The coronavirus pandemic woke the sleeping giant in OTC stocks.
OTC stocks have had a bad reputation for years. When the “The Wolf of Wall Street” hit theaters in late 2013, it made a lot of people scared to touch OTCs.
But then marijuana stocks got hot and the OTC market showed signs of life.
And then it died. You couldn’t buy a play in the entire market for years. But the cycle repeated in 2017 when bitcoin went on its infamous run. This time, it’s all about the coronavirus …
While the overall market flirts with a bear, OTC stocks have been on fire.
Many people are still scared of OTC stocks, but remember … they don’t follow the overall market. And…
Table of Contents
- 1 My Top Students Crush OTC Stocks
- 2 Learn to Play It Safe With OTC Stocks
- 3 The 5 Ps of OTC Stocks
- 4 Conclusion
My Top Students Crush OTC Stocks
Many of my top students started their trading careers with OTC stocks. Why?
Personally, I think they’re easier to understand. There are fewer factors to consider when making your trading plan. Plus, the risk-reward is far superior to listed stocks — especially on multi-day runs.
Here are some examples …
My most successful student, Tim Grittani, grew $1,500 into over $10 million.* His explosive start in the OTC market is a big part of his success.
[*These results are far from typical. Always remember all trading is risky and never risk more than you can afford. These students dedicated time and effort to develop exceptional trading knowledge and skills.]
OTC stocks will always be some of my favorite plays. They can run for multiple days — spiking hundreds of percent in the process. Recently, many of my trades have been on OTC stocks.
I recognize the market isn’t as strong as it was a few years ago. But if you’re patient enough to wait for a sector to heat up … nothing can compete with OTC stocks.
Which is why you need to…
Learn to Play It Safe With OTC Stocks
It’s important to understand that 99% of OTC companies are crap companies. That’s why I don’t invest in them. Most of the time I hold them for a few hours or overnight at most.
But the SEC cracked down hard on promotions in the last five years. Their strict regulations are a big reason OTC stocks aren’t running as often.
Promoters used to pump stocks up all the time. Now, most of them are in jail. The few that remain aren’t very good.
Which is why I’ve been saying short sellers are the new promoters. But there aren’t many shorts in the OTC market either.
Moral of the story: take advantage of the OTC market when there’s opportunity. Like right now.
Not sure where to start? Watch my new NO-COST two-hour guide on how to survive this volatile market.
It’s a confusing time. A lot of money is exchanging hands. The market crashed, companies are starting to fail, and guess what …
The rich are still getting richer. Time to learn how to navigate this volatile market.
One more thing before we get to the 5 Ps of OTC Stocks…
Learn to Lock in Profits
I aim to lock in profits — sometimes too quickly. I almost never time the top perfectly. And I don’t try to sell at the top. When I make a trading plan and alert my students, I always emphasize my price targets. Most of the time, I’m looking for a predictable 10%–20% move.
If the stock follows my plan, I lock in a single. If the stock doesn’t behave as I expect, I cut losses quickly. That keeps my losses small compared to my wins. For newbie traders or those with small accounts, it can help prevent you from blowing up your account.
Now, let’s get on with…
The 5 Ps of OTC Stocks
#1. Keep Things in Perspective
Again, the majority of the time I exit positions too soon. Then haters always say…
“Tim, what’s wrong with you? These stocks can keep going — give it more time.”
They’re right — OTC stocks can keep going. But it’s inevitable that they’ll drop. These are crap companies. Their fundamentals are usually worthless, and they typically only run on a press release.
Then they drop again.
Here’s a great example from a couple of months ago with mCig, Inc. (OTCPK: MCIG).
MCIG was a textbook OTC breakout. But it gapped down the day after the breakout because it released bad earnings. That was the end of MCIG’s run.
Keep in mind, MCIG was up a lot — from 2 cents to almost 9 cents in only a few days. This 400% move is why I’ll always love OTC stocks.
I know, the chart is old … but study it. The same pattern repeats itself again and again.
My students studied this chart from my 6,300+ video lesson library preparing for the next OTC run. I couldn’t have predicted the coronavirus pandemic, but I was prepared to take advantage of it.
Lately, many OTC companies have been “transitioning” to coronavirus companies. I don’t believe the press releases. But anytime a former runner has a new coronavirus catalyst … it can spike big. Here’s a perfect example…
Predictive Technology Group, Inc. (OTCPK: PRED)
First, check out the chart:
PRED announced a new antibody test that reduces the amount of time required to receive accurate results. The stock spiked from 40 cents to over $1.40 — a 250% spike.
This was an awesome opportunity. But if you look at PRED’s one-year chart, you can see in June 2019, the stock traded around $7. It’s been a long, slow death for this company.
I’ll say it again: 99% of OTC stocks are trash. They can offer great trading opportunities but are terrible investments. You gotta keep things in perspective.
One way to do that is to…
#2. Learn From the Past
OTC stocks are hit and miss. They’re usually great the first few months of the year because of the January Effect … Then they die off. Since the market’s cyclical, it’s critical that you learn from historical examples to prepare for future OTC runners.
Here’s a historical example on Texas Mineral Resources Corp. (OTCQB: TMRC)…
TMRC had a nice run from 30 cents to $1.50. That’s a 500% spike.
Now it’s back down 50%.
There’s no one specific way an OTC will drop. Some drop off in a day or two. Others take weeks or months. The question isn’t if they’ll drop — that’s inevitable. It’s when they’ll drop.
These moves don’t surprise me. And because I’ve seen it so many times, I often play it too safe. When you study the past, it becomes easier to see the patterns in real time.
