Are These Penny Stocks Worth The Risk?
Weighing risk and reward is a frequent – daily occurrence – for most people trading penny stocks. Considering the fact that these stocks under $5 can shift course at the drop of a hat, traders are always looking to look at all angles before diving in.
Even today we saw several penny stocks that faked out investors earlier in the session. Most day traders will look at premarket activity to understand what’s going on in the stocks market “today”. What they’ll also do is look for top penny stocks trending before the opening bell.
Here’s where you run into some big risks. I’ll preface this with one thing. That one thing is the fact that not all penny stocks gapping up are going to stay that way at the open. On the flip side, not all penny stocks gapping up are going to plummet either. There are plenty of traders who use premarket as a means to build their watch lists.
Trading Penny Stocks & Spotting Trends
Finding these trending stocks could be key to identifying the underlying sentiment as well. Are the majority of these stocks in a certain sector? Was there a global event that could be sparking momentum? Both good questions to ask especially when you’re weight risk and reward.
Case in point, look at stocks like MOXC, AKER, or even SOL. All of these were premarket gappers today but as soon as the stock market opened, shares came back down to earth. Can they recover? Obviously anything is possible but for today, that premarket gap was a false breakout when it came time for the regular session.
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So what’s my point here? My point is simple, sometimes it may be best to wait a bit, analyze active market trading trends before you decide to jump in. Making a list is key to this and in light of that, here are some penny stocks that after started moving higher after the opening bell today. All can be bought for under $3 but are they the best penny stocks to buy or should you wait?
Penny Stocks To Buy For Under $3: Digital Ally
Digital Ally (DGLY Stock Report) is no stranger to big moves. If you’ve seen this in the past, you might remember the huge move it had in June. DGLY stock jumped from around $1 to as high as $7.10. Since reaching those highs, DGLY hasn’t managed to fully recover. There’ve been a few sessions where the penny stock broke out but at the end of the day, shares ended up sliding lower.
One of the recent developments from the company has refocused some attention this month. Specifically, the company has focused on its video solutions. A few weeks back, Digital Ally announced a partnership with DANA Safety Supply to be a certified domestic outfitter of the company’s law enforcement video solutions.
This week, the company announced another partnership. This time it was with Major League Soccer club Sporting Kansas City. The company will provide Digital Ally’s ThermoVu™ non-contact temperature-screening devices at entrances to Children’s Mercy Park for the match against the Houston Dynamo on Tuesday, August 25, 2020. ThermoVu™ was launched as a non-contact temperature-measuring instrument. It measures temperature through the wrist and controls entry to facilities when temperature measurements exceed pre-determined parameters.
While that news came out earlier this week, the company’s shares took flight on Thursday. Something to note is that DGLY stock has, fortunately, or unfortunately, seen momentum during periods of rioting this year. Whether or not that’s the catalyst behind this recent move is yet to be seen. Regardless, DGLY has been off-and-on the watch list since last August and Thursday’s move put its week-to-date climb at 23%.
Penny Stocks to Buy For Under $3: Houghton Mifflin LLC
It’s interesting to think that during Q1 of this year, Houghton Mifflin LLC (HMHC Stock Report) was trading around $7. With the market sell-off earlier this year, however, HMHC stock dropped as low as $1.03. Since then, shares have been in an overall uptrend with intermittent spikes higher along the way. If you look at the stock chart, you’ll see that, in general, HMHC stock price has moved about 114% from May 14th to today. In between that time, shares spiked as high as $3.69.
A lot of the focus from the market has been on Houghton’s involvement in eLearning. This has been a hot topic in 2020 considering the impact of COVID and if/when schools will reopen for in-person classes. This quarter there’s been a push for eLearning stocks. Houghton Mifflin introduced Teacher’s Corner last month. It focuses on remote education and includes features such as curated content, virtual events, and coaching. HMH serves more than 50 million students and 3 million educators in 150 countries.
This week the company presented at the BMO Virtual Technology Summit. Jack Lynch , the company’s President and CEO, Joe Abbott, Houghton’s EVP and CFO, and Brian Shipman, SVP of Investor Relations participated. This happened on August 25th, however, the biggest momentum came on the 27th with HMHC stock climbing about 8% into the lunch hour.
Penny Stocks To Buy For Under $3: Destination XL Group Inc.
One of the lowest-priced penny stocks on this list, Destination XL Group Inc. (DXLG Stock Report) saw its heaviest day of trading volume of the year. By the time the lunch hour rolled around, DXLG stock saw more than 33 million shares traded. Unlike DGLY or HMHC, DXLG stock had a news catalyst in play on Thursday. Earlier in the morning, the company reported its Q2 results.
Considering that Destination XL is a men’s clothing retailer. It specifically focuses on sizes XL and up. Now, you might thing, “Oh another retailer reporting earnings so I should expect something bad,” right? Well, in this case, Destination XL sparked bullish sentiment in the stock market today.
“Our second quarter performance was better than we anticipated, driven by our DXL.com website’s 69% growth and opening stores sooner than initially expected. Given this increased demand, we have been fortunate that our digital strategies were well-defined and the distribution center has been able to operate without any disruption. We also saw positive growth in our wholesale business during the second quarter, and were quick to mobilize the sourcing and manufacture of protective masks,” said Harvey Kanter, President and Chief Executive Officer.
As we’ve discussed in the past, the brick and mortar penny stocks that have succeeded the best are ones employing a brick and click model. Selling both in physical locations and online. In light of this, it looks like Destination XL was able to achieve better-than-expected results this quarter. Can this sentiment continue through the end of the month?