Pumped Penny Stocks: Expect the Worst and You’ll Never Be Disappointed
Dear Penny Stock Millionaire,
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…
Why I Love Penny Stocks!
I’ve made over $5 million trading penny stocks over the past 20 years. How? I trade by a set of rules. And I focus on trading smart, so I don’t get attached to any particular company or technology.
I’ve traded penny stock pumps for years. This market is no different.
I was on the right track with all of them but missed the giant runups. That’s OK.
The style that I trade — and teach — is to take small consistent profits. The big Wall Street traders love to hate on penny stocks. They say there’s not enough money to be made.
I disagree. I think there’s more than enough for traders like me or anyone with a small account.
Tim Grittani started with a $1,500 account. He studied and worked his butt off to turn that into over $11 million. It’s more than enough.
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.
The key to this niche is to…
Understand Why Penny Stocks Move
Stock pumps can take place in a lot of different ways. Back in the day, it was mailers and phone calls. Now it’s mostly on social media.
The methods may be different, but the patterns and the end results are the same.
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.
The rumor of a deal can be a great catalyst. ‘Buy the rumor, sell the news’ can be a strong strategy, depending on the stock. But you have to understand the catalyst is only one piece of the puzzle.
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
Penny stocks are super hot, ever since the coronavirus pandemic crashed the overall market. It’s a lot like the cannabis mania from a few years ago.
The vast majority of these penny stock pumps will come crashing back down to earth.
In 2018, pot stocks were surging. Everyone was saying pot would take over, and that all these companies would do amazing things.
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?
I use the StocksToTrade social media search tool to look for stock pumps. It’s beautiful — I don’t have to look anywhere else. I used to have to comb through so many resources to find the next pump.
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.
All the stocks I mention in this post were trading millions of shares. Now, here’s a question I hear a lot…
Should I Invest in Penny Stocks?
I’m going to refer you back to that weed stock article.
But here’s my short answer: learn to trade. Learn how to ride the momentum of these pumps like MVIS, MARK, and UAVS. And know when to get out.
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.
That’s why I’m always prepared to be wrong. When any trade starts to go against me. I cut my losses — that’s rule #1 — and get out of the trade.
Never hold and hope. Always trade according to a strategy. Hope is not a strategy, and…
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.
There was a rumor that Microsoft Corporation (NASDAQ: MSFT) was buying MVIS out for $10 a share. But that never came to fruition.
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.
The old adage on Wall Street is ‘buy the rumor, sell the news.’ That’s almost what happened here … but no real news ever came.
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:
UAVS chart: 1-day, 1-minute candle, conference call — courtesy of StocksToTrade.com
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.
I make mistakes all the time. But I keep my mistakes small. Small mistakes are OK. Cut your losses and move on to the next.
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?
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. You can play these pumps, if you’re prepared.
Most traders fail. What are you willing to do differently?
Talk to you tomorrow,
Editor, Penny Stock Millionaires