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How to Pick Biotech Penny Stocks (My Pharmaceutical Penny Stock Strategy)

Here are some of the tips and techniques I use for picking biotech penny stocks using my own personal strategy to find hot pharmaceutical penny stocks.

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Many of you may be wondering the classic question every new trader asks: How do I find the best penny stocks? Today I will be sharing my own personal technique for finding the best hot penny stock picks as a beginner trader. And the secret lies in biotech penny stocks {also known as pharmaceutical penny stocks}.

This is a strategy that will be appealing to those traders who want to be aggressive and are willing to take high risks because when you are willing to take these high risks, the reward can be exponential.

So today I will share a little strategy I developed and uncovered which has yielded huge percentage gains in my own trades. For free.

Now…you are probably wondering –  Why on earth would anyone be willing to give up their secret stock strategy for free?

Let me tell you a story. I have been in your shoes. I have searched for ways to pick the best penny stocks for years. In that search I have been taken advantage of. I have paid embarrassingly large sums of money taking day trading classes. I have spent even more money on monthly memberships only to learn that the best traders use their own strategy they develop and not some secret formula.

I don’t want to see anyone go through the same time and money wasting experience. The vision of The Trade Locker is to develop a community where we can all grow, learn and share our own stock strategies to avoid being taken advantage of by all these “stock market gurus” on Wall Street because we all know Wall Street can eat you alive.

Here’s How to Pick Biotech Penny Stocks Using My Pharmaceutical Penny Stock Strategy

hot-biotech-stocks-strategy

Disclaimer: I am not responsible for any outcomes which may happen as a result of this strategy. As always, do your own diligence in researching and make your own investment decisions because all stock strategies are risky, especially penny stocks.

Step 1: Research the Companies That Are About to Get Hot

The first part of my strategy is to find pharmaceutical stocks that are about to report their results for Phase 3 Studies.

What does it mean for a stock to be in Phase 3 Studies?

In case you are not aware of what that term means, pharmaceutical companies {a.k.a biototech companies} must adhere to federal regulations to ensure that medicine is both safe and effective. They must pass through 3 phases. Phase 1 and phase 2 are the first two phases where the product meets the minimum requirements to justify future research. These first two phases are of no interest to us because we are not going to risk money until phase 3.

Once a Biotech company’s product reaches the third phase this is where you’re going to want to start paying attention.

I have found in my own experiences that the chances of good news in the third and final phase are more likely to be positive. Think about it: just about everybody in the biotech world wants to make money and everybody wants a new miracle drug. Thus, the odds of phase 3 results being positive are good.

How to Find Stocks in Phase 3:

All you have to remember is one important thing: the expected results of each phase are published by the FDA. All you have to do is do an internet search under phase 3 test dates and you will find sources that report these dates.

Step 2: Find Out the Phase 3 Test Result Dates

When you are researching the companies which are in Phase 3, you are going to want to find out what date they are anticipated to post their Phase Three Test Results, as this will be an indicator of when you should start thinking about investing in this particular pharmaceutical penny stock. Also during this step, be sure to research the background of the company and what products they have planned for in the future.

Step 3: Analyze Trade Prices of Phase 3 Biotech Stocks

Once you have a nice list of biotech companies to keep on your radar, it’s time to do a little research and to analyze the stock prices.

Rule #1: You must factor in the current trade price. In order to target hot bio penny stocks you need to make sure that they are on Nasdaq and that they are roughly between 1$ per share and $15 per share in order to qualify as a high enough risk/reward penny stock.

Rule #2: Read the Chatter: Once you have found the best price action you must go to any stock message board or read any stock twit that you can find. Read the chatter because there is often a lot of truth to the rumors. keep in mind however that there are often paid pumpers on these sites meaning that there are paid writers pretending to be “really in to a stock” and they will make crazy promises and predictions. Just use your own judgement.

Rule #3: Use Common Sense and Research the Drug: You definitely should do some basic research on the drug itself. Ask yourself, Is this drug useful? Will this drug help a large volume of people? Do I believe that this drug could make profits in the near future?

Rule #4: Analyze Company Management: In addition to the initial research, do research on the companies and its management. Make sure you trust the company and that the management is competent. Do more research on the companies balance sheets and make sure that they have the funding to keep the research and marketing process going.

Step 4: Formulate Your Strategy to Buy

Once you have done all of these things you need to decide when to buy the stock. I advise waiting for a string of down days so that you can get the lowest price possible. Don’t let the drop in price action scare you. Use it to your advantage. Also, DO NOT RISK IT ALL! Make a responsible trade so you can trade another day if the strategy fails. Use your own judgement on the size of your investment balance that you are willing to risk. Remember that any amount invested on penny stocks could be entirely lost.

Timing is everything in this strategy. You do not want to wait too long before you buy the stock. There is a common pattern which happens: First the price will often move up slow and steady. Then, you may notice that company insiders are starting to gobble up any shares they can find. By this time you have lost potential gains.

Step 4: Patience + Persistence

The last part of the strategy is to be patient after you have bought the stock. Often target dates for phase 3 testing get pushed back. This is normal because the researchers and the government want to get things right since people lives may be on the line. Just wait it out.

When the day comes and the results are published there are 3 possible scenarios:

  1. You made a huge percentage gain.
  2. There was a dud and no change happened.
  3. The news was bad and you lost money.

If you made money…that’s great! If nothing happened or you lost just be patient and try the strategy again.


 

I hope that you will find this biotech / pharmaceutical stock strategy to be useful. By all means please share your own comments or experiences if you have any additional ideas on this strategy or if you have your own strategy that you feel is better.

And if you do find this strategy useful – be sure to sign up for the FREE TradeLocker newsletter to get more great stock strategies and exclusive newsletter content right to your inbox.

2 Comments

  1. Jackie Nicole says:

    Great read. I followed the same sort of procedure and found a NASDAQ stock that should be one to keep an eye on for 2016. After some research, I found this pharma stock that is focused on breakthrough vaccines and is also venturing into other tech areas. The company has been approved for its Hep B vaccine in multiple countries and the research should continue to battle the continuous need for vaccines.

    1. Hi Jackie Nicole, I checked your recommendation. Great success! Congratulations!

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