Penny Stocks Ready to Breakout - What to Look For

Believe it or not, penny stock trading can be boring. Not all of these types of equities spike sharply up or down as a constant. Some stocks can trade in a sideways trading range for multiple months. Not exactly what people expect from stockstackup.com" title="penny stock">penny stocks right? People expect a boom or bust type result most of the time.

The trick to finding stockstackup.com" title="penny stock">penny stocks ready to breakout (to the upside) is to use technical analysis of the chart, along with some research of message board activity of a specific stock. Let's look at a few points of each shall we?

Technical Analysis of the chart (things to look for):

• Noticeable volume increases over 1-3 trading days
  
  


• Slight closing or intraday price increases over previous highs
  
  


• Buy indicators such as the parabolic sar indicate that an uptrend is starting
  
  


• 20 and 50 moving averages cross upward to confirm an breakout is imminent
  
  


• Look for how the stock performed on other breakouts within the last several years to gauge expectations of where to sell or take profits
  
  


• Down trend lines broken to suggest that new bullish buyers are entering the stock

Message board activity:

• Big increase in number of posts
  
  


• Message board posts lay out bullish arguments
  
  


• Lack of coherent "basher" personalities, since they are detrimental to the confidence of the traders who are bullish
  
  


• Absence of personalities often associated with shady pink sheet stocks that perform poorly

Now I realize I did not go into great detail on some of these points, but you get the basic idea. If you are familiar with some of popular penny stock message boards, whether it be ihub or yahoo finance you will know what to look for. If you are not familiar with the jargon I used to describe the technical analysis of the charts, I would recommend going to http://stockcharts.com and absorbing the free information they have there, it's really not as hard to learn as you may imagine it to be.

I use these strategies and others that I find to be effective when I issue penny stock recommendations to subscribers of Microcapmilloinaires.com. It can be time consuming to monitor the market for these types of breakout setups, but it is worth it when you hit a couple big winners that can yield over 100 percent profits.

Written By Matt Morris, Editor of Microcapmillionaires.com the best penny stock newsletter in existence. I am one of the few penny-newsletter-guys that do not accept compensation to "pump" penny stocks. Sign up for 3 free Penny Stock Picks here.

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