Penny Stock Charts - The Basic Patterns You Must Know 

Penny stock charts can tell you whether you are looking at shares with potential to generate a profit. Most traders will tell you that penny stock charts are best to look at on a short-term basis, instead of a long-term basis, but are there patterns that are unique?

The basics of penny stock charts are still similar to large-priced shares, but patterns can help you look at typical movements to expect. Certain shares can be driven up by outside factors, such as possible buy-out rumors, hype publicity campaigns or sudden press releases of a positive or negative nature. If you learn the basics of penny stock charts, there are ways you can monitor, chart, analyze and compare the ones that look poised to double or triple in share price.

  • Learning Basics Of Charting:

    There are several ways to learn the basics of reading charts, but there are free charting tools on investment websites. You just have to determine patterns formed by the highs and lows of the penny stocks you are interested in. Some analysts are particularly good at reading charts, but stock-picking software algorithms can help you with the fundamentals of charts in positive or negative phases. Newsletters offer charting tips, but most financial websites provide charts on the highest volume microcap shares.

  • Shares Open At A Higher Price, Than The Previous Night's Close:

    On penny stock charts, this "gap up" could mean that something was released after the markets closed, causing a gap in the previous night's closing price and the opening share prices, the next morning. This type of gap could mean the shares will be up for the day.

  • Horizontal Movement, With Little Downside:

    If it seems like the penny stock charts are indicating a horizontal movement, with lows that are higher and higher, it could indicate the formation of an "ascending triangle". This could tell you there is pent-up demand that makes investors purchase on dips in share price, meaning it's getting ready to break out of normal trading ranges. It could just indicate an even amount of buying and selling, with investors changing positions, on the other hand.

  • Look For Downward Sloping Tops:

    A pennant continuation pattern will have downward sloping tops, almost the opposite of ascending triangles. This could still mean that an upward trend is going to continue, once it has hit a bottom and bounced off of it, heading it back upwards. Getting in on the lows and selling during the highs are the best way to make money.

  • Look For A Breakout, With A Crossover:

    Penny stock charts that show a pattern with a breakout crossing over the bullish moving average can mean share prices are moving into higher territory. Analysts may establish the bullish moving average, but anytime the price crosses higher than the average-moving line, it is in a good position to breakout to higher prices.

These are some of the basic things to look for, when first learning about charting particular stocks. There are plenty of charting tools, DVDs on investing and you can find stock trading reports offered by experts in charting. Doing your own research helps you spot potential "money-makers" by reading the patterns on penny stock charts.