Once I launched my 7-step pennystocking framework in 2011, some folks known as it a advertising and marketing gimmick. But it surely wasn’t a gimmick. The framework was primarily based on a decade of commentary. It was an try to simplify issues. And admittedly, I didn’t count on it to maintain enjoying out. I assumed
Once I launched my 7-step pennystocking framework in 2011, some folks known as it a advertising and marketing gimmick. But it surely wasn’t a gimmick.
The framework was primarily based on a decade of commentary. It was an try to simplify issues. And admittedly, I didn’t count on it to maintain enjoying out. I assumed if I shared it with sufficient merchants, the sample would cease working.
But it surely hasn’t stopped working. That’s as a result of the rationale behind the value motion continues to be there. Due to greed, hype, and manipulation … the 7-step pennystocking framework simply retains giving.
On this version of the replace, I’ll share the whole framework.
New Karmagawa $1 Million Donation
Learn extra concerning the newest Karmagawa donation right here. Please share the put up on social media. I’m proud to donate 100% of my buying and selling earnings to charity, however we want extra merchants to donate. Collectively we will change the world.
I am proud to announce a brand new $1 million charity donation to meals banks, animal rescues & to construct extra colleges, test it out: https://t.co/QVyHVCEaZm please retweet/assist me get extra merchants giving again as we should ALL do what we will to make this a greater world for people & animals!
— Timothy Sykes (@timothysykes) March 22, 2021
Now it’s time for…
Buying and selling Mentor: 7-Step Pennystocking Framework
The pennystocking framework and its variations nonetheless play out. It’s not an actual science, however when you perceive what’s occurring, you’ll see it many times.
Be taught it, however don’t simply memorize the patterns. Attempt to perceive the rationale behind them. That manner you may adapt to shifting markets. And the important thing to long-term success is adapting.
Shout out to all of the bag holders on previously nice OTCs like $ALPP $ENZC $OZSC $OPTI $ASTI $ALYI as solely the dumbest, laziest, most naive newbies maintain by such destruction. As I warned in actually a whole bunch of tweets, my 7-step framework often performs out on multi-month pumps
— Timothy Sykes (@timothysykes) March 25, 2021
I’ll cowl the fundamentals of the 7-step pennystocking framework on this version of the replace. Learn to the tip for data on how you can study the framework in depth.
With out additional ado, listed below are the seven steps. I’ll embody charts alongside the way in which. Keep in mind, it’s not an actual science. Search for similarities within the charts. Discover the place some numbers repeat. And see that in a few of these charts, the #7 hasn’t occurred … but.
Step #1: The Pre Pump or Promotion
At step #1, you may make massive good points, but it surely takes time. The aim is to foretell the massive spike forward of time, whatever the motive. This step is greatest for affected person folks with small accounts.
That stated, it’s tough to guess on performs like this. It’s robust with out expertise. Particularly for the reason that old-school e mail and mailer promotions just about died.
Jack Kellogg lately performed the #1 with marijuana shares. He’d witnessed the massive sector run in 2017 and 2018. His thesis was that if Joe Biden gained the election, weed shares would spike. So he purchased a basketful of weed shares in January and waited.
Jack’s spent years finding out the 7-step pennystocking framework. He’s arguably one of the best scholar of the framework I’ve ever had. Jack crushed it in February after holding a number of the shares for practically a month.* Maintain studying for a overview of considered one of Jack’s trades.
(*These outcomes aren’t typical. Particular person outcomes will differ. Most merchants lose cash. Merchants like Matt and I benefit from a few years of arduous work and dedication. Buying and selling is inherently dangerous. All the time do your due diligence and by no means danger greater than you may afford to lose. I’ve additionally employed Jack to assist in my schooling enterprise.)
Step #2: Ramp
In step #2, the run-up quickens. There’s consolidation in anticipation of a breakout. Ideally, there’s sideways motion after which a technical breakout. There’s additionally elevated quantity and extra hype.
Again within the day, the hype got here on message boards and emails. As of late, it’s finished by Twitter pumps and in chat rooms. College students ask me on a regular basis how I do know the place the hype is coming from. My go-to supply is StocksToTrade Breaking Information Chat. It saves me a ton of time. Use it.
(Fast disclaimer: I proudly helped design and develop StocksToTrade and am an investor in it.)
Consider … promoters use a TON of bot accounts on social media. Trip the hype, however don’t imagine the BS. You’ve been warned.
When a inventory is ramping, it’s doable to purchase and maintain for a couple of days or even weeks. However once more, you’re principally guessing that the promotion will work.
Step #3: Supernova
That is how I made my first $1 million again in 1999 and 2000.* And to be sincere, I didn’t perceive what was occurring. I simply acknowledged the sample and rode the wave. I purchased the breakouts.
(*Word: My outcomes are removed from typical. Particular person outcomes will differ. Most merchants lose cash. I benefit from years of arduous work, dedication, and expertise. Buying and selling is inherently dangerous. Do your due diligence and by no means danger greater than you may afford to lose.)
That is probably the most rewarding time to be lengthy. But it surely’s additionally the riskiest. You MUST bear in mind that the upper a supernova goes, the extra overextended it will get. Be very cautious with shopping for overextended shares.
