High Volume Penny Stocks

Well kids, let’s take some time out to talk about high volume penny stocks. I’ve spent quite a bit of time in the past talking about penny stock volume and how important it is to understand volume in relation to price action with penny stocks. Volume many times can be your “dead giveaway” as far as detecting when a stock is in what is known as the “accumulation” phase—in other words, in the time period where absolutely nothing looks exciting on the surface, but there’s an actual undercurrent of strong hands picking up the stock, usually at a bargain basement price, on relatively light volume. Believe me, the time when the outlook is the worst for a stock is the time when you should be paying the most attention to it. When a stock isn’t “acting right”, or in other words, when a stock seems to be dragging along in a relatively tight trading range, not making any dramatic movements to the upside or downside, and it’s just slinking along in a boring, doldrums kind of way, that’s when you should be getting excited, because a buildup (hence the name accumulation) is taking place, and a foundation is being laid for a run up in the future. When exactly that run up will happen is anybody’s guess; don’t be too concerned about timing the perfect top or bottom of any stock’s price, just focus on finding out whether or not the stock is in strong hands or weak hands. Here’s the basic premise: If the stock is looking extremely boring and doing as I’ve described above, then more than likely the strong hands are picking it up (which, by the way, you should WANT to be one of the strong hands I’m referring to), and if the stock is going wild to the upside on crazy heavy volume, more than likely the weak hands are beginning to wake up to it and, of course, will chase the price all the way up into the “mania phase”, where people are paying absolutely ridiculous prices for it just to say that they own some of it. If this sounds too far-fetched for anyone, you obviously haven’t done enough homework on the history of the stock market, because this, my friends, is how things work. If you don’t remember anything else I said, remember this: You should be greedy when others are fearful (or disinterested), and fearful (or disinterested) when others are greedy. It’s as simple as that.

But back to my point about high volume penny stocks. This will vary, and what constitutes “high” will vary based on what the price of the stock is at any given time. What may be high volume for one stock may not be high volume for another, so you can’t determine anything based strictly on the number of shares that are traded. For those who may not know, volume is just that—the number of shares of a stock that are bought or sold on any given trading day. For a stock that’s priced below $5.00 a share (which is the loose definition of what a penny stock is), then I would guesstimate volume to be “normal” if it was in the hundred-thousand share range per day. In other words, if I see a stock trading at $2.50 a share and 100,000 shares traded in one day, that’s not a big deal. Actually, it would probably be more “quiet” of it was trading in only the five figures that day (i.e., about 45,000) shares in a day. For the micro cap stocks, such as stocks that trade at 0.0001 or even below, millions of shares a day are no big deal, because we’re talking about stocks that only trade for fractions of a penny per share. Just think about it: If a stock that trades at 0.0001 has a day where 20 million shares are traded, that’s in reality only $2,000 worth of market action. Just a drop in the bucket compared to the blue chips and so forth. So, to make it all make sense, you have to factor in the market cap of the stock in order to really understand what high volume versus low volume is. If Wal-Mart (WMT) has a day where only 500,000 shares are traded, there’s a real problem there. But if a stock trading at $3.00 per share trades 500,000 shares in a day, that’s more than likely a high-volume day. Taking our cues from the FSNM penny stock I highlighted back in April, notice how during the run up to over $1.25 from about $0.60, there were a couple of days where the volume was trading in the millions of shares, and on the heaviest day, it traded at about 3 million shares in one day. That, my friends, is some volume to take note of, and volume that plainly shows that the stock was making its transfer from the strong hands to the weak hands. If you ever want to check out some high volume penny stocks in a list-style format, you can do so with any stock screener (available in the “Trading Tools”-type sections of most online brokerages), and if you want to get “OTCBB with it”, you can actually go to otcbb.com and check out the “most active by volume” microcap stocks by looking at the block on the home page with the drop-down menu that says “Vol Actives”. That’s all for me today, folks; keep trading penny stocks online!