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Patterns To Watch

Why Time Analysis Matters

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Written by Timothy Sykes
Updated 12/7/2022 6 min read

Right now is one of the BEST times to trade penny stocks.

Yet, most people aren’t aware.

They get chart tunnel vision and only look at one or two timeframes…

Never seeing the big picture.

Let me ask you a simple question…

Would you rather trade with the crowd or against it?

I don’t know about you, but I prefer the easier path.

But they’ll trample over me if I’m not facing the right direction.

That’s what it’s like when you only look at a stock from one angle.

And it’s not just about going from a one-minute to an hourly chart.

Seasonal patterns play a HUGE part in trading.

Just the other day, I explained how most people get the ‘January Effect’ totally wrong.

They aren’t paying attention to one of the juiciest moments in a penny stock trader’s year.

If they were, they’d know that stocks like Cloudweb Inc. (OTC: CLOW) or GlycoMimetrics Inc. (NASDAQ: GLYC) offered multiple AMAZING dip buy opportunities over the past few weeks.

The problem is most traders see a stock like CLOW on a multi-day run and think…

Guess I missed the trade…

They don’t realize that trades exist on other timeframes.

As a matter of fact, they can use this larger trend to make those trades even MORE profitable.

That might sound confusing, which is why I want to demonstrate how I look at multiple timeframes to design better setups.

Accounting for Seasonality

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Picture seasonality as an ocean current.

It subtly changes throughout the year making it more or less difficult to traverse certain paths and for certain types of vessels.

Right now, money managers are dumping their worst stocks to take tax loss write-offs by the end of the year.

That puts extra pressure on some sectors, but also creates severely oversold conditions.

Most folks assume this means a bounce in January.

In fact, the moves can start as early as November.

Over the last 4-6 months I took many small trades to ‘test the waters.’

With penny stocks fading nearly every afternoon, I wanted to know when things would change.

Somewhere around October, I began to see a shift.

More setups appeared and a few stocks here and there would run for several days.

Now, I’m seeing this happen more and more frequently.

And I only expect it to get stronger as we finish out the year.

Taking this into account, I plan to take more risk methodically and carefully.

I don’t expect stocks to pop off as they did in 2021. But I do see a ton of opportunity if you know where to look.

Where Are We in the Framework?

investing for beginners short term vs long term
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Whenever I look at a chart, I ask myself…

Where are we in my 7-Step Penny Stock Framework?

Each phase is suited for different types of trades.

As an example, CLOW spent several weeks in Phase 2: The Ramp.

This created opportunities to buy panic tips.

Think of it this way.

On the daily chart, nearly every day closed green for several weeks.

So, if a stock drops down to a key support level, why not try and scoop it up for a reversal?

In a one-minute timeframe, it looks scary.

But when you take a step back, things become clearer.

Let’s zoom in on the price action on November 14th so you can see an example.

The day opened around $1.75.

Shares had already run up more than 100% from $0.75.

The massive drop, noted by the arrow, pulled back to nearly $1.00.

This was too much of a pullback too fast, especially with a solid uptrend.

Now, it can be difficult to know exactly where the stock will find support.

That’s why I like to look at the underlying price action to guide my decisions.

If we zoom in on that drop, you’ll notice a massive drop in the first two minutes followed by huge volume that reversed the momentum in the third minute.

A trader could buy against the low of that candle as the stop out, roughly $0.20 below the high.

That leaves an upside potential of $0.60, assuming the stock gets back to and above the open.

Keep in Mind

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One stock on a multi-day run doesn’t make a trend.

Nor is seasonality guaranteed.

But when you combine the pieces of the puzzle, it forms a picture for high-probability trading.


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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 (888) 878-3621 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”