Reading out the charts patterns:
There are two types of analysis in stock market trading. The first is fundamental, and the second is technical. In fundamental analysis, a person uses the information about the company himself, such as debt, lawsuits, revenues, and management. In technical analysis, a person uses patterns on a trading chart. The preferable method is the fundamental analysis in which a trader analyses the combination of both analysis and separates the beneficial one from the other. When you find high-quality companies, the technical analysis helps you get an insight into the underlying share.

Relative strength index:

The relative strength index is the most reliable indicator used in the technical analysis for penny stocks. It measures the speed and change of price movements on a scale range from 0-100. The use of the relative strength index above 70 determines the stock is overvalued or overbought. In simple words, it indicates either the trend reversal or stock pullback is coming. A value of 30 or below determines that stock is oversold or undervalued. It triggers the correct price reversal on the horizon or correct price.

There are several Penny Stock Tips and reliable patterns to find the best penny stock:

Bottoming out patterns:
It is a reliable pattern for finding the penny stock that emerges after a long sustained slide in the share price. In several months, the trend goes downwards and then goes sideways for a few weeks. When there is a sudden increase in trading volume, the share is expected to go into a sustained recovery price. It generally happens in an oversold condition.

Price dips:
Due to an imbalance in the buy and sell order, the penny stock is thinly traded, such as price volatility. When the sellers outweigh the buyer, this factor causes the shares to a dropdown. When the stock drops down without any appropriate reason for a low trading volume, it is called a price dip pattern. Taking advantage of the price dip requires being in the right place at the right time.

Top out pattern:
It has similar principles as bottom-out patterns but in reverse order. This pattern allows the shares to be in climbing order for a long period. It levels off or turns the sideways share. Shareholders look for captures to sell the shares at high prices. The buying ends lead to the fall down of the share prices.

Share consolidation:
When the base of shareholders turns over, it is share consolidation. It is considered a great sign for penny stock. Shareholders wait for the right time to sell their shares, while the frustrated shareholders look for ways to get out of this. In the sideways, the penny stock trade is higher than the average volume and is a good sign for future shares. When there are no more sellers to get out, and only a small percentage of owners are left, the stock reaches a tipping point. In the next move, the stock becomes high.

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Author's Bio: 

The preferable method is the fundamental analysis in which a trader analyses the combination of both analysis and separates the beneficial one from the other. When you find high-quality companies, the technical analysis helps you get an insight into the underlying share.