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Patterns To Watch

Why Small Accounts LOVE This Type of Stock

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Written by Timothy Sykes
Updated 12/9/2022 6 min read

I sounded a bit nutty talking about the ‘Winter Glitch’

But I knew from years of trading bull and bear markets that NOW is the time to look for epic plays.

So I wasn’t surprised when our StocksToTrade Breaking News Chat Room called out Ambrx Biopharma Inc. (NYSE: AMAM)…

The results speak for themselves.

Now, I know it’s tough for folks not used to trading the news to jump right in.

It takes practice to understand how to read and interpret the headlines.

But don’t worry, the ‘Winter Glitch’ also comes with a special type of stock for you – multi-month runners.

Multi-month runners are IDEAL for anyone with a small account.

Not only are they easier to trade, but they deliver more predictable setups.

Plus, you don’t need to watch 800 stocks at once.

All you need is a handful to find a quality trade nearly every day.

Today, I want to cover one of my favorite multi-month runners and show you where and how I traded it.

Global Developments Inc. (OTC: GDVM)

This stock treated me very well last month.

In just three days, it provided me with three profitable trades.

Check them out here on Profitly

As I wrote above, all of these were panic dip buys.

You might be surprised to learn where these occurred on the chart.

This stumps a lot of new traders.

Why try to dip buy a stock in free fall?

Isn’t that catching a falling knife?

Why not dip buy a stock ramping higher?

Let’s unpack these questions one at a time.

Why Try to Dip Buy a Stock in Free Fall?

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Once a stock goes Supernova, the 3rd phase of my 7-Step Penny Stock Framework, it’s next move is to crash.

Sometimes crashes take a day. Sometimes they take weeks.

A lot of the time, they happen when the folks who pay promoters to juice a stock can finally sell their shares.

That’s why you see huge volume and swift declines.

The thing is, promoters don’t just stop doing their job.

They’ll pump a stock to help their clients get the best exit prices possible.

And they go especially heavy once stock is down huge.

Take a look at this one-minute chart of GDVM on that big red candle down day.

Shares went from $0.11 to less than $0.06 in minutes.

That’s an almost 50% haircut.

And that’s exactly what I look for when I do panic dip buys.

You see, a panic dip buy works precisely because a stock has dropped so much.

It needs that overextension on the downside to give it a hard snap back in the other direction.

For the most part, that doesn’t work on a stock in an uptrend.

While I did trade this afternoon dip buy, I typically wait for the mornings.

That’s when I get the highest probability trades.

Now, imagine the stock didn’t drop 50% in one day but instead slowly bled lower over weeks and months.

The panic dip buy is no longer valid.

I need to see price dislocate, not edge lower, and balance itself along the way.

Isn’t That Catching a Falling Knife?

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Yes, but not the way you think.

Catching a falling knife implies buying a stock that’s down a ton simply because it’s down a ton.

Most of the time, folks do this at random.

I’m not so careless.

I only look for panic dip buys when a stock meets my requirements.

That means it’s in the right phase of the framework, drops hard and fast, and comes into a reasonable support.

Even then I still rely on price action and level 2 data to enhance my trades.

But most importantly, I don’t give these trades a lot of time.

Bounces either happen quickly or they don’t.

So, if it doesn’t move up fast enough, I cut it loose which keeps my losses tiny, and often gives me a small profit.

Why Not Dip Buy a Stock Ramping Higher?

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© Millionaire Media, LLC

As I mentioned earlier, stocks typically don’t drop enough during the ramp and supernova phases to provide a good bounce.

Instead, I prefer to trade breakouts during this part of the framework.

As stocks break their previous highs, you get short sellers stopped out in higher-priced stocks and breakout buyers on all penny stocks.

Each phase lends itself to certain types of trade setups.

Once you understand this and learn which to apply, it makes trading easier and more mechanical.

—Tim


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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

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* 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 (205) 851-0506 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”