Penny Stocks » Penny Stocks Term

4 Steps To Analyzing Penny Stock Chart Patterns

the editor — Wed, 14 Apr 2010 10:16:19 +0000

A mistake far too many investors make is thinking they can get away with not researching penny stocks because they are so cheap. What you need to understand is that they are extremely risky because of the low price. They are unproven investments or have gone through difficult business or financial periods thus lowering the price. For this reason, here are a few steps to help you properly analyze penny stock chart patterns.

Your first step should be to determine the subject of the penny stock chart. There are different subjects you can choose from such as following a chart that tracks the price or the moving average of the penny stock. Make sure you know exactly what the chart is measuring.

The next step is to determine the support and resistance level of the penny stock. The support level is the lowest chart point a stock price fell while the resistance level is the high point on a stock chart where the price has exceeded demand.

Your third step will be to identify the trading range for the chart pattern. The trading range is when the price of the stock will remain within a certain price range for an extended period of time. If the pattern exceeds the top of this range, there is a good chance it is setting new resistance levels. If it goes below the bottom of the price range, it could be setting a new support level.

The final step for you to properly analyze penny stock chart patterns is to look for any trend lines. Trend lines can provide you with feedback for potential future prices. If the trend line is moving upward, it may be signaling future growth while a decline can signal the opposite.

What is the easiest way to trade penny stocks:

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Outstanding shares

the editor — Wed, 06 May 2009 03:23:50 +0000

Outstanding shares are the number of shares that have already been issued on the open market. Outstanding shares include shares that can be freely traded by public and restricted stock. Restricted stock is shares that can not be traded freely, like stocks that have been given to an insider or used in an acquisition. The restricted shares can not be traded for a minimum of one year and depending on the type of restriction even longer.

What is the easiest way to trade penny stocks:

Market Cap

the editor — Tue, 05 May 2009 03:20:09 +0000

The market cap of a company is the price of a share multiplied by the total number of shares outstanding. If a company has 100,000,000 shares outstanding and a share price of .01 then the market cap would be $1 million.

As a penny stocks investor you usually buy companies with very low market caps. And as A value investor, you will be looking for companies that have higher market value.

What is the easiest way to trade penny stocks:

P/E Ratio

the editor — Mon, 04 May 2009 03:18:31 +0000

The P/E ratio is a measure of the price paid for a share relative to the profit per share. A higher P/E ratio means that investors are paying more for each unit of income. The price per share (numerator) is the market price of one stock. The earnings per share (denominator) is the net income of the company for the most recent 12 month period, divided by number of shares outstanding. Investors can use the P/E ratio to compare the value of stocks. If one stock has a higher P/E that of another stock, all things being equal, it is a less attractive investment. Normally, stocks with high earning growth are traded at higher P/E values, because investor anticipate the high growth.

What is the easiest way to trade penny stocks:

OTC Market and Pink Sheets

the editor — Sat, 02 May 2009 01:55:12 +0000

Penny Stocks are traded over the counter (OTC) through quotation services such as the OTC Bulletin Board or the Pink Sheets. OTC or known as OTCBB (Over The Counter Market Bulletin Board), is a regulated quotation service that displays real time quotes in over the counter equity securities. An OTC security is any stock that does not trade on national securities exchange. Broker-dealers who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities.

OTCBB was made to make the OTC equity markets more transparent, to spread price quotes and trade transactions. The system enables anyone form the largest firm to the smallest investor to know about the data of trades.

Pink Quote, informally known as the Pink Sheets, is an electronic quotation system that displays quotes from broker-dealers for many over-the-counter securities. Market makers and other brokers can use Pink Quote to publish their bid and ask quotation prices. These quotes were printed on pink colored paper so it is called Pink Sheets.

To be quoted in the Pink Sheets, companies do not need to fulfill any requirements (e.g. filing financial statements with the SEC, or issue a annual report). Many of these companies in Pink Sheets do not file periodic reports or audited financial statements with the SEC, making it very difficult for investors to find reliable, unbiased information about those companies. This means that you can find exciting opportunities if you can do proper research.

Makers who set markets in pink sheet stocks have very large spread. It is very common for a stock in the pink sheets to have a bid of .1 and an ask of .2. Most pink sheet stocks have went down so far in price that they often trade at less than their book value. If one they they issue a report that attract a lot of attention because it is undervalued, you can get lots of profit.

What is the easiest way to trade penny stocks: