Could the Yuan Effect Penny Stocks ?

Penny Stock is Generally News Driven

Yesterday we saw an interesting development with the revaluation of the Yuan in China. The move seemed to have an impact as steel stocks rallied and while gold and copper stocks were weakened.

The US dollar rallied as well in response to the news. In a normal market, a rising dollar generally wreaks havoc on commodity based stocks and provides the opportunities for massive gains for traders who are short sellers.

Right now we are actually in uncharted territory. China has generally been unresponsive to world markets opinions on their management of their currency. China’s move will unquestionably have an effect on large cap commodity based issues, but does the Yuan really impact penny stocks? Could this move make a micro cap retail play more attractive than a mining company?

Generally hot penny stocks are news driven and are not as sensitive to broader market moves. For instance, Freeport Macmoran (NYSE:FCX) currently doesn’t have the strongest chart, but that doesn’t necessarily mean that we won’t see a huge gain in some unknown penny stock that is mining for copper.

We are looking for a trend to develop and for the market to adjust.  Significant events like this do not happen like this every day.  Uncertainty is definitely prevalent with traders right now.  As events develop, strategies will change.  Once event like this can shift all aspects of the market.

While penny stocks for the most part are news driven, the influx of money in and out of OTCBB companies could have a technical impact as well.  We will be keeping an extremely close eye on micro caps.