My Secret Formula For Finding Penny Stocks Pre-Spike

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Traditional stock traders buy low and sell high. My students take things one step further, both buying low and selling high, and then selling short when prices begin falling and buying to cover. This lets us make a profit both on the way up and the way down, but there’s one question you have to be able to answer to do this:

How do I find penny stocks before they spike?

If you want to be able to go long and sell short, you have be able to identify when a stock is spiking. If you don’t know that it’s going up, you’re still able to sell short at its peak – but then you’re only getting half of the profits. And if you can’t tell when the peak is happening, you risk getting squeezed on the position you’re holding long.

Basically, being able to tell when a spike is occurring is pretty important for penny stock traders.

Want to find penny stocks pre-spike? Follow these 4 rules to spot them before anyone else.

Unfortunately, there’s no 100% guaranteed rule that’ll tell you what every stock will do, in every situation (and if you find something like that, give me a call!). But there are a number of signals you can use to predict when a spike will happen. I’ve developed these years over 15 years of trading penny stocks. Learn them. Love them. And use them to make yourself a better penny stock trader.

Rule #1 – Piggyback on stocks that have already spiked a little

One of the quickest ways to identify a spike in the making is to start by finding a stock that’s already moving. Think about it… Which would you rather do? Sit around staring at empty charts, waiting for breakouts to appear out of thin air? Or would you rather use the many research tools out there to find stocks that are already moving? Here’s a stock I bought on Friday aiming to sell into a spike tomorrow:

Notice the stock has been up trending for several days BEFORE I bought.

I’ll give you a hint – one of these strategies takes a whole lot less time than the other…

Rule #2 – Look for potential breakouts that are reaching new highs

I’m always looking for stocks that are breaking out to new highs – especially those that are still up on the day and holding the morning high. You have to be careful with this, though. If you see a play like this on a Friday afternoon and the stock’s still holding its morning high, there’s always the potential for a short squeeze into the close there.

I talk about Friday short squeezes a lot more in my TIMTactics videos, so check them out. It’s a play that all penny stock traders need to learn to recognize and avoid.

Rule #3 – Bet on price action

Here’s how a lot of people try to predict that a spike is happening… They hit up their favorite chat room to see which stocks other members think are moving or how high they think certain stocks are going to go. Or maybe they buy alerts off another “guru” who tells them when to buy based off the spikes they’re predicting.

Now, I’m not saying that chat rooms are all bad. I’ve made tons of money off the plays that the students in my TIMAlerts group have found and posted about for the whole community to see. But ultimately, chat rooms are just that – places for conversation. What you really need to bet on is a stock’s price action.

Price action gives you the real story about a stock. Is it breaking out to a new high? Has it crossed its VWAP? All the news sites in the world won’t tell you when these things happen, but a stock’s chart movement will.

Rule #4 – Do your research

I hate to say it, but a big reason most penny stock traders fail is because they’re lazy. They don’t want to do the research that my students learn how to do. They want someone to tell them what to do, but what do you think happens when you get your tips from someone who’s passing the same information out to thousands of other subscribers? By the time you get the alert, everyone else has moved in – good luck getting your trades executed at the numbers you need to make a profit.

Instead, let me give you an example of the kinds of research my students do to determine when stocks are spiking…

This is One Horizon Group Inc. (OHGI):

Screenshot (46)

Recently, OHGI had a little spike that held around $1.80, thanks to news about downloads of its communications app (OHGI’s product is an international competitor to Skype, Whatsapp and others). I’m not super knowledgeable about tech investing, but that tells me that this is a stock that moves on news.

So, the big question is, when will the next news come?

One day, it happens. I saw a message in the TIMAlerts chat room, then I saw that it was already up 10-15% on StocksToTrade. So I decided to do some digging…

First, I went to OTCMarkets.com to look up the stock’s filings and disclosures. I saw there the stock had some new SEC news in their filings. It turned out that the company was about to do a presentation at an investor conference. Based on their S-1 filing, I knew that they only had a few million in cash and that they were looking to raise more from a new funding round.

But what was really interesting to me was the copy of the presentation that I was able to look at because I took the time to dig into the SEC filings. In particular, the company included a slide showing a feature comparison matrix that put OHGI ahead of their big-dollar competitors. And a company that puts out a better product than services like Skype and Whatsapp? That’s one that deserves my attention.

So I knew that this was a stock that had spiked before on news, and I knew that news was about to come out about the company’s investor conference, thanks to the presentation I was able to view ahead of time. I bought in anticipation of the hype, and sure enough, when the press release came out the next day, the stock spiked.

I didn’t see it going all the way to $5 a share, but some of my students did – and they made way more money on the deal than I did. And they did it because this was pretty much a textbook setup. All of the signs and signal were there – you just had to do the research to find them.

So what can you learn from these rules?

Proper preparation is key

Most penny stock traders won’t go to all the trouble of digging into a company’s SEC filings. They won’t take the time to read through presentations like the one OHGI posted – let alone try to interpret what all the information found there means.

And that’s why most penny stock traders will bankrupt their portfolios.

Don’t be like most traders. There’s nothing fun or sexy about me recommending that you do your research. If I was trying to sell you a get rich quick solution, I’d fail, because there’s nothing get rich quick about my approach.

But do you know what my approach does involve? Success.

