Lessons From A Penny Pro

NovaBay (NBY) Consolidation Pattern Case Study

Stocks closed green for their fifth straight session today.

That said, Monday mornings are some of my favorite days to wake up too…

I know… I know…

Most people dread Mondays because it means they have to go to a job they don’t really care for…

 …and see people they don’t really care for…

I guess that is why so many people get into trading… it gives them an opportunity to earn supplemental income and potentially become financially independent for live.

But that’s not why I love Mondays.

You see, on Mondays, the early bird gets the worm…

That’s because its when companies send out press releases. And if you’re trading penny stocks… it’s these press releases that can act as catalysts to massive stock moves…

And today was no different.

 

 

 

It happened in NovaBay, a microcap, that announced that its domestic eye care product was going to become readily available on the world’s largest e-commerce store, Amazon.com.

This news was released pre-market… and the stock took off…

And you better believe that Supernova traders were all over it…

 

 

 

(This is why we love Mondays! Not a client yet? Then do something about it.)

 

That said, I’d like to walk you through this setup, and explain how the trade works. It’s one that we see a lot of in the pre-market, so it makes sense to learn this one.

 

NBY Consolidation Pattern Case Study

 

Give a person a fish and you feed him for a day… teach a man to fish, and you feed him for a lifetime.

That’s a proverb that I like to go by.

Sure, I can give you trade alerts and watchlists… but the whole idea behind these is for you to learn how to do it on your own.

You see, my risk appetite for risk might be completely different than yours… and our stock entry and even exits could vary significantly… even if we are trading the same stocks.  

It’s okay to have someone walk you through trades… but at some point, you have to realize that getting alerts is just one part of the equation, the rest is up to you.

For example, just over a week ago, I alerted traders about a chart pattern in NovaBay Pharmaceuticals (NBY)… the stock was one of Wall Street’s top gainers yesterday, being up over 800% at one point.

Sadly, I didn’t take part in that trade… but there were a few clients who stuck with it, and had stellar performances, which was amazing to see. Now, I’ll walk you through the thought process, and why I got out.

Shout out to Joshua for locking in a 196% winner!

Consolidation Pattern Explained

 

Here’s a look at the consolidation pattern, one of my favorite patterns to trade.

 

 

Now, what we’re looking for with the consolidation pattern is a steep drop… followed by a period where the stock is trading in a range.

As you can see in the chart on NBY above… we got that price action.

Not only that, we saw volume pick up that day… when the stock was running up, that let me know there were buyers and the stock could start to run up.

 

 

You see, the stock had the 20-day simple moving average (SMA) above it, and I was anticipating a move to that level… and for NBY to potentially break above.

Here’s the alert I sent out to clients…

 

 

Now, I actually ended up taking a small loss a few days later. You see, I’m doing the small account challenge (trading with a $2K account and trying to turn it into a larger account)… and the stock was doing a whole lot of nothing.

In my mind, I was thinking there are so many opportunities in penny stocks right now… since this position didn’t get the move I expected within my holding period, I wanted to free up some capital in the account to look for trade other penny stocks.

Here’s a look at the chart in NBY again.

 

 

Now, what I teach traders is to focus on the price action, volume, and chart pattern… and they don’t need to mirror my trades once they’ve got the hang of things.

You see, they have access to a lot of material that will get them up to speed on penny stocks and how to build a small account with a simple 5-step plan… which allows them to make decisions on their own.

Those who stuck with their trading plans and didn’t get stopped out, woke up to this yesterday.

 

 

The reason for this massive spike?

NovaBay’s eye care product Avenova will start selling on Amazon.com (AMZN), which should be a key driver of its revenues and earnings…

… did traders get a bit lucky on this?

Sure, but it’s better to be lucky and see positive news… and sit in profits.

Shout out to Elmer who stuck with this trade!

 

 

 

Now, if you want trade alerts, video lessons, and watchlists, as well as learn a simple, yet powerful approach to trading penny stocks… click here to learn more about my 5-step trading system to build small accounts – what I call the Profit Prism.

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