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Oftentimes 2% or 3% moves in the mega-caps make headlines - those moves can even set the "tone" for the day's trading across the whole market.
Those moves are almost always instigated by big institutions moving tens or hundreds of billions of dollars around; it takes a lot to move the needle by single digits on a $2.4 trillion stock like Apple Inc. (NASDAQ: AAPL) or a $1.8 trillion stock like Amazon.com Inc. (NASDAQ: AMZN).
But, hey, that's the life of a marquee stock on the NASDAQ; the New York Stock Exchange isn't much different.
Thing is, if you look beyond the big board, you can see stocks where single-digit moves add up to double- and triple-digit profits.
Lately, I've turned my scanners loose on the over-the-counter (OTC) market, where stocks can trade for anywhere from pennies to a few bucks. I've seen some incredible, head-spinning moves. It takes much less for a $0.05 stock to become a $0.25 stock than it does for a $500 stock to become a $2,500 stock. You'll still make five times your money, but you'll do it in a few weeks or days instead of three years.
Today, I've got an energy-tech penny stock in my sights - I think we can expect a five-cent move that'll hand us 70% in gains. Here's the setup...
This Checks All the Boxes for an Explosive Rally
DarkPulse Inc. (OTC: DPLS) is a Virginia-based tech company that provides monitoring systems and sensor technology to companies in security, oil and gas, aviation, mining, and renewable energy sectors; these companies use DarkPulse's products to keep tabs on their infrastructure.
But that's secondary - we're interested in what the stock is going to do.
What the stock is going to do is rally.
As of Thursday midday, DPLS shares were trading at $0.09. We saw crescendo volume in this stock about three weeks ago, and now we can use DPLS to make a quick buck.
We're going to buy shares between $0.07 and $0.09, and prepare to sell them at $0.12 - a $0.03 to $0.05 price move could mean as much as 70%-plus profit.
When we saw the crescendo volume, DPLS went up to $0.20 before consolidating around the $0.07 level.
In a perfect world, I'd see the same volatility bands that we saw back in June.
If we were in the stock during that time, we'd have known to put in a trailing stop.
Fast forward to today, and shares are pulling back to the 50-day moving average. On top of that, the relative strength index (RSI) is nearing the "oversold level" at 47. Put those two together, and we're looking at a potential downfall in DPLS. And we're looking to buy the dip - so, this time around we're going to get into DPLS at $0.07.
This is the "set it and forget it" price, because the stock had foundational support at this level. Once the stock hits $0.12, we'll add a trailing stop of 5% to protect our profits.
Important: Notice I said "prepare to sell," back there. We are not selling our stock at $0.12... we're just preparing to sell them in case they move against us.
After that's taken care of, we'll sit back, relax, and let the stock fly. I look forward to seeing how much higher it goes from there.
The price to profit potential ratio in "pre-IPO rights" can be even bigger than penny stocks.
Think about this: It's possible to secure these rights for a buck or less in some cases from companies looking to go public in the United States. Then, in the event the company goes public, those rights have the potential to skyrocket in value - peak gains of 2,088%, 6,566%, 8,280%, 9,075%, even 27,550% have been seen in exceptional cases. You've got to learn more about how this works...
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.