If you learned anything yesterday, I hope it’s this…
Never underestimate the ridiculous trashiness of penny stock companies, and you won’t be disappointed.
Sure, the market was thirsty for a big low-float runner…
But a bit of digging exposed the ridiculousness of the low float chat pump du jour yesterday…
And if you stuck to the conservative plan I laid out in my morning SteadyTrade Team webinar, it would’ve kept you safe.
But whether you traded this low float gapper for a win or loss, there are always lessons from any trade … Today, I’ll share two you can learn before you rush out and buy the next premarket gainer…
Watch this video to find out why I love low-float stocks and how to trade them.
The Ridiculous Trashiness of Penny Stock Companies
Yesterday’s premarket runner was JanOne Inc. (NASDAQ: JAN). The stock spiked after the company announced a patent “that covers a method of improving nerve function.”
But a little digging into the company’s profile would show you that this used to be a waste management company. And it pivoted into opioid-free drug development.
On the company’s website, it discloses that it actually still runs its appliance recycling subsidiary…
StocksToTrade lists JAN as a waste management company right on the company profile tab…
Now, I don’t know about you, but if I or someone I knew was struggling with opioid abuse, I would go to a guy who used to recycle washing machines.
All joking and sarcasm aside, this is what penny stock companies do…
They pivot into any hot sector because they’re in business to sell stock. If you think JAN’s unique — it’s not.
I’ve seen hundreds of examples.
So there are two key takeaways from this story. Learn them now because you’ll see stories like JAN’s again and again in your trading career…
Two Lessons From Yesterday’s Chat Pump Du Jour
The first lesson is that it pays to do due diligence. Never believe the hype or ‘buy the PR.’
In JAN’s case, if you knew it was formerly a waste management company, you hopefully wouldn’t believe the company could ever fix opioid addiction…
And once you discover and accept that all these penny stocks are junk, you’d probably think twice about bag holding it if it went against you.
Know what you own, even if it’s for a short time.
That brings me to the second lesson…
These crazy, sketchy stories and pivots are why we trade penny stocks.
These aren’t investments. And we don’t believe they’ll actually solve any problems. Penny stocks are trading vehicles — that’s it.
If you stayed conservative with your trading plan yesterday, as I outlined in the SteadyTrade Team, then you stayed safe from the morning selloff.
And if you focused on watching for a chart pattern, you could’ve profited from the afternoon spike through VWAP and the high of the day. (Click here to discover why VWAP is so important.)
So the next time you see a big premarket gainer, dig a little deeper into the company.
Find out the story behind it. And remind yourself that all penny stocks are trash. Then use my ebook to discover which pattern fits the stock best, and make your plan.
And as always — if it dies, it dies.
Have a great day everyone. See you all back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
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