How to Find Penny Stocks Pre-Spike

Learning how to find penny stocks pre-spike isn’t difficult… as long as you put the work in. I’ve spent decades studying penny stocks and the chart patterns that allow me to spot my penny stock winners.

But what if you’re just getting started? Selecting the right penny stocks to watch can seem daunting, but I’ve put together this article to help you learn how to find the best penny stocks to buy — ideally before they explode.

Let’s dig in…

What Is a Penny Stock?

A penny stock is a security that trades for less than $5 per share.

Although penny stocks can be found on the major Wall Street exchanges, I trade a lot of over-the-counter (OTC) penny stocks listed on the OTC Markets. There are three tiers of OTC markets: OTCQX, OTCQB, and pink sheets. OTCQX is the most-regulated market, while pink sheets are the least regulated. This means the lower you go, the more sketchy the stocks.

How to Pick a Potential Penny Stock Winner Pre-Spike

How do I pick penny stock winners before they spike? I use technical analysis — support and resistance levels and patterns on the chart.

If you can read stock charts and find reliable patterns, you can sometimes find penny stocks before they spike. Does it work every time? Of course not.

However, the more you learn and study, the better your penny stock picks can become…

Sign up for my NO-COST weekly penny stock watchlist here!

Where to Look for Penny Stocks

You can find penny stocks on the regular stock exchanges and the OTC Markets. Find securities that interest you, then review their basic data.

How long has the company been active? What has its previous price movement looked like? What does its volatility look like? What kinds of events influenced its growth? Spend time studying those charts and indicators.

In many cases, you’re looking for a catalyst, like exciting news about a product or development. These catalysts often precede spikes. When traders figure out that the company might have something going for it, they frequently strike.

Share Price and Valuation

Share price and valuation contribute to a company’s market capitalization (a.k.a., market cap). Penny stocks are typically considered micro-cap, which means they have a low valuation. But that’s not a bad thing.

Big-cap stocks are the major companies with huge valuations and high share prices.

Beware of Dilution

Dilution occurs when the number of outstanding shares increases. I avoid trading stock in a company that has recently had a number of its options exercised or issued new shares.

How to Pick a Potential Penny Stock Winner Pre-Spike

Traditional stock traders buy low and sell high. My students often take things one step further, both buying low and selling high, and then selling short when prices begin falling and buying to cover.

This can help us make a profit both on the way up and the way down.

In my “How to Make Millions” DVD, I go over my favorite catalysts that can cause stock spikes. If you want a front row seat to my favorite penny stock trades, sign up for the Supernova Alerts service to see them in action.

I’ve developed the following criteria and requirements for finding the best stocks to buy over my 20 years of trading. Learn them. Love them. And use these rules as you work toward being a better penny stock trader…

Rule #1 — Look For Stocks That Are Already Spiking

One of the quickest ways to identify a spike in the making is to start by finding a stock that’s already moving.

With penny stocks, there are a lot of information inefficiencies. So even if you miss the initial news, you might still be able to catch a part of the move.

Rule #2 — Look for Potential Breakouts That Are Reaching New Highs

I look for stocks that can break out to new highs — especially those still up on the day and holding morning highs.

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. Short squeezes are a play that all penny stock traders need to learn to recognize.

But always be ready to cut losses quickly. Sometimes when potential breakouts reach new highs, they can’t maintain their value above the previous resistance level.

Rule #3 — Bet on Price Action

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

Believe it or not, watching price movements can be educational. It sounds boring, but you’ll start to see patterns you wouldn’t have caught otherwise. Make it into a game. Which way do you think the stock price will move next?

Once you get a sense for a stock’s chart, start with small positions. Alternatively, try paper trading on StocksToTrade and get a feel for how it works without the financial risk.

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 that’s not how I teach.

If you're lazy, I beg you to unfollow me & spare me from wasting a second of my precious life own your useless ass. Sorry to be harsh, but life is short and lazy people & I do not get along. Go make your excuses & whine about your issues to someone who has compassion for I do not

— Timothy Sykes (@timothysykes) February 6, 2022

I don’t want to give you fish. I want to teach you how to fish. That way, you can learn how to find penny stocks on your own.

Research is how I locked onto ​​Paratek Pharmaceuticals Inc. (NASDAQ: PRTK) for a $4,350 profit in 2020 (starting stake $14,010). That same day, Eastman Kodak Company (NASDAQ: KODK) was going supernova off of news of federal funding for developing pharmaceutical ingredients. I was looking for sympathy plays.

I remembered PRTK previously had news about federal funding as well. And it had the potential to spike as a lower priced sympathy play.

It had already spiked slightly on increased trading volume when I bought at $4.67. Then it sped up and was even halted. After the halt I sold at $6.12.

If you want to know how to find the best penny stocks to buy, remember to look for former runners, news, hot sectors, and sympathy plays.

Success requires hard work and determination. It takes the ability to do what other people won’t do. Proper planning isn’t fun, but it’s 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 good reason.

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 trade — just like a retired athlete won’t come back to play for a minor league team. I don’t waste my time, and neither should you.

