On Monday, Phio Pharmaceuticals (NASDAQ: PHIO) was an ideal “box checker” trade, meaning it showed all the signs of a perfect setup.
And as high-probability, reliable setups often correctly predict, PHIO had a nice run that day…
That’s why they’re considered great setups!
As usual, Oracle caught it too, and signaled an entry at $4.71 per share. After hitting a high of $8.79, the stock had returned 107.86%*.
PHIO Intraday, 1-Minute Candles Chart; SteadyTrade
If you’re not familiar with Oracle, the algorithmic tool I couldn’t trade without, you don’t know what you’re missing!
Learn more about Oracle and how I use it during one of our daily FREE live webinars.
Now, what PHIO did on Monday was awesome for those who traded it…
But after Monday was over, so was PHIO.
And I told my Premarket Prep audience on Tuesday, that if you were still holding it, you were on your own. The stock had faded and now you had to lie in the bed you made.
Maybe that sounds harsh, but I harp on this because one of the first rules of penny stock trading is this: Never hold a penny stock overnight.
You should never hold penny stocks overnight because you’re basically playing with fire.
I understand how exciting penny stocks can be, especially when you see these crazy intraday moves.
But that volatility is exactly what makes them unreliable and unpredictable.
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You Cede Control Once the Market Closes
These stocks are often driven by hype, news, or even a sketchy PR release. And during market hours, you have the ability to react—you can sell, cut losses, or lock in profits.
But the second the market closes, you’re handing over control to factors completely out of your hands.
What if bad news drops overnight? What if the company issues a surprise offering? Or worse, what if the momentum completely fizzles out by the next morning?
Remember, we don’t buy penny stocks because we fundamentally believe in the company. It could be gone the next day or the next week.
That’s for “real stocks.”
We buy pennies for the intraday price action…that’s it.
What Could Happen
Say you’re holding some tiny biotech stock that ripped 200% during the day because of a press release about FDA approval.
You’re thinking, “Hey, this stock’s gonna keep going tomorrow.”
Instead, what often happens is that the stock gaps down at the open.
Why?
Because insiders, promoters, or smart traders who got out early took profits and left you holding the bag.
By the time you can sell, it’s too late—you’re down 30%, 50%, maybe more.
And don’t forget about offerings.
These companies are often desperate for cash, and after a big run-up, it’s prime time to drop a surprise announcement after hours saying, “Hey, we’re selling more shares!”
This dilutes the stock and causes it to crash overnight while you watch helplessly.
Just as I said that PHIO was a textbook “box checker” on Monday, it had a textbook stock offering the very next day.
And here’s what happened…
PHIO Intraday 2-Day, 5-Minute Candles Chart; SteadyTrade
Big surprise!
The Right Way To Trade Pennies
Now, I’m not saying you can’t trade penny stocks—I love momentum plays…
But the key is to treat them like hot potatoes.
Day trade them. Get in, get your piece of the move, and get out before the close. You don’t marry these stocks, you date them, and only during trading hours.
And have the right tools in front of you to catch these short-term big runners.
At the most basic, you need a robust trading platform that offers real-time data, charting, technical indicators, and more.
My top pick, and the one I use every day, is StocksToTrade.
It features everything mentioned above…PLUS, right now, you can get two weeks of both the STT platform and our Breaking News Chat service for $17.
Grab your 14-day StocksToTrade + Breaking News Chat trial today for only $17!
My Final Thoughts…
Penny stocks are volatile, unpredictable, and prone to overnight disasters.
The risk/reward proposition simply isn’t in your favor when you hold them overnight.
Be smart, protect your capital. This way you can sleep better at night knowing you’re not waking up to a disaster in your account.
If you’re looking for more trading mentorship and advice like I gave above, as well as stock ideas, subscribe to my StocksToTrade Advisory service.
Every STT Advisory member gets a monthly newsletter with a list of my top picks, three weekly videos with my watchlists, bonus reports, and more.
Sign up for StocksToTrade Advisory right here!
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade