Specific Factors Driving the Prices of Penny Stock
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Posted On: 09/20/2018 3:02:41 PM
Specific Factors Driving the Prices of Penny Stocks
When it comes to low-priced shares, most investors believe that stock prices are moved by corporate earnings, acquisitions, new customers, or huge contract wins. While these influences can have an impact, there are a whole host of other factors that can drive the prices of penny stock companies.
..If you are considering trading in a low-priced investment, your results will be directly proportional to the amount of work you commit towards your analysis .
Technical Trading Imbalance
In some cases, there is just too much buying compared to the selling, or too much selling compared to the buying. Often these technical imbalances are not even related to the operations of the underlying company, but nonetheless can establish themselves simply because of chance or the timing of investors. This becomes especially true with penny stocks, because typically lower-priced shares will have fewer buyers, or they will have fewer sellers, at any given point. This thin trading activity can often result in pretty significant technical imbalances.
..Eventually, when a technical imbalance (which by its nature is usually temporary and artificial) gets absorbed over time , the shares often move back to where they were in the first place . Whether it takes minutes, days, weeks, or months, the penny stock usually rebounds to former levels.
..There are many temporary technical imbalances. Astute investors might spot sudden selling activity, and be able to capture a small position at a deeply undervalued price
Corporate Growth
.. When a company sees their revenues increasing , and/or their earnings rising, and their market share ballooning, while their customer base expands along with their profit margins, the share price will almost certainly follow suit . This is truly a picture of the whole being worth more than the sum of the parts.. ..typically this means that the company is going to expand quickly , taking its share price higher on the way.
..Keep in mind that the price drivers discussed above can apply to blue chip and large cap companies, just as much as they do with penny stocks. ..After all, the smaller something is, the less energy it takes to move it.
https://www.thebalance.com/factors-driving-pe...es-4072794
Eventually Share price will follow financials irrespective of todays thin price.
When it comes to low-priced shares, most investors believe that stock prices are moved by corporate earnings, acquisitions, new customers, or huge contract wins. While these influences can have an impact, there are a whole host of other factors that can drive the prices of penny stock companies.
..If you are considering trading in a low-priced investment, your results will be directly proportional to the amount of work you commit towards your analysis .
Technical Trading Imbalance
In some cases, there is just too much buying compared to the selling, or too much selling compared to the buying. Often these technical imbalances are not even related to the operations of the underlying company, but nonetheless can establish themselves simply because of chance or the timing of investors. This becomes especially true with penny stocks, because typically lower-priced shares will have fewer buyers, or they will have fewer sellers, at any given point. This thin trading activity can often result in pretty significant technical imbalances.
..Eventually, when a technical imbalance (which by its nature is usually temporary and artificial) gets absorbed over time , the shares often move back to where they were in the first place . Whether it takes minutes, days, weeks, or months, the penny stock usually rebounds to former levels.
..There are many temporary technical imbalances. Astute investors might spot sudden selling activity, and be able to capture a small position at a deeply undervalued price
Corporate Growth
.. When a company sees their revenues increasing , and/or their earnings rising, and their market share ballooning, while their customer base expands along with their profit margins, the share price will almost certainly follow suit . This is truly a picture of the whole being worth more than the sum of the parts.. ..typically this means that the company is going to expand quickly , taking its share price higher on the way.
..Keep in mind that the price drivers discussed above can apply to blue chip and large cap companies, just as much as they do with penny stocks. ..After all, the smaller something is, the less energy it takes to move it.
https://www.thebalance.com/factors-driving-pe...es-4072794
Eventually Share price will follow financials irrespective of todays thin price.
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