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Penny Stock Basics

How to Spot the Top of a Penny Stock Pump

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Written by Timothy Sykes
Updated 6/19/2023 9 min read

How to Spot the Top of a Penny Stock Pump: Key Takeaways

  • Revealed: A weird new way to spot the top. (Due to its nature, sharing before the crash is only possible for the Trading Challenge community.)
  • Check out ILUS … and see how I called it ahead of time.
  • Promoters twist the truth to lure in newbies! (See how I use their BS to judge potential dip buys in today’s market.)

If you’ve ever wondered how to spot the top of a penny stock pump, you’re going to love this. Learn how it works and understand the opportunity.

“This Is the Sign the Pump Is Nearing Exhaustion”

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This weird new way of identifying the top didn’t come in a blast of light from above. It came from finally putting two and two together.

What I’m about to explain has happened more than once this year. At first, I laughed it off — even though I was getting attacked by promoters on social media.

But this week promoters confirmed my suspicions. Before I explain, understand that promoters have been around a long time.

Old School: Why Penny Stock Promoters Changed Things Up

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In the past, you could make a rough guess about how long promoters would pump. It was pretty clear based on the dollar amount in the disclaimer of their email blasts.

$3 million channeled into a “marketing campaign” meant a longer pump than $300,000.

panic profits ad insert

But now, all the biggest email promoters have shut down. Promoters have gone underground. They changed tactics. It’s not new — I’ve been warning about Twitter pumps and promoter chat rooms for a while.

But what I didn’t know was how obvious it is when they telegraph the top. And I don’t know how long this will last. They might see this post or the video lesson I made for Trading Challenge students. Let’s hope not — I want to see this keep working.

Massive Props to Promoters

Some people ask why I talk about promoters so much. Why don’t I just focus on the chart?  We’ll look at a chart, but I have to give props to the promoters first. I’m grateful for what they do. Check it out…

Here’s Why We Should Thank Penny Stock Pumpers

When penny stocks get overextended, they become perfect potential morning panics. That’s what I’m waiting for — opportunities to dip buy.

But, and this is key, the best panics aren’t just the stocks that are up the most. The best panics come with stocks that have promoters. That’s why I like it when promoters get involved.  But beware…

Caveat Emptor

You never really know who the promoters are or how many are involved. All these people talking about penny stocks on WeBull, Reddit, or Twitter could be one or two guys who have hired a click farm to create bot accounts.

And because it’s done on social media, there aren’t any disclaimers. So expect the worst out of everybody in this industry. Especially penny stock promoters. I could give you hundreds of examples of recent promos that went bust. They all collapse.

Here’s a recent example I called in a video lesson for Trading Challenge students. (The video lesson goes into great detail about how to spot the top of the pump. Watch it!)

Ilustrato Pictures International, Inc. (OTCPK: ILUS)

Here’s the ILUS six-month chart…

top of penny stock pump
ILUS chart: 6-month, tell-tale sign calling the top of a penny stock pump — courtesy of StocksToTrade.com

As you can see, I called the top almost perfectly. Notice the last three candles on the right. I was up filming the video lesson at 2 a.m. Eastern on September 21. In other words, just hours before the market opened and ILUS went red…

Again, this isn’t the first time this year it happened. It’s just the first time I figured out exactly what they’re doing.

I don’t plan on exposing the promoters. Frankly, I don’t know who they are. And I don’t want to know. But I’m aware of their techniques.

Ready? Check out this tweet from September 2. Keep in mind that it was before ILUS went supernova.

Believe it or not, that tweet gave me an even clearer look into…

The Corrupt Underbelly of Penny Stocks

Weird, right? But over the past few days, all these bot accounts started reposting that tweet from September 2. And not just one or two. I’m talking about 200, 300, maybe even 400 accounts.

This is key — they tagged me.

Now, before I give you the last piece of the puzzle, understand that on September 2, ILUS was boring. Look at the yellow arrow on the chart above. It points to September 2. ILUS did nothing that day. Nothing!

So when all these accounts started reposting and tagging me, I finally put two and two together…

It’s laughable to me because I have nothing against ILUS. I want all pumps to go as high as possible. But they made me an “enemy of ILUS longs.” And now all these ILUS longs are saying things like, “We know you’re secretly short.” That’s ridiculous. I haven’t shorted anything in two years.

How Promoters Pimp the Pump

Tim Sykes giving top tested trading tip from Venice, Italy 2021
© Millionaire Media, LLC

So now there are all these social media promoters. And when the promoters take my tweets and twist them, they’re looking for attention. They’re desperate to maximize the pump.

It’s usually the beginning of the end. Whoever’s doing it is obviously trying to rile up people and squeeze every last penny out of the pump.

Now that it’s happened a few times I see it. This is the sign that a pump is nearing exhaustion. The promoters try to rope me in and get my community involved. They’re desperate to find any buyers for their trash at, or near, the peak.

That’s usually the sign of a top.

Again, I can’t thank the promoters enough for the opportunity, for this tell-tale sign.

Coming soon…

Don’t miss my follow-up post on common dip-buying mistakes. You won’t believe it. ILUS had the perfect panic and bounce … and I wanted it so bad I screwed it up. Aye, aye, aye.

Trading Challenge

In the meantime, apply for my Trading Challenge. It’s where I share when I get tagged by hundreds of Twitter accounts — signaling the top of the pump. It’s also where all my top students honed their skills. Apply for the Trading Challenge now.

What do you think of this weird new way to spot the top of a penny stock pump? Comment below, I love to hear from all my readers!

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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

* 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”