Once I launched my 7-step pennystocking framework in 2011, some individuals referred to as it a advertising and marketing gimmick. However it wasn’t a gimmick.
The framework was primarily based on a decade of commentary. It was an try to simplify issues. And albeit, I didn’t anticipate it to maintain taking part in out. I assumed if I shared it with sufficient merchants, the sample would cease working.
However it hasn’t stopped working. That’s as a result of the rationale behind the worth motion continues to be there. Because of greed, hype, and manipulation … the 7-step pennystocking framework simply retains giving.
On this version of the replace, I’ll share your entire framework.
New Karmagawa $1 Million Donation
Learn extra in regards to the newest Karmagawa donation right here. Please share the publish 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 taking place, you’ll see it time and again.
Be taught it, however don’t simply memorize the patterns. Attempt to perceive the rationale behind them. That means 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 means of such destruction. As I warned in actually tons of of tweets, my 7-step framework normally 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 tips on how to study the framework in depth.
With out additional ado, listed here are the seven steps. I’ll embody charts alongside the best way. 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 can also make massive positive aspects, nevertheless it takes time. The purpose is to foretell the large spike forward of time, whatever the purpose. This step is greatest for affected person individuals with small accounts.
That mentioned, it’s tough to guess on performs like this. It’s powerful with out expertise. Particularly because the old-school e-mail and mailer promotions just about died.
Jack Kellogg lately performed the #1 with marijuana shares. He’d witnessed the large 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 learning the 7-step pennystocking framework. He’s arguably the very best pupil of the framework I’ve ever had. Jack crushed it in February after holding a number of the shares for practically a month.* Hold studying for a overview of certainly one of Jack’s trades.
(*These outcomes should not typical. Particular person outcomes will differ. Most merchants lose cash. Merchants like Matt and I benefit from a few years of exhausting work and dedication. Buying and selling is inherently dangerous. All the time do your due diligence and by no means threat 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 hurries up. 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. Lately, it’s carried out 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. Experience 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 mainly 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 taking place. 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 exhausting work, dedication, and expertise. Buying and selling is inherently dangerous. Do your due diligence and by no means threat greater than you may afford to lose.)
That is essentially the most rewarding time to be lengthy. However it’s additionally the riskiest. You MUST remember 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 apply. Once you’re mistaken (and you may be typically) all the time comply with rule #1: reduce losses shortly.
How lengthy do you maintain a supernova? That is dependent upon a whole lot of issues. Is the large transfer taking place in someday, three days? What number of days has the inventory been inexperienced? You could think about many elements.
I like to recommend studying the primary inexperienced day sample. But additionally study to make use of the seven indicators of the Sykes Sliding Scale. And be prepared to adapt.
Keep in mind, supernovas can flip on a dime.
Step #4: Cliff Dive
You realize the previous 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 typically dropped 50% or extra in a day.
Quick ahead to immediately. Inventory promoters won’t 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 the very best time to short-sell promotions. However it’s additionally normally essentially the most tough time to seek 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 house and a really dangerous technique.
Second, I’d NEVER brief an ultra-low-priced play. Even once I was brief biased, I not often shorted something beneath $1. Even then, there needed to be purpose and/or proof of a pump.
However that’s OK as a result of I’ve discovered to adapt by taking part in…
Step #5: Dip Purchase
The panic dip purchase is my favourite sample for small accounts. For me, that is the very best time to purchase a promoted inventory. There’s nonetheless momentum and curiosity. The promoters inform their followers to carry, however a whole lot of newbies set exhausting stop-loss orders. When the cease losses get taken out, it turns into a self-fulfilling prophecy.
And sometimes there’s a strong bounce for 2 causes. First, dip patrons are ready for the flip. But additionally, brief sellers purchase to cowl. A inventory can run 50% or extra in a couple of hours or days. Generally the bounce occurs in beneath an hour.
Which means preparation is vital.
How must you put together? Be taught to learn Degree 2 and use technical evaluation. My DVD, “Be taught Degree 2” is a good place to begin. Warning: studying Degree 2 on listed shares isn’t as simple as OTCs. With listed shares, it’s extra about technical evaluation and studying the chart.
Once more, typically the panic bounces, and typically 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 need to brief it. However that may be harmful as a result of you don’t have any thought how far it will possibly go.
However as soon as the inventory has had a cliff dive and a bounce, brief promoting could be a little extra predictable. That mentioned, there’s not as a lot vary. So whereas it’s simpler to seek out shares to brief, you’re not as more likely to get an enormous p.c win.
Additionally … we’ve seen a whole lot of performs have two or extra massive spikes lately. Generally the bounces have gone proper again to highs. Once more, I don’t suggest brief promoting for newbies or anybody buying and selling a small account.
Generally there’s no bounce in any respect. Bounce or not, the subsequent step is…
Step #7: The Lengthy Kiss Goodnight
Don’t suppose this ends with the penny inventory firm altering the world with their superb 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 an extended, gradual decline.
It got here again to life in the summertime of 2020 and went full supernova once more in January 2021.
High Suggestions 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 end result is identical. So what are you able to do to raised 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 will possibly run once more with the correct information and quantity. The OPTI and SHMP charts above are good examples. And the bubble market this 12 months noticed a number of shares have a #3 and #4, solely to spike even larger for one more #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 well losses. So remember that former supernovas not often go as excessive the subsequent time round.
Tip #4: Perceive Primary Technical Evaluation
Each time a inventory breaks a brand new low or excessive, it exhibits up on some dealer’s display screen. It doesn’t matter if it’s every 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 gradual 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 a very powerful 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 pupil to learn “Extraordinary Well-liked Delusions and the Insanity of Crowds.” Though it’s 180 years previous, it’s nonetheless related.
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Now check out this chart displaying the phases of a bubble as utilized to a penny inventory supernova.
The inventory within the chart above doesn’t matter. I may’ve chosen any certainly one of dozens of shares that adopted the 7-step framework (or variations) up to now six months. The purpose is to grasp the psychology behind the completely different phases 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 completely different components of the mania or #3 supernova stage. Be taught them in and out. And notice 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 couple of inventory.
Commerce Evaluation: 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 taking part in the #1 of the 7-step pennystocking framework.
Jack nailed it*…
American Premium Water Company (OTCPK: HIPH)
Once more, Jack had a thesis in regards to the marijuana sector (try a number of the particulars on this TWIST podcast episode). American Premium Water has a spread 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. Try the chart beneath. 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 ‘sensible’ cash’ section. He offered into energy — within the greed section. Jack took an 893% win on this commerce.* That’s loopy!
(*These outcomes should not typical. Particular person outcomes will differ. Most merchants lose cash. Merchants like Jack and I benefit from a few years of exhausting work and dedication. Buying and selling is inherently dangerous. All the time do your due diligence and by no means threat 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 rationale that’s a #3 is as a result of the inventory spiked 382% that day. Then it spiked one other 70% the subsequent morning earlier than slowly fading. For a couple of days, it traded a comparatively wide 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 a terrific 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 at the least partially explains Jack’s superb success within the final 12 months.*
See Jack’s $132,039 win right here.*
I lately interviewed Jack about his success. He talked in regards to 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…
Confessions of a Valet Turned Millionaire Day Dealer Half 1 of 4.
Millionaire Mentor Market Wrap
This publish solely scratches the floor of my pennystocking framework. It’s sufficient to start to acknowledge the general sample. To actually study the framework, you could 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 inside the sample. If you happen to’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 whenever 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 reside trades utilizing the 7-step framework.
What do you consider the 7-step pennystocking framework? Remark beneath, I like to listen to from all my readers!