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Trading Tips-Tim Sykes Penny Stock

Could This Catalyst Take Us Into 2023?

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Written by Timothy Sykes
Updated 12/2/2022 5 min read

We could be on the cusp of some INCREDIBLE trading months.

While most of Wall Street battles back to breakeven, penny stocks are starting to heat up…

…And I know EXACTLY why.

Last month, I began pounding the table, telling my Millionaire Challenge students to prepare themselves.

Because after months of stale action, true penny stocks began to show signs of life.

It all comes down to a seasonal trend known as the ‘January Effect.’

Most market commentators don’t explain this concept thoroughly.

And it’s not like it takes a degree in quantitative finance to understand what’s going on.

They speak in broad terms and get the basic idea right.

But they miss the mark when explaining HOW it plays out.

Fortunately, I know the ‘January Effect’ like the back of my hand.

I want to fill in the holes left by Wall Street pundits and social media jockeys.

To get you started, check out this YouTube video I made in 2018 that explains the basics:

Once you’ve got a good handle on the fundamentals, head to my blog and I’ll explain where and when to look for these opportunities.

Find The Carnage

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Search the internet for the ‘January Effect,’ and you’ll find the same explanation…

Investors sell losers in December to take a tax write-off and then buy them in January.

Makes sense right?

Here’s where almost everyone gets it wrong.

They ignore the most important word in that description – losers.

People hear the words ‘January Effect’ and apply it to every stock.

But that’s not how it works.

The ‘January Effect’ tends to move the most beaten-down names.

Broadly speaking, that would make technology stocks a prime target for this year.

In the penny stock world, it tends to create sharp moves and multi-day runners.

That’s precisely why I keep an eye on former Supernovas.

These stocks already proved they can run, so I want to know if and when they start to move.

Take Chinese stocks for example.

Names like Xpeng Inc. (NYSE: XPENG) and NIO Inc. (NYSE: NIO) surged as shorts got squeezed.

Commentators attributed this to a possible reversal in COVID restrictions.

The reasons don’t matter.

What matters is the convergence of three factors:

  • Beaten down sector
  • Headline catalysts
  • Underlying strength

Now, let’s talk about how to locate these potential plays

Look for This…

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We already have a watchlist that includes former Supernovas.

I want to add any tickers that started the year much higher and are now below $5.

This includes momentum names like Stitch Fix Inc. (NASDAQ: SFIX), AMTD IDEA Group (NYSE: AMTD), Helbiz Inc. (NASDAQ: HLBZ), and more.

Once my list is set, I look for any increase in volume.

Typically, stocks follow my 7-Step Penny Stock Framework and fade into oblivion.

However, like zombies, they can rise from the dead under the right conditions.

Take HLBZ, for example.

This former Supernova fell for nearly a year before catching a spike in late Summer.

After that, shares faded until recently, when things began to pick up on tremendous volume.

So far, the stock has held up, even after giving back some of the gains.

And it may not recover.

But this illustrates what I’m looking for in terms of the ‘January Effect’ on a penny stock.

I also want to let you in on a little secret…

The ‘January Effect’ can start as early as November.

Shocking right?

With markets down as much as they have been, tax loss selling can occur earlier than normal.

All you really need is a stock to get so oversold that the slightest bit of news can send it soaring.

Keep This in Mind

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The ‘January Effect’ creates potential opportunities.

But it’s an inexact science as well.

I caution traders against blindly following any penny stock or former momentum name that’s rallied hard.

Especially with larger cap stocks and those with bigger floats, look at the overall market.

Generally, when the indexes float higher, these stocks do better.

That doesn’t mean they can’t operate independently.

However, aligning a trade within the market context will make things a lot easier.


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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”