There are many articles written on the internet exposing the danger behind purchasing Canadian penny stocks. However, investors still react to these low-priced shares like a kid in a candy store. There have been many success stories with sky-rocketing gains, but to invest in penny stocks you must be willing to do research. To get started, here is a simple guide on how to pick the best Canadian penny stocks.
First of all, do not simply rely on search engines to look for lucrative penny stocks. Screen the stock market for stocks with shares prices below one dollar, trading volume over 200,000 shares, and 12 month revenue above $20 million. These requirements should help cut down the selection of stocks to only a few hundred companies.
To break down your list further, choose an industry that you think will offer the highest gains. You can choose between industries that include basic materials, consumer goods, healthcare, technology, and many other choices. After choosing an industry, you can get even more in depth by choosing a group. For instance, in the consumer goods industry, decide between auto, food, and tobacco. With these simple selections, you have narrowed down your stock selection to just a dozen or more picks.
Once you have done this, you will need to time when to buy or sell these stocks. There are three important rules to remember when considering the timing of buying or selling.
For buying,
- The slow stochastic should rise just over the 20 reference line and
- The Money Flow Index should rise just above the 50 reference line and
- The price should break just over the 20 day moving average
For selling,
- The slow stochastic should fall just below the 80 reference line or
- The Money Flow Index should fall just below the 50 reference line or
- The price falls just below the 20 day moving average
Always remember that buying Canadian penny stocks can be extremely risky due to the high volatility of low priced shares. Investors who have the capital to take part in such risky investments should utilize the above methods to reduce their risk with buying and selling penny stocks in oil, gold or mining.
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