There is a general curiosity of knowing about the factors the contribute to price movement. In many cases, positive results make penny stocks rise. Although there are innumerable factors to consider. We shall discuss the most important factors which are as follows:
Penny Stock Earnings Results
The first factor that could be responsible for the rise in penny stocks is earnings results. In this case, if the profit made or the corporate revenue go exemplary well then the prices of the penny stock could automatically rise. Vice-versa, a negative result could trigger selling in penny stocks. Keeping this predominant factor in mind, trading is a prominent sort of penny stock trading.
In order to make this factor practical, you need to acquire extra information regarding the company’s capacity to go above the expected profits.
New Product Launches
The launch of new products may directly affect the price of penny stocks. In the case of a new product, it could attract huge popularity. The price of a stock could rise proportionately, however, failure to deliver a product or a product that fails to meet consumer expectations could trigger a negative effect on the penny stock.
Generally, it is not easy to make a new product successful. Conducting the inspection of the product is suggested before trusting what the company shows.
New Partnerships
Though many new partnerships remain unaffected, if any of them finds space in Costco or Wal-Mart, for example, then it is obvious for sales to potentially benefit.
There other are cases that a company doesn’t have a product but offers a service. Take the Defense industry as an example. If a defense contractor penny stock obtains a government incentive or higher payouts and milestones, this could be big for a company. In such a case, the company can gain huge profits, which could translate into a rise in price.
Penny Stock Rumors
Most of the times the penny stocks get accompanied by rumors. But such rumors can sometimes cause a huge price hike if they are somewhat genuine. Screen all the cheap stocks especially on community banks.
New Management
The newly designated management can also help trigger price movement in penny stocks. A new CEO can change the whole scenario. Furthermore, a good sales manager can bring great profits especially if they bring experience from a leading competitor. On the other hand, removing poor management can harm the penny stocks in the short term. This could indicate that/ the company isn’t doing all it can to grow its business. In either case, it can be a catalyst for penny stocks.
Penny Stock Guidance
There are some companies providing financial guidelines on issues like the opening of stores, profit, revenue & market share. A lot depends on the guidance as per the expectations of profits. If expectations of guidance are above the expectations of Wall Street, the price of the stock could quickly rise.
Penny Stock Buybacks
Good penny stocks can bring you back a great return if you have the required capital. Not many penny stock companies will conduct buybacks but for those that do, this is another potential catalyst for price action. Because most micro-cap stocks have very low prices and lack liquidity, a buyback can quickly spark a rally. By removing excess shares in the market, the tradable float decreases. As we know with low float penny stocks, a rule of thumb is that the lower the float, the quicker the price movement can become.
Industry Regulations
It doesn’t happen as often as you would think but changing legislation every few years can greatly impact penny stocks in certain sectors. Take marijuana stocks for instance. The rise of legal cannabis brought about immense excitement across the stock market. Cannabis stock played a pivotal role.
Likewise, FDA rulings and government crackdowns can also impact stocks. In this case, it would be companies operating within the biotech and healthcare sectors. No matter the case, positive outcomes, and negative outcomes can play key parts in deciding to sell or buy penny stocks.
Commodity Pricing
Industries like mining and oil & gas are fueled by commodities. Their price depends on the ability to obtain certain materials. For instance, a fall in the price of gold by 2% can harm a gold miner by 10%. Similarly would be the case for the price of crude oil or natural gas. Therefore, profits would fluctuate in such cases and could result in the rise or fall of stock prices.