Thinking like a retired trader can stop you from making emotional plays. You might not have a trade every day, and you can work to avoid falling into the overtrading trap. It’s how traders lose everything they’ve built.

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 for yourself.

How to Select a Penny Stock Broker

The top penny stock brokers have reasonable fees and better executions. They’re also supportive and provide a user-friendly interface.

What Should You Consider When Picking a Broker?

There are lots of other qualities you need to consider before selecting a penny stock broker. Just as you must do your research to learn how to find penny stocks, you also have to research brokers to figure out what they offer.

Check out this video for an overview:

Does the Broker Have an Online (and Mobile) Trading Platform?

Find out whether you’ll have access to both an online and mobile version of the broker’s app. That way, if a trade goes against you, you can access your trading account whether you’re sitting at home in your pajamas or lounging by the pool at a hotel in Fiji.

Get a free copy of my book “An American Hedge Fund” to read about the trade I made from a highway rest stop.

When it comes to a broker, also make sure it offers great customer service. This is the company that will be holding your money and responsible for good executions. So when you have a problem, you want to be sure you can get through to someone and have any problems resolved quickly. Always check the customer service reviews page before deciding on a broker.

Fees

You’ll definitely want to know what you’ll pay for orders you execute with a broker. Although most brokerage services have gone to a commission-free structure, you’ll still have fees for locating shares to short, interest on borrowed shares, and monthly fees for real-time data.

Make sure you know the details before you get started.

Broker-Mandated Regulations for Trading Frequency

You probably won’t have to worry about this. Most places don’t require a minimum number of trades per month, unless they’re offering a rebate on monthly fees for higher-frequency traders.

If your broker requires you to trade at a certain frequency, bow out. As I mentioned before, you need to think like a required trader. If the stars don’t align, don’t trade.

Minimum Deposit

Many online brokers don’t require a minimum deposit anymore. Of course, you’ll have to fund your brokerage account if you want to trade.

Do your own research on the minimum deposit requirement for the broker you’re interested in. Also remember you’ll be subject to the pattern day trader rule (PDT) if you fund your account with less than $25,000, no matter which broker you use. (Unless it’s offshore, which I don’t recommend).

List of 5 Penny Stocks to Watch in 2023

My list of the best penny stocks to watch in 2023 includes:

• (OTCQX: ABML) — American Battery Technology Co. — The EV Battery Dip Buy Penny Stock
• (NASDAQ: XPON) — Expion360 Inc. — The EV Battery Multi-Day Runner Penny Stock
• (NYSE: BBAI) — BigBear.ai Holdings Inc.
• (OTCQB: GTII) — Global Tech Industries Group, Inc.  — The Pump All-Star Penny Stock
• (OTCQB: CLNV)  — Clean Vision Corp. — The Choppy Penny Stock on a Multi-Month Run

No, that doesn’t mean that I’ll trade them. Learn the patterns that work best for you — you might see a chance to use them with these stocks!

American Battery Technology Co. (OTCQX: ABML) — The EV Battery Dip Buy Penny Stock

My first 2023 penny stock to watch is American Battery Technology Co. (OTCQX: ABML).

The great thing about this stock … it’s the gift that keeps on giving.

The first time I traded it was back in September 2020.

But past spikers can spike again. Between then and now I’ve squeezed a total of $21,903 out of this one ticker (click the link to see my individual trades).

The recent catalyst of a 140% ABML spike was the discovery of a massive lithium deposit.

Lithium is a major factor in the production of today’s high-tech batteries. Batteries used in things like electric vehicles…

The EV sector isn’t very hot right now, but with the right catalyst, we can still find quality spikers like ABML.

The EV market is only expected to grow.

Sure, high inflation discourages would-be consumers and high-interest rates make new EV projects more expensive … but this industry’s an inevitability.

Chevrolet just announced the last production year of its gas-powered Camaro. California’s banning the sale of new gas-powered vehicles by 2035. This is happening whether you like it or not.

And if that’s where the money’s going, that’s where I’ll be watching.

Expion360 Inc. (NASDAQ: XPON) — The EV Battery Multi-Day Runner Penny Stock

My second 2023 penny stock to watch is Expion360 Inc. (NASDAQ: XPON).

This is another lithium battery play.

Right now it’s consolidating near the highs of a multi-day run.

The strength in this niche is unbelievable sometimes … XPON managed to run more than 250% and there are still tons of opportunities.

Even if the price doesn’t go any higher, there will be volatility plays on the way down. That’s where we see intraday bounces.

That’s some of my favorite price action to trade.

Here’s a brand new video that explains my dip buy process …

This niche is rampant with speculation. That means my 7-step pennystocking framework applies.

BigBear.ai Holdings Inc. (NYSE: BBAI)

My third 2023 penny stock to watch is BigBear.ai Holdings Inc. (NYSE: BBAI).

This ticker is at the top of my artificial intelligence watchlist.

It spiked over 2,300% in 2023 already.

That was back when the AI sector was first taking off.

Since then, it’s slowed down considerably.

But that was mainly due to companies like Alphabet Inc. (NYSE: GOOG) dropping the ball after ChatGPT started on a strong note. Google couldn’t keep up and that soured sector momentum.

