There are 4 things you must look for when buying a penny stock gap up.
Otherwise this kind of tragic event could happen.
And the 4 criteria are
We’re coming off an extremely hot market in the past week.
With runners such as APDN, NSYS, KERN, and PSTV.
In a market conditions where we have new penny stock gappers everyday, it's even more important
to do your own due diligence before jumping into buying a stock.
And if its too much work, well maybe following chat room alerts better.
I hear people are turning $500 into lambos every single month.
While im working my ass off doing premarket research every single day.
So clearly Im doing something wrong.
If you’re looking that hot stock alert that’ll change your life, well you’re not gona find
that here.
BUT, if you want to learn about the 4 key criteria to look out for before buying a penny
stock gapper.
Well, this video is made for you, as you long as you smash that like button for the Youtube
algorithm.
I’d really appreciate you my friend.
So, the first criteria I look for when determining whether a stock gapper is a potential buy
is unusual trading volume.
Simply put if a premarket gap up volume is thin, its not likely to hold.
Thats what we call the stock is up on air.
And its likely to sell off right at the open just like CLSN and VLRX on Friday Nov 15.
And how do you determine whether the volume is actually above average for a particular
stock?
Well that brings us to the second criteria when analyzing a potential penny stock runner.
Which is the daily chart.
Let's take a look at one of the hot stock from last week, NSYS.
This stock gapped up huge on Wednesday Nov 13.
Now let’s take a look at the daily chart for this stock.
You can see the stock trades with extremely thin volume on the daily.
This is what I call a barcode chart.
Where there isn't any range or volume.
Basically no one is buying or selling this stock normally.
So on any other day, this stock NSYS isn’t worth looking at at all.
But on Wednesday during the premarket trading session, the stock was already trading around
300 to 400 thousand shares volume.
Which is unusual for a stock that generally trades only 300K for the entire day.
So that's the kind of above average volume that we need.
It means there’ll be more potential buyers and sellers interested in this ticker.
And the volume will move the stock.
This is the kind of easy volume analysis you should be looking at premarket.
Now besides the usual trading volume, the daily chart give us key technical information
about the key support and resistance on a stock.
So if we look at NSYS.
It’s gapping up to above $5 premarket on that day.
SO on the daily we can see there's resistance levels around the 4.80 to $5 area.
So that's a price level of interest.
And if we are speaking purely in technical analysis terms, previous resistance once broken
becomes support.
I'm not saying that's true all the time.
But that's what the majority of the people are taught and follow, and that becomes a
self-fulfilling prophecy.
And after the $5 support on the daily we can see the next clear resistance is $5.5, after
that there is more upside to $6.25-$6.5, and then the $7-$7.5 mark.
And this is the kind of chart traders like to see, that the stock can give them a huge
range to squeeze to the upside.
If you want to learn more about how to draw support and resistance on the daily chart,
check out this other video.
Besides important resistance and support levels, the daily chart can also tell us historical
behavior of a stock.
Let’s take a look at a few runner charts from last week.
First, TRNX, what do you see?
The stock is l downtrending since pretty much 2014.
When you see beaten down charts like this.
There's a few things you should know right away.
First and most importantly, this stock is probably a piece of sh**.
No joke it’s true.
Look at all these penny stock daily charts.
Downtrending charts like these are usually results of multiple reverse splits, insider
selling, and even more dilution.
Generally speaking of course.
Now another important thing u need to realize from a long term downtrending chart like TRNX,
is that there are many many bagholders.
And no i'm not talking about my multiple boyfriends and husbands that I don't have holding my
purse while I shop at Louis Vuiton.
The bag holders im talking about are the traders and investors stuck holding the position long
from $5, $10, $20’s and even higher.
So let's put our psychology hat on again, if you were stuck holding this penny stock
TRNX long, what would you do every time the stock gaps up significantly.
Well I’d probably want to take this opportunity that ive been waiting for weeks, months, and
sometimes even years to sell my position and get out.
Right?
I’ve already lost my lamborghini money on this stupid penny stock that I should never
have bought.
So I just want to gtfo before I lose my Civic too.
Besides looking for ex husbands, i mean bagholders, on the daily chart, another key factor I look
for is whether this stock has a history of holding its gains after a run intraday.
You can see on TRNX daily, everytime it spikes up, that's followed by a sell off.
That's why they have these huge candles spiking up but then still close red on the day.
Same thing as APDN and PSTV. that means these penny stocks can squeeze, yes, but they tend
to sell off either near the end of the day, or on day 2.
So that probably means you should not buy or hold the stock long overnight or swing
it hoping it’ll go to the moon the next few days.
Now I’m definitely not saying every stock with a daily chart like those will sell off
right at the open.
So please don’t just short short every stock with that kind of daily chart.
And that’s because we need to always look at the third criter, which is the float of
the stock.
The amount of shares outstanding available to be publicly traded.
