With just a few basic charting skills you can greatly increase your success rate as a trader in the OTC markets but not just for penny stocks, charts work across the board with Nasdaq, Forex, Etf's, etc. Let's get started with some basic terminology.
Simple Moving Averages: The 200 day simple moving average is really just that. It's a line that represents the price movement over that last 200 days and gives you a graphical image of the averages. The theory works the same with all other moving average days. The longer the simple moving average indicator you see, the longer that price period has moved in the direction it is showing you. The shorter moving averages like the 10 day and the 20 day will give you a much closer look at the direction based how tight they are moving to the candle sticks. What we want to see using these simple moving averages are reversals in their direction.
As you can see in the chart example below, all major moving averages are in a down trend. For most people that is not positive. For a technical trader, this is the time I begin moving these type charts to a watch list. What I want to see as these charts begin to find a support or a "bottom" is larger than usual volume without price movement. There are also other indicators that can pick up this type of accumulation but we can cover them later.
At this stage of the chart I still want to see the shorter term indicators begin to flatten or go sideways showing to me that there may be a bottom setting in for the stock. When you begin to see short term moving averages such as a 10/20 Day SMA begin to push upwards on volume you may have a reversal starting or at the least a bounce.
For now this example would be a watch list chart. There appears to be selling in the 0001/0002 and most likely this is funder dilution. The risk of jumping into these too early is without researching the debt note conversions you never know just how much could be selling and you risk a stock going to no bid. For some traders you could take whats called a "lotto" but for this example we wont discuss.
The static support and resistance lines show that this chart could offer a couple of different moves if it reverses. Ideal trade set up IMO would be when the simple moving average lines begin crossing upwards and the price action movement is supported by higher volume giving you a possible trade from .0004 to .001 or a little better than 100% move.