Happy Tuesday!

After yesterday’s action, I woke up feeling excited and optimistic for what’s to come.

As you might know, the market has its cycles.

These cycles include periods of increased volume and speculation and periods of lower liquidity and less speculation in specific stocks and markets.

Yesterday, for the first time in a while, I noticed something exciting and positive as a short-term penny stocks trader.

My scanner was LIT UP!

One reason for this, in my opinion, is that the overall market was positive yesterday after the impressive bounce off the lows continued.

The SPY closed the day up 1.80%.

SPY continued its rally off the bottom and closed the day right near the high.

With such an impressive bounce back in the overall market, I noticed a wider variety and number of small-cap stocks hit my scanner yesterday.

In my opinion, this is because with a stronger market than in recent weeks, investors and traders might feel more comfortable applying risk and speculating in small-cap penny stocks than they did at the beginning of the year.

Here’s another look at the performance of the market yesterday. The above map, from Finviz, shows the S&P 500 stocks, categorized by sector and market capitalization.

It’s clear to see that a sea of green dominated the market yesterday, and with that, the overall sentiment might have changed as well.

This could bode well for penny stocks, as I mentioned already, because investors and traders might now feel more comfortable speculating with historically riskier stocks, i.e., penny stocks.

For me, this is fantastic news, and I welcome it!

Just take a look at my scanner from yesterday afternoon:

The number of options I had on my scanner yesterday was far and beyond previous days in the year, so far.

The scanner also included numerous stocks up 20% or more on the day and trading impressive volume.

The action from yesterday tells me that the relatively quiet period I have seen lately with small-cap stocks might be coming to an end. With that, opportunities and liquidity could rise sharply going forward!

As a trader, this is music to my ears.

With that being said, though, I will need to make the necessary adjustments going forward and double down on patience, focus and discipline.

Going forward, I will be paying close attention to stocks trading abnormal volume in the morning and stocks holding above support showing signs of possible momentum.

On top of that, I will be looking to identify my favorite setups within those stocks that are showing signs of possible momentum.

Two setups in particular that I will be stalking going forward is the higher high higher low pattern and the consolidation leading to a breakout pattern.