Stocks are about to enter a very volatile period. But believe it or not, it isn’t a bad thing for us.
For example, nearly most of my trades are uncorrelated to the market.
What does that mean?
The market could be down… and my stocks could be up.
For example, stocks were weak on Friday and Monday… but guess what wasn’t?
That’s right… my Supernova and Weekend Wiretap trades
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Now, these returns might look small, but it’s all relative. When you trade a small account (under $25k), it’s all about having a series of small victories. And before you know it… those little victories add up…
… like the recent trades in IPIX and SESN we had.
And you know what?
I’m going to show you precisely the thought process behind these two trades and why it wasn’t a fluke at all… that said, let’s look two real-money case studies and more.
Table of Contents
Penny Stocks Trading in Volatile Markets
Traders are focused on the U.S. – China trade war still… but I don’t really care about what’s going on with that. You see, I focus on trading penny stocks… and trade war headlines don’t really affect my this space.
Now, what works with penny stocks is focusing on the charts, and letting the price action tell you whether you should buy a stock or get out of your long positions.
That said, I want to go over two trades today, since I’ve been getting some questions about how I made 20% overnight in one trade… and my first Weekend Wiretap trade.
Focus on Volume and Price Action in Penny Stocks
Now, when you’re trading penny stocks, it helps to have indicators like simple moving averages (SMA), and know how penny stocks trade.
For example, I locked in ~20% in Innovation Pharmaceuticals (IPIX)… just by using a few SMA lines and understanding price action.
Here’s a look at the daily chart I used to trade IPIX.
Check out the chart above. You’ll notice IPIX had a strong runup… and started to pull back. Now, a lot of beginners will just try to catch the falling knife… thinking IPIX will just continue higher. However, with penny stocks, you have to be patient and identify areas of support and know when and where to exit.
Notice how IPIX pulls into 17 cent area and starts to catch a bounce. Well, this was a previous inflection point. In other words, this was an area where the stock was one at resistance, but now that resistance has become support. Additionally, the 20-day SMA (the blue line) held as support.
Now, I actually waited for some strength in IPIX to get long.
There was some volatility in IPIX recently, and I figured this stock could have large swings in either direction. If you look at the chart above, IPIX bounced off the 50-day SMA (the blue line nicely)… however, generally, with penny stocks, you want to see the stock run up on volume before you get long.
Could I have bought IPIX right around the blue line?
However, the chart wasn’t telling me it was time to get in, until we saw IPIX have a big up day on heavy volume.
Check out the chart below.
Notice the volume bar (at the bottom of the chart)… the volume bar with IPIX running up was much larger than all the previous ones. That let us know there were buyers in the stock, and IPIX was fairly liquid.
The next day, IPIX opened up around 35 cents and I sold the stock right at 36 cents (the high that day). The reason I got out was the fact that IPIX wasn’t strong out of the gate, and the bids looked weak.
Although I didn’t get the target I wanted… I knew it was time to get out because IPIX just doubled in just a couple of days… and the stock was getting a bit tired.
That was a nice win for my $2K account.
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Now, I’ve been getting a lot of questions about my Weekend Wiretap trade… and I want to show you how I’m still able to “make money” on the weekends.
Weekend Wiretap Case Study
Since we’re trading with a relatively small account (trading with a $2K account for the small account challenge)… we have to come up with ways to get around the pesky Pattern Day Trader (PDT) rule.
That in mind, I figured out a way to find stocks on Friday that are likely to trade higher into Monday. In other words, I’m looking to make “passive income” over the weekend.
For example, here’s a look at the daily chart in Sesen Bio (SESN).
Now, this trade was pretty simple. SESN was making higher highs and higher lows… and volume was rising along with the stock. However, I wasn’t just going to buy the stock randomly.
On Friday, I actually waited for the stock to pull back into the lower blue uptrend line… when it did I bought shares at $1.33. That said, my risk was defined (if SESN broke below that blue uptrend line)… I would’ve stopped out of my trade.
Not only that, that same day, SESN broke above the 200-day SMA (the green line)… when the price breaks above a key SMA – like the 200-day SMA – it signals the stock could run higher… when SESN closed above the green line, I wasn’t too worried about this stock gapping down on Monday… and I was able to go about my weekend.
Here’s a look at what SESN was doing yesterday afternoon.
I sold my shares in the pre-market at $1.49, and my second sell was shortly after the market opened at $1.46.
That was a nice ~10% gain over the weekend. And one I will take many times over again. That said, if you’re ready to take your trading to the next level and would like to receive my mentorship and real-time alerts, click here to get started.