Easy Steps to Reading THIS Indicator
- The best time to short a stock if you can get it…
- One of the most important lessons when faced with an opportunity…
- Understanding how to read the lines…
Dear Penny Stock Millionaire,
Using technical indicators to trade penny promotions is always tricky. They work better for standard momentum plays that are based off of news or some other event.
However, it is no secret that promotions are the big money makers, long or short.
The problem with a momentum stock is that it might not come down as far as you like, and unless you caught the exact peak it might be hard to make a good profit. Promotions artificially inflate a stock to extreme levels so they are the best candidates for shorting.
Using the lines on the MACD indicators can be helpful signs that a reversal has set in.
A reversal is a great time to short a stock if you can get it. Many times a reversal might be obvious to the whole market, but sometimes the indicator along with some other signs might signal you a bit earlier than people looking at different things.
One of the most important lessons is that you do not need to grab every opportunity. You just need to pick the right one. Do you need to double your money on every promotion per week? That would lead one to make impetuous decisions.
Look for your window and then take it.
The nitty-gritty of the MACD indicator will make your eyes roll to the back of your head, but if you are technical-minded it might be worth a look.
When I say technical-minded, I do not mean you like technical analysis but that you like hardcore math.
You just need to know that one of the lines goes faster than the other one.
For the purposes of clarity I will say that a black line moves faster than the red-line. Ignore the bars because you can just look at the lines to get the idea you need.
When the lines cross it is critical, which the bars reflect, but even a sharp turn in the black line is notable and using the bars alone might make you miss the signal. Examples would be more than helpful.
Learning from the Chart
NSRS was one of the more famous promotions in recent history. See what you can learn from the chart. Focus on the black line as the primary indicator with the red forming the baseline.
There are two big changes. The first is around January 23rd. Had you shorted there you would have a significant drawdown on your account during the following run up. Now that run was more like a death rattle, because it was the end of NSRS.
It is a bit frustrating that we have two signals and one was a false start. The problem is that there is another hand in this than the hand of the market. That is the company and the promoters.
Still look at the difference between the black and the red when NSRS really did reverse. It had risen so fast and then burned out. When the black line first turned it would probably have been too soon to go in. It is right in hindsight, but at the time it could be another fake out.
The second day the decline continued and by the end of the day or beginning of the third day the black line crossed under the redline, and in a big way. It was not like the first time where it only skirted underneath before going back up.
The black line was on a downward trajectory and there was white to be seen between the two lines.
That was as good a signal as any to go short. Even if you caught the bottom of the second red candle or any of the white candle after you would have made a substantial profit going short.
The GWBU Example
GWBU provides an even clearer example.
Keep in mind that the scale on the chart is logarithmic, just because it looks flat and seems like you could get in mid-May and wait it out there are significant swings. That is why the black line turning was your first sign, but not to initiate a short.
It even dipped under around the beginning of June, but there was no confirmation of the trend. It poked back above the redline a bit, then it was about 3 days before the black line started pulling away from the red.
You had about 7 trading days to initiate a short before GWBU began its extensive death. If you decided not to bail on that sad excuse for a bounce at about $0.30.
From there it is almost smooth sailing into September where it flattens out before something kicks it while down. The potential for profit here is massive. If you spot the signal early June and have the risk tolerance to short any shares you find, then you might be in for a fantastic ride.
You are more likely to find shares to short before it starts showing severe weakness in price, but in general finding shares to short is hard.
The Bottom Line
The MACD indicator will not always give signals. It is just one of the tools to have handy.
For example, SNPK did not have enough history for the indicator to be active. The black line does not appear until the peak is reached, and there is no red line until far later.
Trading on just the curve in the black line is dangerous, and another indicator would need to be used for SNPK. For a BDPS pick look at SPAH.
Shorting that one would have been lucrative, but it was such a short promotion that by the time the signal appeared it was too late to make a serious profit.
I hope this helps show you how you can use this indicator to your advantage. It’s a useful tool that can be helpful when deciding your next course of action.