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Tips on When to Buy Penny Stocks
Doing a thorough fundamental analysis, where you study a corporation's financial reports and possible outside influences, is only half of investing right in penny stocks. An investor should also know when the best time is to buy that particular penny stock. Opportunity is the key in hitting big rewards and profits in penny stocks. In my previous article I have discussed that buying when the penny stock price is temporarily on the dip is a good idea if the dip is caused by merely a shortage in demand for that penny stock. This enables you to buy cheap penny stock that you know will hit it big because of the modified fundamental analysis that you made. In pervious articles I also warned you that the dip must be merely temporary and not because of a corporation's collapse. To determine which corporations are strong and which are collapsing, I referred you back to doing a thorough analysis of certain fundamental factors. For this article I would discuss spikes in the penny stock prices.

Buying and selling in penny stock spikes or price increases is a good way to earn money. As in dips, there are two kinds of spikes: the temporary spike and the permanent spike. In the temporary spike, the price increase is not because of some solid increase in capital or profit or increase in the industry but by superficial and temporary events such as a government agency certification or an award or recognition of the corporation. The rise in penny stock prices, in temporary spikes, is caused by investor speculation. The penny stock prices would increase and gradually decreases after the momentum of penny stock speculation stops. The increase in the penny stock price would decrease and go down to its normal level. It would be an opportune time to gain some profit during this time of temporary price increase by buying and selling penny stocks when the temporary hype is still rolling. A temporary penny stock price hike is identifiable by an increase in the trading of shares of the penny stock.

A permanent price spike is good for you if you were able to find the perfect penny stock to invest in. A permanent price hike can earn you an increasing unrealized capital gains as you hold on to the penny stock. Choosing the correct penny stock would mean that you have found the right corporation that has a solid financial record. A permanent price spike is not far behind for these penny stocks. There are two reasons why a penny stock price permanently increases: one, is when a corporation lands a good contract or project or receives a government grant or some favorable government policy treatment and the other is because of the corporation's growth and profit over time. The first permanent spike is more obvious and more people would take advantage of this. Price spikes of this kind often happen overnight. The second permanent price spike is more difficult to notice because it happens over a period of time; taking weeks may be even months to happen.