April 14

4 Steps To Analyzing Penny Stock Chart Patterns

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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