Penny Stocks With Natural Volume Breakouts


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Video Transcription:

Hey Traders! Welcome to the stock trading course at the 8th annual stock training. This lesson we are going to learn how to look for penny stocks that are breaking out with natural volume. And when we say natural volume we mean stocks that are breaking out naturally, or they are breaking out because good earnings reports. We want to filter out and dismiss all breakouts that are happening because of newsletters hype and pumps.

So what we’re going to do here is we’re going to go to the [inaudible 00:00:35] and we’re going to filter in penny stocks only. So on the “descriptive” tab we want to look at below 2 billion in market capitalization, which is a small company, price under five dollars, where is it under five dollars, with an average volume of 200,000 shares traded per day. So we want an average volume above 200K.

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Now this is just to filter in only penny stocks that have good volume. Now we want to filter in the breakouts. So to do that we go to the “technical” tab, and as you can see right here we have 373 stocks, or 373 takers. What we want to do is we want price to be above the 20 period simple moving average, price to be above the 50 period simple moving average, and price to be above the 200 period simple moving average.

Now this is going to give us stocks, or penny stocks that are trending up. And if you look closely we only have 19 penny stocks in our list, and we can start by looking at what we have right now. And we have ADAT which is priced under 50 cent with very low volume, so I really don’t like this stock. We have BLFS, just check out those spikes. Those spikes from 250 to above 4, and from around 280 to above 4. This is another stock that I am not going to be looking at.

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Right here, CBB, this is a pretty nice stock. Just look at how it has been trading up since it rebounded from this trend line. Now we are looking at a descending resistance, and as you can see the 380 level was rejected, but now this is a stock that you have to put on your daily watch list, because once it breaks with the 380 level you can trade it up with minimum risk for at least a four dollar and ten cent target. You can see that we have a target of four dollars here, and well it’s only a 20 cent move for a 10 cent risk, but I mean it’s a breakout that we’re looking for.

CRNT. CRNT is trading up too, but it’s actually pretty obviously rejecting all ascending resistance, so we are going to dismiss that. Check out this, this is an example of a breakout that we don’t want to be trading in. Now DSKX broke out at the beginning of October, when apparently we had this news. Rodman and Renshaw, a unit of HC Wainwright and Company has initiated coverage on DS Healthcare with a by-rating and a six dollar target price. But you can see this was just a high breakout that didn’t follow through, and we are just here trading in a very terrible range after the breakout.

Remember that we are going to be doing this every single day, looking for breakouts. Once you see a breakout, look at the news of the company and if you see that it’s based on the newsletter hype or news hype, well just don’t trade it. But if it’s based on the acquisitions or earnings rising, you can go ahead and buy the breakout.

Now let’s continue. We got EDAP that basically is doing nothing, it’s inside of a range, not breaking out at all. We are trading above the simple moving averages, but we are doing nothing. We have ENBI that gapped up two dollars, but we are not doing much. Now this is a very good example of what we want to do. Now this is a great opportunity for breakout. Remember that we are not going to have opportunities every single day but this is one that I’m looking for.

Let’s look at why GIG has been going up. Let’s start with this one, GIG receives 6.1 million dollar order with one of the largest suppliers of advanced aerospace and defence products. Huge news for the company. We start to trade. Then comes an excellent use for the company, which I have open in another tab. GIG takes reports all-time record revenue and profitability in the third quarter fiscal year 2015.

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Now let’s look at the numbers. Third quarter fiscal year 2015 revenue was the highest ever, increasing for the sixth consecutive quarter to 10.4 million, up 23% from 8.5 million in the third quarter of the fiscal year 2014. So up 23% year over year. And let’s look at more interesting numbers here. Record revenue of 29.3 million increase 23% year over year, and basically an excellent earnings report from this company, started trading up again and it started to gap up. Then we broke with this high and check out what happened on the last candle.

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We made a high almost 2.80, or 2.80 dollars, and then we broke to the downside. We broke with this levels off, with the previous highs, but we fail to close below the previous highs. This means that we found buyers at this area, and at an excellent price to buy this stock at 240 with a 20 cent stock, mental stop loss. So I will be a buyer here of this breakout and retest of the previous high.

This is how you’re going to be looking for breakouts on a daily basis, and remember that sometimes you’re going to find breakouts, sometimes you’re not going to find breakouts, but breakouts are not the only way we are going to be trading penny stocks. But this is a clear example of what we are looking for. Good earnings report and excellent news on sales and a breakout of the previous high. I retest of the previous high and this is where we are going to be buying, I will be a buyer here at the open, one hour from now.

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