Success requires hard work. It requires determination. It requires the ability to do what other people won’t do in exchange for the kinds of rewards those traders will never enjoy. Proper planning isn’t fun, but it is necessary.

Think like a retired trader

If the rules I’ve listed above tell you anything, it should be that I don’t make a move unless there’s a damn good reason. I don’t buy into a stock because I read online that I should. I only make a play when the signs line up and when my research tells me that the setup I’m looking at meets the criteria for my patterns.

These opportunities don’t come around often (and they’re coming around even less as we move into a more bearish market). That’s why I like to think of myself as a retired trader.

I’m not going to come out of retirement for a so-so stock play – just like a retired athlete isn’t going to come back to play for a minor league team. I don’t waste my time, and neither should you.

The rules above – along with the other guidelines I teach the students in my Millionaire Challenge – show me when good opportunities are happening. I listen to them because they’ve shown me time and time again that I can make good money if I stick to the system that’s helped me make me millions of dollars in trading profits.

I can teach you these patterns, but I can’t teach you the discipline it takes to be a successful penny stock trader. Only you can do that. If you’re ready to give it a shot and put in the time and energy needed to develop a successful mindset, join me today to learn the rules and patterns that’ll pave your way to financial freedom.

Posted in Basics, Breakouts, Patterns To Buy

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28 comments

Timothy Sykes

Hey Everyone,

As many of you already know I grew up in a middle class family and didn't have many luxuries. But through trading I was able to change my circumstances --not just for me -- but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!

Which is why I've launched my millionaire challenge. I’m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.

So when you get a chance make sure you check it out.

PS: Don't forget to check out my free Penny Stock Guide, it will teach you everything you need to know about trading. :)

  1. Erik Guerrero

    Very nice post, thank you for your motivation and determination. Think like a retired trader, that’s a great tactic in order to pick the plays worth getting into. Keep on giving great advice and succeeding.

  2. giilbertgrand

    Saw the 5 min video. With more and more people learning your teachings, there will be less the naive kind of traders you talk in the video. I think competition is turning stronger in pennystock land, so i´m not sure if it is going to be so easy to find naive traders tomorrow to sell into a possible spike into. ($AVXL).

  3. Jeff Howard

    Tim this is great! I’m learning a fricking ton everyday. I’m only 16 and I am currently settling on a few patterns that suit me. Once I have made enough money to apply to the challenge, I will. Legend!

  4. Anshul Jain

    You are right we should identify when a stock is spiking. If you don’t know that it’s going up, we’re still able to sell short at its peak – but then you’re only
    getting half of the profits. For example – If read blog on Mmfsolutions so we can easily understand the things.

  5. Justin

    This comment is in regard to your entire website, your mission, and you. I can’t express my appreciation for all of this free information you are providing to anyone who is willing to use it. I am getting wiser and wiser to the trading game every single minute. My notebook is running out of pages and I might have to go look for a new pen here pretty soon. I’m 21 years old, and like most people my age, I’m searching for what it is I want to pursue as a career. I have never felt so compelled and motivated to learn as I have been today. Its 130am and Im thinking a cup of coffee is in order. Thank you, Tim. You da man!!

  6. aaron

    I woke up today and realized Im 23, 2 kIds, car note and a mortgage. I make less than 250 dollars a week im pinching pennies i dont have i say all that to say i know i wont survive with the way things are going with all the odds stacked against me being a minority on top of all that. I came across this site by chance and just from skimming this guy seems to good to be true what does he gain from this it seems like the rest of the sites of who have hidden agendas then i realized thats my mind sabotaging my freedom. I’m going to follow everything on this site and create my own new techniques. I will let this site be the foundation to the greatest penny stock come up of all time.

  7. Che

    Hi Timothy,
    I am interested in learning how to trade stocks. By chance I came across an online article on penny stocks which linked to your website. Please keep in mind I would be a first time investor with absolutely no background in trading stocks, therefore I would need a vast amount of education. How can I get started?
    By the way I do not want spend money to be educated… I am so done with seminars in which I pay only to be disappointed in the worthless information.

  8. Amine Gzili

    Always great advices from Tim Sykes. Thank you Tim. I am trying to learn everything about your teachings. When i can buy your DvDS i will. Till that time i do my best

  9. Ron

    Hello Tim, great article as always! I have a question regarding longer term trading as opposed to shorter term. By setting your stops lower in the longer term strategy, does it help to avoid the noise of the markets and allow you too sit there until you have the spike there thereby increase your probability of success. Thanks.

  10. Ian

    Is it bad that Im binging on all the free content thats available during finals? 4th day in a row and still going strong, eager to learn!!! Also Looking forward to be a part of the challenge, can’t wait!!

  11. Deidra

    Hey Tim’ I’ve been following you for nearly a week now. I love what I see and that’s why I study so much. I’m greatfu for you and hope you will reply to my emails. I’ll keep you updated on everything. Today is my forth day of the trading challenge and I am looking forward to the interview!

  12. Pingback: Penny Stocks: 5 Steps To Picking A Big Winner - Timothy Sykes

  13. Adam

    Hi Tim,
    thanks for the great article! all of the free information on this sight is amazing! I have signed up for the challenge and cant wait to start working with you and your team. Everytime I read another article I cant help but think that it is going to be amazing. but at the same time I’m think “hurry up! I want to start learning from you guys!” i also have a question. how large of a postion do you take when going long and when going short?

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