All of it comes right down to expertise and follow. Whenever you’re mistaken (and you’ll be generally) all the time comply with rule #1: minimize losses rapidly.
How lengthy do you maintain a supernova? That depends upon plenty of issues. Is the massive transfer occurring in at some point, three days? What number of days has the inventory been inexperienced? You have to think about many elements.
Keep in mind, supernovas can flip on a dime.
Step #4: Cliff Dive
You realize the outdated adage … what goes up should come down.
The 7-step pennystocking framework got here from observing value motion on penny inventory pump-and-dumps again within the day. Once I launched it, as soon as a promotion stopped, the underside fell out. Shares generally dropped 50% or extra in a day.
Quick ahead to right now. Inventory promoters may not use the identical instruments, however they nonetheless pump shares. And when the promotion stops, the underside nonetheless falls out. A small decline close to the highest turns right into a full-on collapse.
That is one of the best time to short-sell promotions. But it surely’s additionally often probably the most tough time to search out shares to brief. Why? When a inventory goes from 50 cents to $5 over a couple of days, brief sellers begin circling like vultures. Particularly if it’s primarily based on promotion and hype.
We’ve seen many sub-penny performs go full supernova lately. So they may stand up to 10, 20, and even 50 cents a share.
So earlier than we get to step #5, now we have two MAJOR caveats right here…
First, I feel shorting is a flawed technique proper now. There are too many overaggressive beginner shorts out there. It’s a crowded area and a really dangerous technique.
Second, I’d NEVER brief an ultra-low-priced play. Even once I was brief biased, I hardly ever shorted something under $1. Even then, there needed to be a great motive and/or proof of a pump.
However that’s OK as a result of I’ve discovered to adapt by enjoying…
Step #5: Dip Purchase
The panic dip purchase is my favourite sample for small accounts. For me, that is one of the best time to purchase a promoted inventory. There’s nonetheless momentum and curiosity. The promoters inform their followers to carry, however plenty of newbies set arduous stop-loss orders. When the cease losses get taken out, it turns into a self-fulfilling prophecy.
And sometimes there’s a stable bounce for 2 causes. First, dip patrons are ready for the flip. But in addition, brief sellers purchase to cowl. A inventory can run 50% or extra in a couple of hours or days. Generally the bounce occurs in underneath an hour.
Meaning preparation is vital.
How do you have to put together? Be taught to learn Stage 2 and use technical evaluation. My DVD, “Be taught Stage 2” is a good place to start out. Warning: studying Stage 2 on listed shares isn’t as easy as OTCs. With listed shares, it’s extra about technical evaluation and studying the chart.
Once more, generally the panic bounces, and generally it doesn’t. Don’t get cussed. When unsure, comply with rule #1 and get out.
As lately as January and February, the morning panic dip buys got here quick and livid. In March, there haven’t been as many good bounces. Morning spikers and supernovas simply died.
Keep in mind, you MUST adapt.
Step #6: The Useless Pump Bounce
Once I was brief biased, this was my favourite time to brief promote. Once more, when a inventory goes supernova, brief sellers wish to brief it. However that may be harmful as a result of you don’t have any concept how far it may go.
However as soon as the inventory has had a cliff dive and a bounce, brief promoting is usually a little extra predictable. That stated, there’s not as a lot vary. So whereas it’s simpler to search out shares to brief, you’re not as more likely to get an enormous p.c win.
Additionally … we’ve seen plenty of performs have two or extra massive spikes lately. Generally the bounces have gone proper again to highs. Once more, I don’t advocate brief promoting for newbies or anybody buying and selling a small account.
Generally there’s no bounce in any respect. Bounce or not, the following step is…
Step #7: The Lengthy Kiss Goodnight
Don’t assume this ends with the penny inventory firm altering the world with their wonderful product…
It doesn’t occur. They’re all junk. And that’s the place step #7 occurs. It’s a gradual decline over days, weeks, or months. Check out the chart above. After the primary supernova in early 2019, the inventory had a bounce after which a protracted, gradual decline.
It got here again to life in the summertime of 2020 and went full supernova once more in January 2021.
High Ideas for the 7-Step Pennystocking Framework
Hopefully, you see the similarities and perceive the numbers on the charts above. Examine these charts. Once more, it’s not an actual science.
The general sample has variations, as you’ll discover the extra you research. However the consequence is similar. So what are you able to do to higher put together for the alternatives as they play out?
Tip #1: Watch and React
You don’t know if there are better odds of bouncing or failing. All you are able to do is watch and react. By no means guess. If unsure otherwise you’re mistaken, get out.
Tip #2: Former Runners Can Run Once more
Pay attention to former runners. As soon as a inventory runs as soon as, it may run once more with the proper information and quantity. The OPTI and SHMP charts above are good examples. And the bubble market this yr noticed a number of shares have a #3 and #4, solely to spike even greater for an additional #3.
Tip #3: Watch out for Bag Holders
An organization that has been round some time and has gone supernova has bag holders. These merchants believed the hype, purchased at a stupidly excessive value, and refused to chop losses. They’ll attempt to promote into any massive spike simply to get better losses. So bear in mind that former supernovas hardly ever go as excessive the following time round.
