How To Screen for Oversold Penny Stocks
How to Screen for Penny Stocks
I see this question asked a lot and I thought it would be helpful if I created a detailed step by step instructional how-to screen for penny stocks. There are many different types of screeners but this one specifically will cover oversold stocks that are on the verge of a reversal.
I will be releasing a few of my other stock screeners I use to trade with daily in the near future. These include penny stocks, blue chip stocks and some crypto trades. So be sure to subscirbe to the newsletter and check back for some of my other strategies.
I have seen a lot of people charging for screeners similar to this one but everything below can be set up on tradingview.com which is a completely free service. Of course with paid services you may get better and or more accurate results but I’ve been using trading view for a while and have been very pleased with it.
Here are my stipulations for the oversold penny stocks that I screen for:
The stock price must be under $4.00
The stock must have an average volume of 300,000 or more
I use MFI so I want my readings to be oversold and under 20.
Last candle has a change of 0.5% or better
Obviously, since we are trying to trade cheap penny-like stocks we don’t want to spend more than $4.00. I’ll be honest I typically play under $3.00 but I like to have that $1.00 buffer incase something is set up nice. We also need enough volume to execute our trade in and our trade out. There are plenty of set ups everyday with little to no volume. Trust me, that is a terrible place to be in.
I trade MFI on everything so that is my preference but you can change MFI to RSI or Stochastics or another momentum based oversold/overbought indicator. The idea is we want to see an oversold level on the daily chart.
Lastly, the change in the closing candle needs to be the reversal candle. We can try and time reversals and predict the bottom but it rarely works out. It’s okay to let go of some of that profit in order to catch in-the-momentum action. This is why I set the change to half a percent or greater so that we can see where the reversal is. This makes your trade a little safer.
I typically ride these penny stock plays to at least 3-5% before exiting.
So, now that you know why my screener is set up this way let’s walk through the how-to of getting it set up on tradingview.com
That should be all you need to do to start screening for and identifying oversold setups. This is a great beginner screener as well because it generally doesn't pull more than a handful of stocks so its not super overwhelming to look at and decide what trades to execute.
This screener is great because it allows you to find stocks that have sold off quite a bit recently and are primed for a bounce, while also catching the first movement to the upside since the sell off so in most cases you are getting in right at the reversal point and can ride the stock back up for profit.
This is one of the easiest and one of my most favorite and most successful screeners I have used for years. Let me know how it works out for you and if you have any questions about it you can find me on Twitter. I will be releasing quite a few more screening strategies in the future so stay tuned and subscribe to be notified when the newsletters drop!