Then the banking crisis happened. That didn’t help at all …

A series of unfortunate events led to the AI slowdown.

But now Google is back with a revised software called Bard. The bank situation seems contained. Things are looking up.

A sector revival wouldn’t surprise me. And BBAI is my top watch.

Global Tech Industries Group, Inc. (OTCQB: GTII) — The Pump All-Star Penny Stock

My fourth 2023 penny stock to watch is Global Tech Industries Group, Inc. (OTCQB: GTII).

I still see GTII in my dreams.

The spike in September 2022 was the stuff of legend.

Six back-to-back green days and a spike that moved prices more than 590% higher.

I’ve managed to pull a total of $12,062 from this stock over the years (click the link to see my individual trades).

It makes me feel like a broken record to repeat this but … always remember that past spikers can spike again.

https://t.co/gIIuF22exF Former runners can run again, never forget!

— Timothy Sykes (@timothysykes) December 7, 2020

I continue to watch volatile stocks long after the spike because I know there are more opportunities ahead. And GTII proves that theory.

After September 2022’s move, we saw a 270% spike in December 2022 and a 290% spike in January/February 2023.

It’s only a matter of time before we see another surge from this stock. And I’ll be ready.

Watch for a hot catalyst and more volume to push the price higher.

Clean Vision Corp. (OTCQB: CLNV) — The Choppy Penny Stock on a Multi-Month Run

My fifth 2023 penny stock to watch is Clean Vision Corp. (OTCQB: CLNV).

This is another legendary runner from recent months.

There have been multiple spikes between October 2022 and now.

But I’ve actually been trading this stock since 2021.

All said and done, I’ve managed to profit $8,054 in total from these subsequent spikes (click the link for my individual trades).

As I’m typing this, the price is still consolidating above $0.05. That’s a key level to watch.

Tickers like to bounce between key price levels. They often occur around ‘psychologically significant’ numbers. In this case, numbers like $0.05, $0.10, $0.15 … multiples of five and ten, whole numbers, and things like that.

Here’s a video with more information …

I use these levels to plan trades and determine sentiment/direction.

If CLNV stays above $0.05, that’s a hint it may push higher. But if the price breaks below that level, it’s a bearish signal.

My Favorite Platform to Trade Penny Stocks

If you’re looking for my favorite penny stock trading platform, check out StockToTrade.

I might be a little biased (I helped develop the software and I’m an investor), but I think StocksToTrade is one of the best trading tools on the planet. It has custom stock screeners made by traders, for traders. You can use it for everything from paper trading to price event alerts.

You’ll have access to more resources, better-quality information, and high quality catalysts with the add-on alerts service Breaking News Chat.

Get Breaking News and StocksToTrade for the next 14 days — only $17!

I also have a NO-COST weekly watchlist of my stock picks. But this newsletter isn’t an example for you to copy — it’s for you to study the process.

Remember, do your own due diligence and make your own trades. Different people trade for different purposes, and your goals may not be the same as theirs.

How to Protect Yourself from Penny Stock Scams

The penny stock world is rampant with scams. New traders tell me how they’ve lost money buying and holding stock pumps ALL THE TIME. They usually fall victim to the hype and promises of big earnings.

Never listen to Internet stock promoters sending out mass emails about so-called no-risk penny stock picks. If you receive them, you’re probably the target of a pump and dump scam. Run the other way!

Promoters often inflate a penny stock’s price so they can profit. Naive traders lose because they’ve been tricked into thinking that penny stocks are long-term investments.

One of the best steps to protect yourself is to only listen to traders who show all their trades, like my students and I do on Profit.ly.

Tread with caution and seek advice from experienced traders if you’re not sure about a stock. And NEVER trade a stock because someone told you you should.

Potential Penny Stock Payoffs

Will you get rich tomorrow from penny stock trading? Probably not. Instead, develop a good basis for trading by investing in your education.

I turned just over $12,000 into more than $7.4 million in profits. Some of my top Trading Challenge students have profits well into the seven figures, and many more have six-figure gains.

But that doesn’t mean everyone finds success or achieves profitability. Chances are, you’ll experience losses. You won’t make the right trading decisions and get big returns overnight. Trading is one of the hardest things you’ll ever learn, so be patient and study hard.

Join My Trading Challenge

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.

My blog is chock full of tips and useful articles… But if you’re ready to get serious and put in the time and energy needed to develop a good trading mindset, you should apply for my Trading Challenge! That’s where I teach the rules and patterns that have helped many of my students pave their way to financial freedom.

You won’t need to learn alone, either. You can make trading friends in my Challenge on the same path as you, so you can learn from multiple sources.

Apply for my Trading Challenge here if you’re ready to get serious about your trading!

The Bottom Line on How to Find Penny Stocks

Becoming a better trader involves lots of research and work, but it can also be fun.

If you learn how to find penny stocks accurately and consistently, you might do well in the market. Over time, if you see profits add up, you’ll find yourself even more motivated to do the research.

What’s your favorite way to find penny stocks to trade? Let me know in the comments … I love to hear from my readers!