Penny stock life cycles evolve…
There was a big shift in 2016 that you’ve probably heard me talk about repeatedly.
But in the post-2020 trading world, there’s been another shift…
What does it mean for stocks and your trading?
You might find this confusing at first … But in the end, it will all make sense…
The Evolution of a Penny Stock Through Its Life Cycle
Last week I was asked about Jasper Therapeutics, Inc. (NASDAQ: JSPR) in my SteadyTrade Team webinar.
It was gapping up in premarket, so a member asked what I thought…
This is where it can get confusing for some new traders. Because they remember that only a few weeks ago, I liked JSPR. It was a big spiker … but on Friday, I didn’t love it.
So you might be wondering, can’t former runners run again?
Most times, yes.
But JSPR isn’t the same stock it was a few weeks ago…
It’s run through the penny stock life cycle.
It had a big gap up and spike. Then the company diluted shares.
When I liked it a few weeks ago — it was a low-float stock.
Now after dilution, the stock has a crazy high float of almost 100 million shares.
So it’s not going to react the same as it did in the past. Plus, it’s probably loaded with bagholders from that big day back in January.
JSPR chart: 3-month, daily candle — courtesy of StocksToTrade.com
But two months later, the stock is still trading around $2.
This is why I’m so excited about trading this year…
The Change In The Penny Stock Life Cycle
The penny stock life cycle pre-2016 would last about one to three days … A stock would spike on a press release, the company would dilute, and the stock would tank.
From 2016 to 2020 the penny stock life cycle increased. Instead of fading in the afternoon or a few days later, stocks would hold up for a week or two.
But in the post-2020 trading world, the penny stock life cycle has changed again.
Stocks are ‘hanging around’ for multiple months.
It’s two months later and JSPR is still up roughly 250%.
Genius Group Limited (AMEX: GNS) was another January jump chart. The stock spiked from around 53 cents and hit a high of basically $8 within a couple of weeks.
And it’s still trading around $6!
GNS chart: 3-month, daily candle — courtesy of StocksToTrade.com
GNS hasn’t diluted — yet. But the fact that these stocks have held up for so long can mean they’re loaded with trapped short sellers.
And buyers are holding them up.
It doesn’t mean there’s a trade right now … But the fact that they’re hanging around could mean more squeeze potential if a catalyst and volume come in.
But if they die, they die.
Eventually, they all do. It’s the penny stock lifecycle.
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Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade