One of the secrets to successful and profitable trading is knowing when to buy, sell, or hold stock. These decisions often have to be made at a moment’s notice, with no opportunity to consult with stockbrokers, interview financial managers, or browse research reports beforehand. Even so, it is possible to make solid decisions based on knowledge of penny stock breakouts and stock chart patterns.

Increasing Sales

An increase in sales is usually a good sign that stocks are ripe for purchase. Of course, you do have to make sure that the increase is due to sustainable sales growth and not a one-time occurrence.

It’s always a good idea to check sales growth from the previous quarter as well as from the previous year. A clear upward trend in quarterly sales usually indicates stock profitability, and it may help you better recognize breakout penny stocks.

Improving Margins

The management of a company usually determines the state of its margins. Although an increase in sales is generally a good sign, a faster increase in costs may not be a favorable indicator.

These situations aren’t necessarily negative. Some companies incur higher costs when they launch new products, embark in a new direction, or expand the scope of their operations. It could also mean that the company is poorly managed, which isn’t a good sign from an investment standpoint. Pay particular attention to how management explains the quarterly results. This will often provide a good indicator of the reason for the company’s rising costs.

Looking for Guidance

Companies typically provide a guide for future earnings. As an investor, you will want to be aware of the company’s claims concerning how much it expects to earn in the near future, but it is just as important to consider how the stock market reacts to these claims. If the company’s quarterly guidance differs from the stock market’s expectations, this could have an effect on the company’s stock prices over the short term.

You should generally be wary of overly optimistic reports. If a company fails to meet its earning projections, its stocks could take a significant hit. If you think you need more guidance on knowing when to buy, sell, or hold, make sure to ask a seasoned investor to teach you about penny stock charts, consolidation pattern charts, and any other charts he or she thinks you need to know about.

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

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