That’s when you’ll know that you…
#3. Know the Patterns
Each of these examples is making its way through my “PennyStocking Framework.” Yes, it’s a few years old, but the patterns still work. It blows my mind hearing students complain about not understanding patterns. But they haven’t studied some of my most basic lessons.
For example, in February, CytoDyn Inc. (OTCQB: CYDY) had a nice run-up from 30 cents to the $1.50s just like TMRC. And when it started to crack, people wanted to dip buy on the first red day.
Take a look at the CYDY chart from February…
It hadn’t really bounced (yet). For weeks, people were asking, “Why isn’t it bouncing?”
Well … the stock was up big? Plus, it hardly panicked. I want to see BIG panics.
OTC stocks follow the same basic pattern. When they spike 400%–500% in a few days or weeks — be conservative.
Find OTC stocks confusing? Check out “The Complete Penny Stock Course” by my student Jamil. It combines all my lessons into one book. It’s a great way to learn the rules I follow when I trade.
CYDY was entering the sixth stage in my PennyStocking framework when the COVID-19 pandemic struck fear around the world. The company took advantage of the situation and transitioned its HIV drug to treat coronavirus symptoms.
CYDY announced the FDA approved of its HIV drug for COVID-19 trials. The stock gapped huge on the news … topping out at $3.50. If the company continues to update people on its trial, this move could just be beginning.
CYDY is a rare case. If you tried dip buying CYDY and got bailed out by the coronavirus news … you learned the wrong lesson.
Study more. Study my 649 video lessons on morning panics. (More about panics in a bit.)
I want dedicated students. Think you have what it takes? Apply for my Trading Challenge today.
#4. Be Prepared
Case in point … U.S. Lithium, Corp. (OTC: LITH). It was uptrending nicely so I wanted to take advantage before the trend turned.
I recognized it was overextended. I bought the first big green day with volume, but it was also the fifth green day in a row. Normally, I’d never buy the fifth green day. In hindsight, I also shouldn’t have held this overnight.
But because I was prepared, I had two profitable trades. I didn’t overstay my welcome, and I kept things in perspective.
I know this might seem complicated. Stocks might seem random and unpredictable. Trust me — we all started there.
Remember: preparation is key. Spend more time studying the past. Immerse yourself in the patterns. And not just the basics, but all the nuances too.
When you do that it can be much easier to…
#5. Adapt to the Present
I’ve been trading the same patterns for two decades. But that doesn’t mean they play out exactly the same every time. It doesn’t work that way. You have to learn to adapt to the present.
The first two months of the year the OTC market saw a lot of false breakouts. Then … the action dried up for a month.
People get tired of a pattern when it stops working. Breakouts can be powerful, but I recognized they weren’t working well at the start of the year. What happens one month might not happen next month.
Learn. Adapt. Prepare.
The moment you stop learning is the moment you start losing.
Currently, the OTC market are moving … but it won’t stay this way long.
That brings me to my next example…
No Borders, Inc. (OTC: NBDR)
The company repeatedly released coronavirus updates. All in all, I played it five times and locked in a total of $4,297* (See my verified trades here).
NBDR was halted by the SEC due to suspicious activity. The company is a total scam and took advantage of the coronavirus situation to pump its stock. The SEC’s action could be the beginning of the end for coronavirus OTC stocks.
This is another great example of why you need to cut your losses quickly and never invest in OTC stocks. NBDR had multiple spikes and plenty of great trading opportunities. Don’t confuse trading with investing. They’re very different.
The haters can tell me how risky these trades are … But guess what? I was prepared and took advantage of the news after it came out. I didn’t predict the moves — I reacted.
(*Please note: my results are not typical. I’ve spent years developing exceptional skills and knowledge. Always remember trading is risky. Never risk more than you can afford.)
Bonus: Panics — Don’t Be Desperate for Dip Buys
I want to make something very clear about dip buying … It’s not about buying the first dip.
Too many people make this newbie assumption after watching one or two video lessons. It’s not that simple.
There’s a reason I have over 6,300 video lessons. My top students studied them all. Mark Croock watched each of them three times. If you want success, you have to work hard for it and study. It’s that simple.
Sadly, a lot of people don’t prepare. Dip buying doesn’t work every time. But if you study more, you can better understand how to adapt to the market.
When a dip fails, people freeze, like, “Ummm … why isn’t this bouncing?”
OTCs don’t have to bounce! Look at those charts again. They were up over 500% … and you think you’re guaranteed a bounce? Please. That’s not how it works.
Don’t be desperate. These stocks are up so much. And people try to dip buy them when they’re only 10%–20% off their highs … They think they’ll go right back to the highs.
Does that happen? It can. But stop trying to predict and start learning how to react to patterns. Newbies learn the wrong lessons when they dip buy a speculative OTC and it bounces back to highs. They start to think…
“Oh, this is easy. I can do it every time.”
Then they’re unprepared when a stock doesn’t bounce.
Frankly, it’s better if you don’t have a long position overnight. Why? The odds of a gap down or panic increase exponentially. I’d rather start the day fresh with a morning panic dip buy.
Play it safe. Conserve your mental capital and your real capital. It’s impossible to trade when you don’t have any capital.
Keep these OTC stocks in perspective. You can’t expect all bounces to work perfectly. Nor should you expect these sketchy stocks to go back to their highs.
These are newbie mistakes. You set yourself up for failure when you aren’t prepared or you have the wrong expectations.
I want to keep you safe. I want to see you succeed.
It sucks if you get stuck in a stock that completely collapses. Especially if you have no idea of what’s happening because you’re underprepared.
Be obsessed with studying. Know these charts inside and out. Study up.
What do you think of OTC stocks? Leave a comment below. I love hearing from dedicated students!