the volume to spike and then take a position on an inside bar. I will use a limit order to try and get the best price. I will not stay in these styles of trades for longer than a day since they will usually die off very hard the following day if they get a pop.
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