Unusual Volume In Penny Stocks Can Lead To Profits
Regular readers of my column know that I often highlight big penny stock movers. Sometimes these big movers provide opportunity for profits. Other times, theyre just interesting stories and case studies.
Heres the thing
I often get asked why I talk about the big movers now that theyve already moved. In many cases, the chance for big profits is already gone. The ship has sailed, so to speak.
Readers want to know how to find these stocks before they gap higher (or lower).
Its a fair question.
As I mentioned earlier, large moves in penny stocks can be quite educational. The more you learn about how stocks move on big news, the more youll be able to profit from similar cases in the future.
But is there a way to find these stocks early so that you can maximize your profits?
Of course, theres no such thing as a sure thing in the financial markets. However, you can often gain useful, predictive information about a penny stock by looking at volume particularly unusual volume.
Lets say a penny stock doesnt typically trade heavy volume, say fewer than 50,000 shares a day on average. And then suddenly, hundreds of thousands of shares trade on a given day it could be the start of something.
Heavy volume could signal the start of a trend, or the imminent release of important news. It can be especially valuable when there isnt a big move in the share price to go along with the increased volume.
Still, even if there is a large move, the additional volume could be a sign of more big moves on the way. At the very least, you can expect increased activity in the stock in the short-term. And that could mean opportunity for profit.
For a good example, take a look at MEMSIC (MEMS)
MEMS develops semiconductor sensor and system solutions based on integrated micro electro-mechanical systems technology and mixed signal circuit design.
So whats so special about MEMS?
This past week they reported record quarterly revenues. Now, the stock did shoot up 19% on the news. But, whats really important is that over 1 million shares were traded.
Heres the kicker
The stocks average volume is normally around 43,000! Thats what I call unusual volume.
And despite the 19% spike, if you had bought the shares the next day, youd still be making money. You see, the stock jumped an additional 5% the following day with over 500,000 trading.
Whats wrong with making 5% in a day? And, judging by the high volume, MEMS might not be done climbing.
Bottom line just because you miss the initial spike in a stock doesnt mean you cant make money. If you keep an eye on unusual volume, youre giving yourself a huge advantage when trading penny stocks.
Yours in profit,
Gordon Lewis
Category: Investing in Penny Stocks, Penny Stock Tips
