Sometimes, especially if you are day trading stocks and do not intend to hold on to them for a long time, you can earn a sizable amount of money from penny stocks that follow a trend. These stocks are usually characterized by gains of more than 100% in a day or over a few days. These stocks get their boost from major events or news, and follow the current trend.
When a major event occurs or some unusual news breaks out, experienced traders will make a list of penny stocks that can be connected or related to the news or event. If any of these penny stocks companies releases a favorable press release, the investors will buy up the stocks and thus drive the price up. When the price rises other investors will notice as well, and start watching these stocks carefully.
If another similar company issues a press release, these investors will start buying that stock, as well as the previous company's. This results in the penny stocks accelerated growth as more investors realize the rising value of the stock and jump into the investing bandwagon.
Very often, these stock trends do not last long; this will depend on the duration of the event or news that the stock rode along with. Natural disasters or illness epidemics, such as the avian bird flu and Hurricane Katrina, are just among the many examples of events that started a penny stocks trend.
When the bird flu broke out the whole world, including governments, companies, hospitals, the general public, and victims, were desperate for a cure. Biotechnology companies that rode the wave saw a rapid rise in the value of their penny stocks as investors scrambled to buy these up. A few years ago, Hurricane Katrina swept over the United States and devastated several states. Companies that could help in the cleanup and rebuilding operation were in great demand.
Trends may not necessarily result from natural disasters alone. They may spring up from news about new technologies, niche markets, or new ways of solving old problems. Some of the penny stocks companies may have been on the OTCBB for a long time, but if they fit into a trend, these companies may suddenly see their stocks rise upwards.
Experts say that the trend of the future is in companies that can help save our planet. For instance, as petroleum prices seesaw (mostly upwards), and the world begins to realize the harmful effects of oil and other fossil fuels on the environment and the earth's ozone layer, companies offering alternative energy sources are becoming more in demand.
Health and wellness will always be important, and as the strains of previously simple illnesses such as flu become stronger and more difficult to treat, companies with cures addressing these will most likely see an upward rise in the value of their penny stocks.
The business process outsourcing industry has seen a major boom in recent years, as companies move to outsource their customer service, accounting, information technology and other external and internal functions in an effort to save on labor costs.
Note that in order to know what is going on and be able to spot a trend, you will have to read up on current events. If you intend to go into stock trading and seriously want to earn from it, then make it a habit to read the newspapers and learn to spot breaking or potential trends. Once you're able to do that, penny stocks trading will be easier, and a lot more fun.
About the Author:
Nir Dotan is a writer and promoter of
Penny Stocks
services, and
Penny Stocks Preferred source for the latest news and information on the best and brightest Small Cap Stocks.
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71
Date Published :
Nov 21 2008