There are so many pumped penny stocks right now. And I love it!
Though recently I’ve come out pretty hard against these stocks that spiked big. Like MicroVision, Inc. (NASDAQ: MVIS) — it went from 25 cents up to $1.80.
AgEagle Aerial Systems, Inc. (NYSE: UAVS) spiked up from 60 cents to $5! And Remark Holdings, Inc. (NASDAQ: MARK) went from 37 cents to $2.60.
All these stocks are well off their highs now.
And these stocks all have something in common: they’re all crap. They crashed just like every other pumped penny stock I’ve ever seen.
Don’t get me wrong, there’s money to be made on all these — that’s why I love them. But are these the type of companies I’m willing to invest in for the long term? Nope, I won’t hold these for more than a few hours max.
But they’re great examples of…
Table of Contents
- 1 Why I Love Penny Stocks!
- 2 Understand Why Penny Stocks Move
- 3 Learn From the Past
- 4 How Can You Find Pumped Penny Stocks?
- 5 Don’t Believe the Hype
- 6 Expect the Worst From Pumped Penny Stocks
- 7 Learn From Your Mistakes
- 8 The Wrap on Pumped Penny Stocks
Why I Love Penny Stocks!
I’ve traded penny stock pumps for years. This market is no different.
On all these stocks, I went long. I bought UAVS in the $0.80s and sold for measly gains.
With MARK, I bought around 40 cents and sold around 42 cents … It just didn’t spike. On my MVIS trade, I bought in the $0.30s and sold in the $0.40s. It didn’t spike either.
I was on the right track with all of them but missed the giant runups. That’s OK.
Don’t let anyone tell you there isn’t money in penny stocks. But don’t let anyone convince you to invest in penny stocks long term either.
(**Results aren’t typical. Most traders lose money. Always do your due diligence and remember trading is risky … never risk more than you can afford.)
The key to this niche is to…
Understand Why Penny Stocks Move
So pumps are now mostly people getting on Twitter and plugging these junk companies. They say how great these companies are … They’ll mention all these upcoming great deals with big companies.
And too often, the information is unreliable — especially if it’s coming from an email or social media post.
I trade these stocks, but I never hold for long. And I never believe any of the lies the pumpers are telling me.
I say this all the time, but I’ll repeat it again. You have to…
Learn From the Past
The vast majority of these penny stock pumps will come crashing back down to earth.
But look at pot stocks now. They went nowhere — all the stocks crashed.
So, yeah, I love that these stocks are running. But don’t think it’s based on fundamentals.
I want you to understand right now that you have to be super careful with who you trust.
Here’s a video where I share some stories from people who learned the hard way. Learn from their mistakes. Never believe the stories about pumped penny stocks.
How Can You Find Pumped Penny Stocks?
You can filter stocks by price, float, and volume. Always make sure there’s enough volume. I prefer to look for at least one million shares. It’s not an exact science. You may need to look at the dollar volume too, depending on the stock. That all feeds back in the Sykes Sliding Scale I cover in the “Trader Checklist Part Deux.”
All the stocks I mention in this post were trading millions of shares. Now, here’s a question I hear a lot…
(Quick disclaimer: I helped design, develop and have a financial interest in StocksToTrade.)
Should I Invest in Penny Stocks?
I’m coming out against them now after they already surged five, seven, and 10 times. The pumpers say they’re up due the fundamentals. I’ve been pretty hardcore that they’re not up due to fundamentals.
Now, I don’t know if these people pushing these stocks’ fundamentals are getting paid — I don’t care. I don’t know if they’re talking to each other and coordinating. Again, I don’t care.
All I care about is the price action. Pumped stocks can surge, but they’re also bound to crash. It doesn’t matter if their ‘revolutionary’ technology is a success.
In my 20+ years of experience, I’ve watched most penny stocks fail.
People ask me, “How can you be so sure?” Obviously, I can be wrong. I can be wrong on any trade.
Don’t Believe the Hype
I go with the odds. And the odds are that these technologies and companies aren’t going anywhere. Odds are they won’t be the next superstar.
MVIS, UAVS, and MARK got tons of hype. Let’s check out what happened with these stocks.
UAVS was supposed to be working with Amazon.com, Inc. (NASDAQ: AMZN) on a big deal. Instead, the CEO resigned.
MARK delayed its quarterly filings. But everyone expected a press release with big news.
Maybe these companies have deals with big companies. Maybe they’re giving free samples to big companies.
The truth is, we don’t know.
Which is why you should always…
Expect the Worst From Pumped Penny Stocks
I say expect the worst out of every company, and you’ll never be disappointed.
Yes, that’s a cynical approach. Not every company is trash. And you can miss out on some of the big runups.
But it’s impossible to tell the real from the fake — so I play it safe. And I assume that most of these companies are complete trash and will fail.
Never trust a pumped penny stock.
This mindset could potentially protect you from losing a big chunk of your account on a single trade. And along the way, you must take small profits, cut your losses quickly, and…
Learn From Your Mistakes
I heard horror stories from too many people, especially on UAVS. Some people held right into the conference call. Everyone was expecting a big announcement, something with AMZN.
Here’s the chart from that day:
The day started with a gap up. The price held near the high right up until the conference call at 11:00 a.m.
But the company didn’t announce any good news. Instead, the CEO resigned. Traders raced to sell and the stock went bust. After an hour-long halt from the SEC it finally reopened at $1.50, down from $3.75 before the call started.
If you were one of the bag holders, that’s OK. We all make mistakes.
If you take a big loss, that’s OK. Learn from your experience. But never hold and hope. Again, hope is not a strategy. Is it sinking in yet?
How My Students Trade Penny Stock Pumps
When UAVS crashed after its debacle of a press conference, my students were cleaning up.
My top students are used to these companies failing. They’ve studied the past and know the drill. Never trust anyone and always expect the worst.
(**Students’ results aren’t typical. These students put in the time and dedication and have exceptional skills and knowledge. Most traders lose money. Always remember trading is risky … never risk more than you can afford.)
If someone won’t show you every trade, including their losses, can you really trust them?
But if you’re ready to take your trading to the next level…
If you’re ready to forget everything the news media and talking heads want you to believe about Wall Street … and make a serious change in your life and willing to make sacrifices to live the life you want … Apply now for my Trading Challenge.
The Wrap on Pumped Penny Stocks
In today’s world, you’re better off erring on the side of caution.
The big lesson I want you to learn here is to be overly cynical. It’s a smart lesson to learn…
… because if you don’t learn this lesson from me now, you’re likely to learn it the hard way in the future.
Pumped penny stocks are scams. There’s no free lunch. Ever. If you want to succeed in trading, you gotta put in the time and effort to learn the markets.
Most traders fail. What are you willing to do differently?
What do you think of pumped penny stocks? I want to hear from you about this! Leave a comment below.