How I Called the Best Morning Panic So Far This Year
Dear Penny Stock Millionaire,
I want to show you the power of the morning panic pattern. This week I called the best morning panic of 2020 so far — in the midst of absolute market insanity.
First, you must understand that studying the past is crucial to learning patterns like the morning panic.
The last month has been market madness — and my students report absolutely crushing it every day.
But while most traders were distracted by oil stocks, the best play of the day was on one of the hottest OTC stocks of 2020. But before I get to that…
I want to show you the power of my favorite pattern…
The Morning Panic Pattern
I’m primarily a long-biased trader. I don’t like going short. I think it’s an overcrowded niche and the risk/reward is terrible.
Long-biased trading can offer better opportunities … if you know what to look for.
Every morning, newbies fire up their scanners and chase the largest percent gainer of the day. Chasing stocks up 50%–100% isn’t a strategy — that’s gambling. Instead…
Wait for panic. What does panic look like? Here’s a classic example from last year…
After a multi-week run from 30 cents to 75 cents, CBD Unlimited, Inc. (OTCPK: EDXC) gapped down on April 23, 2019, and started tanking. In the first hour of the day, it pulled from the low $0.70s all the way to $0.314 — a drop of over 50%.
Any long traders who held from the previous day were stuck in their positions and couldn’t sell their shares. As more traders tried to sell, the stock continued lower … and lower.
It’s extremely difficult to sell shares during a drop like this so people start panicking — hence the morning panic pattern. Before I show you the best morning panic this year…
What You Need to Know About the Morning Panic Pattern
Here are a few critical elements of the morning panic pattern:
- First, the stock must be up a lot — at least 50%. The higher the stock runs, the bigger the panic. I don’t want to try to dip buy a stock that’s only up 20% over a few days. There’s not enough meat on the bone. Wait until they’re extended.
- Don’t randomly buy a stock that’s down huge in the morning. Companies have bad news all the time. I want a stock that’s a recent runner, not a company with a negative catalyst.
- Don’t rush into the panic. Stocks can panic much further than you think. I’ve seen stocks drop over 90% in a day. Wait until the stock begins to test support levels and buyers step in on level 2.
- Cut losses quickly — it’s my #1 rule for a reason. It’s difficult to nail the bottom of panic, so sometimes I enter too early. If that happens, cut the loss and try again. Holding the loss further into the panic could result in a huge loss.
Alright, it’s time. Here’s the stock I perfectly called the morning panic on…
Decision Diagnostics Corp. (OTCPK: DECN)
When stocks go supernova, I start watching them for morning panics.
Here’s my plan on DECN for April 23:
“DECN should be the best potential panic and bounce if it can drop hard and quick enough over the inevitable disappointment of their update regarding test kits.”
How did I know it would happen on April 23?
Take a look at the daily chart:
DECN ran from a penny in February to a high of nearly 50 cents on April 23. The stock was up 50 times in less than two months. That’s overextension.
Since the stock was up 5,000%, it was long overdue for a pullback. But what gave me the conviction on April 23 specifically was its looming test kit update. The company scheduled the update to release midday.
I was slightly disappointed DECN didn’t panic out of the gate, but I kept watching it. I was waiting for the update to hit the news wire because I thought this could be a classic “buy the rumor, sell the news” situation.
Within ten minutes of the update, the stock panicked over 50%.
I saw some buyers stepping in at 22 cents. I tried buying 25,000 shares but ended up filling 75,000 shares at $0.225 because I put in multiple orders. I didn’t want to miss this incredible opportunity.
I’m usually too conservative with my trades. I alerted to my students that I was only looking for a quick 15%–30% bounce. The bounce came quick and I locked in all my shares at a $0.267 average…
DECN bounced all the way to 36 cents before flattening out for the rest of the day. What an opportunity.
What’s Next For DECN
A week after my trade, there was news that DECN has been suspended from trading by the SEC.
Remember, most of these stocks are garbage. Never believe the news these companies are pumping out, especially if it’s about the coronavirus pandemic.
Penny stocks are penny stocks for a reason. If DECN really had the testing kits it claimed it did, it wouldn’t be trading on the OTC market. It was a great trading vehicle but never should have been a long-term investment.
I sincerely hope none of you are stuck in this halt. It will open much lower … probably on the grey sheets.
The morning panic pattern is a classic that I’ve used for years.
I think it’s a great place for new traders to start because it can offer huge percent opportunities. DECN bounced 50% in fifteen minutes. You won’t find that anywhere besides penny stocks.
The pattern is simple and predictable. Most importantly, it’s repeatable.
Talk with you tomorrow,
Editor, Penny Stock Millionaires