Penny stocks attract investors for their amazing upside potential. Many of these stocks are cheap for a reason. They are companies with fading sales and presence. Additionally, many are in serious debt. Investors disregard companies such as these for good reason. However, many penny stocks to watch are detailed in this article.
These companies share common characteristics. Investors use these commonalities to identify penny stocks to watch in the future. In financial markets, many things repeat over time. For this reason, successful penny stock traders experience astronomical returns.
Heavily Traded Penny Stocks To Watch
Liquidity is paramount to trading penny stocks. If a trader cannot exit or enter a position easily, he is taking unnecessary risk. Over time, this leads to decreased returns. Many penny stocks to watch trade heavy volume each day.
Helios and Matheson Analytics Inc. (NASDAQ : HMNY) provides a range of information technology (IT) consulting solutions and analytics services to Fortune 1000 companies and other organizations in the United States. This name reacts on news headlines which seem to come constantly. The company acquired MoviePass which offers a brand new service. This acquisition gives HMNY a subscription based revenue stream from a number of cinemas nationwide.
Additionally, the stock shows short interest over 40%, causing news the stock to move dramatically. The stock once experienced a monthly gain greater than 1000%. The stock trades over 6 million shares daily. This volume allows traders to swing large size. Savvy traders make their year in such scenarios, making this a top penny stock to watch.
GNC Holdings, Inc. (NYSE: GNC) operates as a specialty retailer of health, wellness, and performance products. The company received a large foreign investment as they explore alternatives. Such headlines cause the stock to pop to extreme heights. This name shows short interest over 40%. Consequently, any take over news would send shorts in a panic to cover driving the price higher.
Furthermore, this stock traded as high as $60 in the past. It trades over 5 million shares daily, allowing easy entries and exits. Additionally, the company shows steady sales growth around 5% the past 5 years.
Biotech Penny Stocks To Watch
The biotech sector has a reputation for being volatile, and rightfully so. They experience massive moves on drug or takeover news. However, many names enter this space only to go bankrupt. Only and informed investor makes superior returns in this world.
AVEO Pharmaceuticals (NASDAQ : AVEO) develops targeted therapies for cancer and related diseases. Cancer is one of the biggest killers in the world. Positive drug news in this space causes spiked in investors interest. If the company develops a major breakthrough, large funds buy massive amounts of stock driving the price higher. Additionally, this news draws takeover interest from large firms. These large firms typically offer huge premiums to the market price.
This name has reputable analysts offering opinions on such news as well. Many times headlines are confusing and paint a vague picture. Consequently, these analysts help clear the air offering price targets and stock ratings. This name recently gained investor interest showing returns over 200% last year. Furthermore, the stock traded over $20 in the past, still offering upside potential.
Ampio Pharmaceuticals, Inc. (NYSE : AMPE) focuses on the development of therapies for the treatment of prevalent inflammatory conditions in the United States. In contrast to the previous company, this firm focuses on a more well-understand condition. Investors love buying such companies, as they feel others understand and will buy to drive the price higher.
Furthermore, this penny stock to watch has almost 20% short interest. When this company reports positive news, the scenario described above plays out, driving the price much higher. The stock traded almost at $10 in the past. It is moving higher this year, showing returns over 200%.
Penny Stock Investing
With so many penny stocks to watch, how do investors generate abnormal returns? Identifying companies with metrics discussed in this article is a start. Penny stock screeners are available online. Additionally, investors tend to hold a couple names, diversifying risk. This is especially common among biotech names. Many companies fail, but the ones that develop a significant product rise so much, it more than covers the duds.
These penny stocks to watch have built-in risk management tools. They cannot trade below $0, giving investors easily defined risk. In fact, this is how so many traders become very wealthy. Staying current with news is integral to profiting from penny stocks. They have patterns that repeat over time, such as rising into a news announcement. Sometimes when these companies become hot, they do secondary offerings.
Consequently, these offerings give traders even more opportunity. In some instances, investors trip over themselves to get a piece of the new offering. This phenomenon causes large moves up lasting days or weeks at a time. Conversely, some investors feel offerings cause companies to become diluted. These investors sell stock at any cost, causing prices to plummet allowing for profitable short trades, or dedicated longs to buy lower.
Final Thoughts
Penny stock trading became more popular with the advent of social media. Some accounts post large returns for all to see. Not surprisingly, many became interested. However, these stock do not simply skyrocket out of nowhere. Finding consistent patters such as volume spikes or breakouts gives penny stock traders the edge. This article details a few penny stocks to watch, and gives criteria to find others.
If a stock finishes the trading session at the high of the day with abnormal volume, it likely to continue the next day. This makes sense logically, as the smart investors or insiders likely accumulate stock prior to an announcement. Traders predict the stock will open the next day higher, resulting in immediate profit. This scenario causes short sellers to cover at any price available. This is precisely why these moves last days to weeks.
Traders with winning strategies typically become familiar with news releases. Similar news releases happen across sectors, usually resulting in similar stock moves. This creates profitable opportunities for well-informed and prepared traders. It is important to let profits ride as there is no telling how high stocks will rise.
