Every trader knows that news — either positive or negative — is a key driving force behind the performance of a stock.
Penny stocks are no exception.
Their prices and momentum usually get quickly affected by hype and breaking news. For example, there could be a major advancement in the company’s process or a game-changing acquisition — which is expected to positively impact growth.
Or the company’s Management will try to fix a bad situation by sealing game-changing deals. And when the positive news gets released, the stock price soars!
When I’m looking for potential penny stocks to trade, I keep my eyes out for positive news, financial reports, or reports speculating an increase in the value of the company.
Let’s look at a volatile stock I had on my watchlist that I believed was set up for a good upside this week.
DIDI
DiDi Global Inc., a mobility technology platform, provides ride-hailing and other services in the People’s Republic of China, Brazil, Mexico, and internationally. It offers ride-hailing, taxi-hailing, chauffeur, hitch, and other forms of shared mobility services, as well as enterprise business ride solutions.
The company halted the Hong Kong listing as they were not able to meet Chinese regulators’ demands of improving their systems to prevent security and data leaks.
This was the driving catalyst in the stock dropping by 41% to about $2 and sending it to oversold territory.
I was positive that any favorable news would likely send it a lot higher. My guess was the State will take this private to protect the data they are concerned about.
A Swing Trade Idea I Had:
This is a classic J-Hook setup and making an entry at somewhere around the $1.90 to $2.1 area would seem logical to me.
A few days later, the stock has been up and currently trading at $3.88 as at Friday (March 18).
That’s why I talk a lot about the importance of…
Focusing on One Strategy and One Pattern
It can be tempting to trade all the exciting patterns you may have identified.
But in this business…”Patience is king”
The thing is, there are enough trading setups that will occur throughout the course of the month and year. And all these patterns and setups may require different trading strategies to apply them properly.
When your account is small, you cannot afford these experiments.
Focusing only on one strategy and one pattern is an effective method I’ve found to stay on the path of growth.
I try to find my favorite pattern — one that gives me the best win rate and that seems the least risky. And then laser focus only on that pattern!
Did you trade this stock? Let me know in the comments below.
