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3 Penny Stock Patterns to Watch

Chart patterns are a good starting point for penny stock research


Some traders mistakenly think that technical analysis and penny stocks are an ill-fated combination…but that’s not always true. Using technical analysis is not a foolproof method because of the low liquidity often associated with penny stocks, so here are a few bullish ideas from the Trending123 Pattern Scan powered by Recognia to get your research started. All have volume over 200,000. These patterns are expected to play out in the intermediate term (six weeks to nine months).

Head and Shoulders Bottom

7-17-13-thmInternational Tower Hill Mines (THM)

The price seems to have reached the end of a period of “accumulation” at the bottom of a major downtrend; the break up through resistance signals a reversal to a new uptrend. The head and shoulders bottom is created by three successive declines in the price following a significant downtrend. The lowest low (head) is in the middle, flanked by two higher lows (shoulders) at roughly the same level. Volume is highest as the price makes the first two declines, then diminishes through the right shoulder. Finally volume surges as the price closes above the neckline (drawn between the two highs) to confirm the reversal.

Volume: 250,862

Price Target: $0.86 – $0.92
Stop: $0.49

Bottom Triangle

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Senesco Technologies

The price seems to have reached a bottom, showing signs of reversal as it has broken upward after a period of uncertainty or consolidation. A Bottom Triangle shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks above the upper trendline with a noticeable increase in volume, confirming this bullish pattern as a reversal of the prior downtrend.

Volume: 776,833

Price Target: $0.04 – $0.04

Stop: $0.01

Double Bottom

7-17-13-erfbERF Wireless (ERFB)

The price seems to have reached a bottom after failing to break through a support level and ultimately rising higher in a sign of reversal to a new uptrend. The Double Bottom pattern forms during a downtrend as the price reaches two distinct lows at roughly the same price level. Volume reflects a weakening of the downward pressure, tending to diminish as the pattern forms, with some pickup at each low, less on the second low. Finally the price breaks upward above the highest high to confirm the bullish signal.

Volume: 280,217

Price Target: $0.68 – $0.70

Stop: $0.36

InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the OpenParabolic Options and Trending123.  Trending123 members receive access to the Trending123 Pattern Scan powered by Recognia free as part of their membership.

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