Penny stocks are high-risk, high-reward investments. If you’re looking to take a risk on the stock market to make some serious money, then penny stocks might be for you. However, finding the best penny stocks to buy can be challenging. Today we’ll show you ten different ways to help you find the best penny stocks to buy this year! You don’t need special scanners or screeners. You need to take a little time and know where to look. Using public information to your advantage can help you make money in the stock market.
Finding The Best Penny Stocks To Buy [10 Secret Methods For Top Traders]
Like anything worth learning, it takes time to perfect the methodology you use. It’s also worth noting that even after identifying different ways to find penny stocks to buy, there’s a learning curve for understanding exactly how these things play into market movement. Taking the time to practice your strategy – even using a trading simulator – can give you a massive advantage over novice traders.
Learning how to trade, in the first place, is critical. To help, here are a few articles to check out:
- Former Hedge Fund Trader Teachs How To Trade Like Wall Street Pros
- How to Buy Good Penny Stocks In 2022: Tips & Tricks For New Traders
- Penny Stocks & 5 Stats To Know If You’re Trading Or Investing
- Trading Penny Stocks? 7 Things to Know For Beginners
- 7 Ways To Find Hot Penny Stocks To Buy
- Penny Stocks Definition & 3 Trading Strategies To Master In 2022
Let’s check out some of the “Secret” ways top traders find penny stocks to buy.
1. Penny Stock News
News is one of the first and more apparent catalysts for certain penny stocks. Companies release updates via PR wires to inform the public about recent achievements or upcoming events. In many cases, penny stock news will give a broad overview of what companies are up to. However, the thing to remember about headlines is that they might also avoid mentioning other, more refined details.
For instance, if a company secured a new deal with a “Top 100” company in their industry, specific dollar amounts or contract periods may not be mentioned. This isn’t intended to hide anything from investors in most cases. It’s usually because a company wants to give the highlights for excited investors to read quickly. They’ll usually tie this PR with a public filing called an 8-K, which will provide more specific information.
2. Corporate Filings For Company Events
In light of that last paragraph, companies will also choose to file certain statements with the Securities and Exchange Commission. An 8-K, for example, is filed with the SEC after a significant event in a company. In general, there’s a 4-day grace period for a company to file the 8-K.
Keep in mind that just because a company files one of these 8-Ks, they aren’t required to release a PR. So, another “secret” way to find penny stocks before the crowd is to look for corporate event filings. Many companies will choose to file the 8-K before the formal PR or elect only to release the filing.
3. Penny Stocks With Upcoming Earnings
Tying together the first two “secret” ways to find penny stocks to buy, you’ve also got what I’ll call “pre-event hype.” This is most frequently observed in companies that announce the date of their next round of earings. It might be several weeks or a few days beforehand that news like this comes out. Some traders take this as a bullish (or even bearish) event. As a result, speculative trading action can ensue right up until the official earnings release.
This also coincides with upcoming corporate calls and shareholder meetings. Remember that even if stocks trade lower or higher before a formal company update, it doesn’t dictate the trading action that could come after the news breaks. If you’ve heard about “buy the rumor, sell the news,” this would be a prime example. In many cases, it can play out precisely in that manner.
When it comes to earnings, in particular, corporate filings come into play as well. Sometimes companies will elect to only release a quarterly (10-Q) or annual (10-K) report. They may not release a PR along with it. Once again, being aware of the filing types to look for can give you an advantage over novice traders waiting for official news updates alone.
4. Insider Trading Penny Stocks
Other than 8-K filings, you’ve also got things like Form 4s and Schedule 13s. These could indicate interest from insiders and big money managers. Once again, companies don’t need to announce events like these formally. They rarely do when it comes to insider trading in particular. However, in 2022, traders have found some exciting catalysts, especially regarding this next “secret” way to find penny stocks to buy.
According to the Securities & Exchange Commission, a “Form 4 must be filed within two business days following the transaction date. Transactions in a company’s common stock as well as derivative securities, such as options, warrants, and convertible securities, are reported on the form.”
The SEC defines Schedules 13D and 13G as beneficial ownership reports. “The term ‘beneficial owner’ is defined under SEC rules. It includes any person who directly or indirectly shares voting power or investment power (the power to sell the security).”
Furthermore, when a person or group of persons acquires beneficial ownership of more than five percent of voting shares, they’ll file a Schedule 13D. A 13G reports the acquisition and other information within ten days after the purchase. Both of these filings would be highlighted by traders looking for “Whale” trades as they generally connect to large funds or investment trusts.
5. Patents/FDA Trials/Oversight Body Updates
Other publicly available data that can prompt early momentum even before the news is released involves oversight bodies; let me explain. The U.S. Food and Drug Administration (FDA), for example, may report approval of or a response to specific clinical trials on its official website even before a company reports it to its shareholders. Furthermore, when companies submit a trial framework and file it with the FDA, it could get posted to the FDA site before any news comes out. This is something that can give an edge to the well-informed.