Tip #4: Perceive Fundamental Technical Evaluation
Each time a inventory breaks a brand new low or excessive, it reveals up on some dealer’s display. It doesn’t matter if it’s each day, month-to-month, or yearly. Merchants scan for highs and lows. Pay attention to the highs and lows in a number of time frames. Be taught extra about technical evaluation right here.
Tip #5: The 7-Step Framework Occurs in A number of Time Frames
As unusual because it sounds, the pennystocking framework can play out in a day. Test it out…
The VDRM chart above skips the #1 and doesn’t spend a lot time at #2. It was just about a #3 proper out of the gate. After that, the framework performs out fairly precisely. Do you see the cliff dive, the dip buys, the lifeless pump bounces, and the lengthy sluggish kiss goodnight?
Look ahead to these patterns as a part of the general sample. Search for them day by day. Particularly on massive p.c gainers.
High Tip: Perceive Bubble Psychology
I saved this for final as a result of it would simply be crucial idea for any penny inventory dealer. The 7-step pennystocking framework is an instance of a bubble. Even when it’s for a single inventory, the psychology matches that of a bubble.
So it’s key to grasp how bubbles work. I encourage each scholar to learn “Extraordinary Common Delusions and the Insanity of Crowds.” Despite the fact that it’s 180 years outdated, it’s nonetheless related.
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Now check out this chart displaying the levels of a bubble as utilized to a penny inventory supernova.
The inventory within the chart above doesn’t matter. I might’ve chosen any considered one of dozens of shares that adopted the 7-step framework (or variations) prior to now six months. The purpose is to grasp the psychology behind the totally different levels in a bubble.
Then study to use that to buying and selling the 7-step framework. It’s all about hype, manipulation, greed, and worry.
Discover the totally different components of the mania or #3 supernova stage. Be taught them inside and outside. And word that media consideration means social media, too. That’s when social pumps are sometimes at their highest. Some promoters tweet 75–100 instances per day a few inventory.
Commerce Overview: Monster OTC Swing by Jack Kellogg
I inform my college students to overview trades by all of the Buying and selling Problem mentors. So this week I’m reviewing a swing commerce by Jack Kellogg. I picked this commerce as a result of it’s an ideal instance of enjoying the #1 of the 7-step pennystocking framework.
Jack nailed it*…
American Premium Water Company (OTCPK: HIPH)
Once more, Jack had a thesis concerning the marijuana sector (try a number of the particulars in this TWIST podcast episode). American Premium Water has a variety of CBD-infused drinks. It was a bit speculative, however he was meticulous. He made a plan and adopted it.
Jack entered the commerce on January 11, taking a roughly $14,835 place. Take a look at the chart under. I’ve circled Jack’s entry and common promote value. (I’m unsure if he scaled out.) I additionally added the pennystocking framework steps.
As you may see, Jack was on this inventory within the ‘good’ cash’ part. He offered into energy — within the greed part. Jack took an 893% win on this commerce.* That’s loopy!
(*These outcomes aren’t typical. Particular person outcomes will differ. Most merchants lose cash. Merchants like Jack and I benefit from a few years of arduous work and dedication. Buying and selling is inherently dangerous. All the time do your due diligence and by no means danger greater than you may afford to lose. I’ve additionally employed Jack to assist in my schooling enterprise.)
Discover the primary #3 on the chart. The explanation that’s a #3 is as a result of the inventory spiked 382% that day. Then it spiked one other 70% the following morning earlier than slowly fading. For a couple of days, it traded a comparatively big selection for a low-priced inventory. However the impact was consolidation. Then it went full supernova once more.
Be taught From Jack’s Dedication
This was a masterful swing commerce and an incredible instance of Jack’s dedication to the 7-step framework.* He’s studied the framework incessantly. Whereas I desire to play #3 to #5, Jack has discovered to search for performs on all of the steps. That’s spectacular and I feel no less than partially explains Jack’s wonderful success within the final yr.*
I lately interviewed Jack about his success. He talked concerning the 7-step pennystocking framework and its significance to his buying and selling. It’s a must-watch sequence — make sure you watch all 4 components. Begin with…
Millionaire Mentor Market Wrap
This put up solely scratches the floor of my pennystocking framework. It’s sufficient to start to acknowledge the general sample. To actually study the framework, you want to research. Listed here are a couple of choices…
Day 13 of the 30 Day Bootcamp is an outline of the 7-step pennystocking framework. Days 14–19 break it right down to the patterns throughout the sample. In case you’re simply getting began, the 30-Day Bootcamp is a must have useful resource.
This information explains the 7-step framework intimately. Word: “Pennystocking Framework” is a bonus while you get the 30-Day Bootcamp.
Pennystocking Framework Half Deux
This information offers a historical past of the 7-step pennystocking framework and updates it. “Pennystocking Framework Half Deux” additionally has examples of dwell trades utilizing the 7-step framework.
What do you consider the 7-step pennystocking framework? Remark under, I really like to listen to from all my readers!