Every now and again I read some of the penny stock sites and I am always impressed by the vigor and enthusiasm of those traders that swear by the pennies. I have traded some lower priced stocks in my time and I did make some money from them but then I moved away from the whole idea. Why?
Well, quite simply I wanted to have good idea which way my stock was going outside of pure technical indicators. Now, I know that not all penny stock investors only use technical but I would say a good chunk of them do. I wanted to have a reasonable chance that my stock would end up rising. Good fundamentals always makes technical analysis a sure(r) bet.
For example. If a stock that has been performing well, has great fundamentals, has large institutions buying into it and has had recent good financials suddenly hits one of my over sold filters then i have a good idea that this is a position that "it" (the stock) is not 'comfortable' staying in. In other words it's ready for a bounce. I am talking about the best companies in the US here.
Generally speaking the best companies are NOT penny stocks so that is why I stay away from them. I have developed a watchlist of about 100 stocks using Investors Business Daily. These stocks are quite simply the best. By the way, the list is not restricted to IBD's 100.
I run all my filters past this list. IF one of them hits it - it's a go. My fundamental analysis is already done and I am ready to go. In a fairly decent market my filter gives me a 90% success rate of the stock moving 5%+ within a ten day window. Not bad (in my opinion).
So, to sum up - go with an established list of stocks that have great fundamentals. Learn how they react in certain situations and invest with confidence!
Till next time!