What I’ll call “the oversight body advantage” can also be seen from things like the US Patent and Trademark Office, The SAM [dot] gov site for government contracts, or even foreign bodies like the European Medicines Agency, Japan’s Pharmaceutical and Food Safety Bureau, or various other oversight bodies.
The main thing to remember is that these associations and administrations aren’t working on a company’s schedule. They release or post information whenever a decision is made within the organization. If you know how to search for this type of information, you’ve got a good chance of reacting before novices.
6. Short Squeeze Penny Stocks
Now, we get into more technical trading based on data. The idea of short squeeze penny stocks has grown in popularity ever since the big moves made by AMC Entertainment (NYSE: AMC), GameStop (NYSE: GME), and even Eastman Kodak Company (NYSE: KODK). This entails finding penny stocks or higher-priced stocks where the percentage of the publicly traded float has a high level of short interest. Also known as short float percentage, the higher the figure, the more traders are betting against a company.
Since shorting involves borrowing stock, selling it, then repurchasing it at a lower price to return the loan, people make money if stocks drop. But if share prices rise, the stock loan still needs to be returned. In the event of a squeeze, short traders get forced to repurchase shares at higher prices (instead of lower prices), take a loss, and add to the underlying bullishness in specific stocks.
A squeeze tends to trigger a volatile and aggressive breakout that can last a few minutes or even a few days. Plenty of outlets offer short percentage data, including brokerages like TD Ameritrade. We’ll also frequently report on potential short squeeze penny stocks right on PennyStocks.com.
7. Low Float Penny Stocks
Like short squeeze penny stocks, low float penny stocks can be incredibly volatile. For those just learning about this, a company’s “float” references the total amount of shares actively traded in public hands. It doesn’t include other things like restricted stock or unregistered securities.
Remember that the float can fluctuate depending on factors like buybacks, debt conversions, and other events that would add to or subtract from the float. Just know that the float will never be larger than the Outstanding Shares, and the Outstanding Shares (O/S) will never be larger than the Authorized. So if float data isn’t easily accessible, a low O/S can act as a ballpark.
When we talk about “low float,” the general rule of thumb sets the threshold around 20 million shares or fewer. However, if you’ve traded for a while, you know that the lower the float (in some cases a few million), the higher the volatility and the bigger the breakout potential. Keep in mind that breakouts can quickly turn into breakdowns thanks to the exact reason why the uptrend triggered in the first place.
For example, Insignia Systems (NASDAQ: ISIG) was able to break out from under $5 to over $35 within a matter of days, thanks to both a low float and short squeeze. However, looking at where it closed on January 14, ISIG stock is clearly, well off of its recent high. If you’re looking for low float penny stocks to buy, be prepared for volatility and have a plan in place ahead of time.
Like upcoming earnings, companies may or may not announce upcoming industry conference participation dates. For example, biotech companies frequently attend investor and industry conferences. They’ll present new updates, trial results, or give updates to their peers.
In many cases, these can ignite another “buy the rumor, sell the news” type of event in the stock market. Then again, it can also act as a primer for what’s to come if a company reports something even more significant than initially expected. We frequently update on upcoming events to be aware of right on PennyStocks.com.
9. Social Sentiment
If there’s one thing 2020-2021 taught us, it’s that social sentiment can play a significant role. The rise of the Ape Army has continued fueling the AMC/GME fire. It has also brought rise to new trends in the stock market. It’s important to note that social sentiment isn’t always an indication of interest or potential.
In many cases, rumors are created by unsavory groups to quickly boost shares prices so that they can liquidate their positions. This tends to leave inexperienced traders holding a big bag. If you’re reading information on forums like Reddit, sites like Twitter or Facebook, or subscribing to trading groups, there’s no substitute to doing your research. If anything, observe the discussion and then verify further with your research.
10. Unusual Options Flow
Not all penny stocks have options available to trade. But of those that do, options flow can play a role in trading trends. In general, higher options volume (calls or puts) can be seen as an underlying play on sentiment. In some cases, higher call volume for a specific strike can be seen as a bullish indicator and spark optimism. Higher put volume can result in the opposite. Like social sentiment and insider trading, there’s no guarantee that the outcome of significant options volume or open interest will dictate the ultimate move in a stock. However, in the short term, options flow is something traders use to gauge sentiment. Once again, observe, then verify using your personal research methods.
How To Find Penny Stocks To Buy
There are plenty of ways to find the best penny stocks to buy. Based on what I’ve seen from thousands of new traders, they fail to research things beyond news headlines or social sentiment. Today we looked at 10 “secret” ways to find trade ideas. Now it’s up to you to take this further and figure out how you can fold these tactics into your trading strategy for 2022.
10 Secret Ways To Find The Best Penny Stocks to Buy
To summarize, the 10 [secret] ways to find the best penny stocks to buy include:
- Penny stock news
- Corporate Filings For Company Events
- Penny Stocks With Upcoming Earnings
- Insider Trading Penny Stocks
- The Oversight Body Advantage
- Short Squeeze Penny Stocks
- Low Float Penny Stocks
- Social Sentiment
- Options Flow