The float of the stock is a key factor to whether a penny stock gapper will run.
And honestly checking all the 3 out of 5 criteria mentioned so far takes less than 5 minutes,
so there's no excuse not to do this before buying a stock.
And you know what else takes less than 5 minutes?
Tapping the like button if you haven't done that already.
Actually that takes less than 1 second.
Videos like these take me 10-12 hours to make, if you dont mind taking that 1 extra second
to hit the like button.
I’d truly appreciate it.
So the float of the stock is a key factor to whether a penny stock gapper will run.
If you look at some of our famous, or infamous runners, depending on whether you were long
or short, all these hot stocks like BPTH, SES, and most recently APDN all have one important
factor in common, is that they are all low float stocks, meaning their float are all
under 5 million, some even as low as 800 thousand.
And when a stock’s float is under 5 million, that means with enough above average buying
volume, which we talked about in the first criteria, all the existing public shares available
for trading are being swapped between buyers and sellers in a short amount of time.
And the price of the stock can be quickly bid up when there's an overwhelming demand
to buy and not enough people to sell.
If the stock has above average trading volume, a lot of clear upside on the daily, when you
sprinkle that low float factor on top.
That could be explosive for a penny stock gapper.
And we’ve seen stocks like these running 200-300% before.
Now lets not get too excited about all these potential runners, because many beginner traders
see the potential upsides of turning $500 into a million in six months, or using max
buying power and put everything into a $5 stock hoping that’ll make it rain lamborghinis.
I hate to be a party pooper, but I must tell you the truth, that no one wants to hear...
As exciting as all those day trading marketing and chat room alerts tell you, these penny
stocks can often break your account.
And that's because most of these low float runners are actually pumped up to do potential
offerings.
Which is the fourth criteria we must talk about.
Look for potential penny stock dilution.
I get it, reading penny stock SEC filings, it sounds hard, it sounds boring, but guess
what, this can save your trading account.
What I look for in all the penny stock gappers, is whether the company has any outstanding
common stock registered to be offered in order to raise more capital, if there's outstanding
warrants, convertibles, and whether they can issue any of the securities mentioned at the
market.
And thats exactly why its so hard for me to buy stocks like APDN and PSTV.
If you’ve seen the intraday offerings this year on CAPR and PSTV, you’d understand
what I’m talking about.
I’m perfectly fine letting APDN go when it was running from $7 to $20.
Because I dont want the risk of a rug pull on an offering announcement.
And instead of trying to join the hype and buy the stock, I’d rather be looking for
toppings to short this pig.
Everytime something like that happens, it hurts and makes me really sad inside.
Because there are some trader friends I never hear from the next day, and I see my subscribers
asking me for help in the comments or DM because they were holding long when the stock announced
offering either intraday, premarket or afterhours.
The truth is, these penny stocks like CEI, SLS, YRIV, TOPS and many many others, are
simply vehicles for the insiders to sell and continue printing money out of thin air, meaning
the stock is publicly listed in order for them to keep on pumping the stocks up with
news, then register to do offerings to raise “capital” to grow and expand the company.
As a result stock dumps and continue downtrending to below $1, then the stock gets delisting
warnings from the Nasdaq, then they file to do reverse split, after the split they pump
the stock again with another press release.
And the toxic cycle continues over and over again.
And you can find all those information in the stock’s SEC filings form 10Q, S1, or
S3.
I have made 3 videos already on how to read these complicated looking SEC filings.
So please go watch that, I explain them step by step in those videos.
That's the reason those videos are made.
And they’re free, you don't have to pay a $5K DVD for it.
And let's be clear, I am NOT at all a trading guru.
I’m just sharing my ideas and takeaways here.
To be a guru you need to be the expert of it all and turn 500 into a million in 6 months,
and own multiple lambos.
Guys I don’t even own a bike.
As a matter of fact, I’m wrong all the time, you can see the losses in my trading recap
videos.
But the key is, I make more than I lose.
I do all my own research, plan out all my trades, and manage my own risk.
If you guys want to me do a video on how I create my premarket watchlist everyday and
plan out all my trades, comment “watchlist” below.
If there's enough requests then I'll do it for you guys.
Then you can learn to plan the trades yourself.
like i’ve mentioned in this video, maybe penny stocks not for you, you can grow your
small account trading mid caps and large cap stocks instead, and still keep your emotional
sanity.
Or some of it anyways.
I’ve been sharing my weekly trades and commentaries in the recap videos on the weekends.
And also charts during the week on my instagram.
So if you’re interested, make sure to check that out.
And the free perks of being part of the humbled trader family doesn't end here, i'm also sending
out weekly watchlists on Sundays for free.
You can sign up for that using the link below.
And the only thing that's costing you is a like on this video.
And also don't forget to comment “watchlist” if you want to see the premarket planning
video.
Thank you guys for watching as always, and ill see you next week.