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How to Choose the WinnersUnderstanding Penny Stocks

Did you know that Peter Leeds publishes his penny stock picks? Visit www.PennyStocks.com and learn how you can benefit from the Peter Leeds Penny Stocks service.

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Leeds Analysis V - Technicals

We have learned how to discover the best penny stock companies in Leeds Analysis (Parts One to Four). Now, let me show you how to get those companies at the best prices.

As I mentioned earlier, technical analysis is the examination of the trading chart in order to (hopefully) predict the direction the stock may take in the future.

Depending on the type of analysis, and the tools used, TA has had varying degrees of success. One of the major problems of using the past to identify the future is that past patterns and trends can change at any time.

Until now, TA could not be applied to penny stocks, because the low trading volumes and small market capitalizations negate the theories.

However, my company has developed our own TA methodology with the specific purpose of applying it to thinly traded penny stocks. We have enjoyed tremendous success with it now for many years. Over that time we have also refined and fine-tuned the strategy.

Look for the following TA patterns and trends in penny stocks that you may be interested in. Details about where to get trading charts for the penny stocks you are interested in can be found in My Picks for High Quality Web Sites.

Dip

Sometimes a penny stock drops sharply by 10% to 30% (or more in some cases), but the dip is based simply on a temporary lack of buying demand. (Or alternately, a sudden increase in the amount of selling volume). Because penny stocks are thinly traded, they are very subject to such 'buying opportunities.'

If the dip is not based on a deeper problem, it can be an excellent opportunity to accumulate shares. A true dip is both temporary and unfounded. Investors who get involved in a fundamentally strong penny stock by buying into these dips are generally looking at profits of 10% to 20% within a matter of days.

Generally, the trading volume may be very light at the time of the dip, further solidifying the idea that the price slide was brought on by a lack of activity, as opposed to a panicked sell-off.

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