In this post, we’re going to take a look at technical analysis versus fundamental analysis when it comes to trading penny stocks.
A lot of people when they get into trading penny stocks, they’re trying to evaluate these companies the normal way that they go about investing stocks.
What People are Looking for When Trading Penny Stocks?
They go about looking at the records and their earning sheets. This is ultimately what many people do. They check out some of these financial analyst reports.
People want to know how’s the company doing, how it’s performing the current quarter, what’s the growth estimates next quarter. It might look great. When you take a look at this, it says that it might be up to about 300%.
When in reality, in the past five years, it’s been going down about 20%. That’s one thing you have to realize and recognize. When you’re dealing with penny stocks, you’re dealing with speculative trades.
With that in mind, it’s not to say that you can’t trade them. You just have to trade them properly and the right way.
That’s why we have an upcoming course called the Penny Stock Profits Course.
If you’re serious and interested in trading the cheaper stocks (the penny stocks, the more speculative stocks), you could check this course out.
We are doing a secondary course where we have case studies and a full evaluation of the technicals when it comes to trading penny stocks.
Penny Stocks Case Studies >>> Click Here
I think you have the answer to the big question, and that is which way is better – technicals versus fundamentals when it comes to penny stocks.
It’s really technicals.
Penny stocks – Short Term Trades
A lot of the penny stocks move based on the technicals. And why is that?
Take a look here at our paper. When you look at the long term investing, and you evaluate how do people make decisions. Well, it’s based on the fundamental data. It’s based on all those reports, those sheets, those earnings calls, And why is it? Why is it that fundamentals are for the long term?
Well, it’s because when you’re dealing with big companies, it sometimes takes a handful of weeks or months to redo those things depending on how large of a company you are.
If you have a big ship and you have to turn that boat around to go in the other direction – it takes a very long time. That’s why a lot of the long-term investing takes into account the fundamental data.
But when you’re looking at penny stocks, the majority of the trading you’re doing in penny stocks is shorter terms. Or not super long term. In some regards, you might have some long-term investment penny stocks. Maybe you put in a little bit of cash for the long term, but a lot of it is going to probably be shorter-term trades.
They might be 2-4 days hold. They might be a single day hold. Also, they might be 5-25 days hold. But very few are based on fundamental data because there’s not a lot of fundamental data out there. And that fundamental data doesn’t apply, and it does change fairly quickly.
A lot of penny stocks trade based on momentum. If you’re taking a look at these penny stocks, it’s not that something drastically changes all of a sudden when you look at these sheets.
It’s just you get that explosion, and then you take your profits. You’re waiting for that explosion that breaks out the momentum. And then you take your profits and eventually these things usually sell back off.
If you take a look at many of these companies, you’ll understand what I mean. Here’s your penny stock move. Well, maybe you had a nice break out you got into the stock, and then the rest of the time, it’s flat or eventually starts selling off.
You can see that happening in a handful of charts.
Here’s another one right there. Maybe you got into the stock right here, and you are there for a couple of days, and then it’s coming back to where it was.
That’s the nature of penny stocks. That’s what you have to realize and recognize. They’re not necessarily trading off of fundamental data.
Some people, of course, do get into these things thinking that they’re going to hold this one for a couple of years, and it may work out for them.
But the majority of the time, when you’re looking at technicals versus fundamentals, you’ve got to stick to the technicals when it comes to penny stocks. That’s because these are more speculative, they’re usually shorter-term duration, and that’s what you have to realize as you’re trading these things.
They are trades and less so much investment.
When you look at these things, you’ll notice that the majority of them do sell-off with time, even if they had a few nice weeks or months.
Remember, they are trades and usually not on long term investments.
Diving Deeper with BTAI
Let’s see what we can find.
Well, let me look at the analyst and summary. What’s going on with this company? What’s the news? How do you trade it based on the news?
The thing is that sometimes those companies go out and pump the news.
You could start looking into things like historical data. What’s been going on, but all of that doesn’t tell you the picture of how you should trade it.
If you’re doing this, you’re looking for a very long term investment. And in that case, you should be even more familiar with the company than just looking at fundamental data reports.
Otherwise, if you’re looking to trade something actively, then, in that case, you have to learn the technicals.
We have a lot of great classes when it comes to technical analysis. If you want to learn how to trade stocks by the technicals check out our website tradersfly.com
Also, if you’re serious about trading penny stocks, we get into this as well in the Penny Stock Profits course.
Definitely check that course out.
There’re also Penny Stocks Case Studies >>> Click Here
I hope you found this video helpful and insightful and gave you some things to think about as you trade penny stocks in the future or look to invest in them.
Don’t forget to check out these penny stock courses: