InvestorsHub Logo
Followers 50
Posts 2457
Boards Moderated 0
Alias Born 05/15/2012

Re: PhenixBleu post# 180980

Thursday, 01/16/2020 8:34:30 AM

Thursday, January 16, 2020 8:34:30 AM

Post# of 203913
Stocks that trade below $5 are considered by Wall Street to be "penny stocks." These oft-derided, decidedly risky equities are populated by both illiquid, unlisted, wildly speculative "lottery ticket" companies that trade over-the-counter, and reputable companies that are either just beginning to grow or have perhaps fallen on hard times.

Stocks that trade below $5 are considered so risky that institutional investors, including pensions and mutual funds, aren't allowed to buy penny stocks and can even be required to sell securities that fall below the $5 mark. This double-edged sword cuts both ways, however, when an issue rises above $5 and institutions are allowed to buy.

This forms the basis of the $5 threshold trading strategy.

When stocks cross the $5 barrier in a bearish manner and institutions sell, the market is flooded with shares and the price is driven down. When a stock rises over that $5 threshold, institutions and hedge funds can, and sometimes do, load up on shares which in turn drives the price higher.