Cheap Stocks Reign Supreme On The Nasdaq & NYSE On Thursday
Our readers have known this for a long time, but now that market is starting to catch on. Penny stocks are attractive. But why do people choose to risk it all with these cheap stocks? Making money, of course. This is the main motivation for high-risk traders choosing to jump on these volatile stocks in hopes of capturing quick gains.
This year, many outlets, including ours, have compiled data on daily activity in the NYSE and Nasdaq. The results have shown that stocks under $5 continue taking up most of the top 10 most active stocks on any given day. It began as 5-6 leading stocks under $5 were in the top 10; it’s now encompassing most of the top 20. As of the lunch hour on February 4th, 8 of 10 of the most active listed names are penny stocks. Furthermore, of the top 20 most active stocks today, 14 of them started Thursday’s session as penny stocks. What does this say about the markets right now?
For starters, it looks like retail traders are still alive and well. Following the massive breakout that GameStop (NYSE: GME) had over the last few weeks, many who tried to “hold the line” learned valuable lessons in the market: “Nothing goes up in a straight line forever,” and it’s never a bad idea to take at least a little profit.
The fact that shares of GME were trading above $400 and fell to below $80 within a few days should be a glaring sign that the market doesn’t necessarily care how much you love a stock or company. It will eventually do what the market does.
Small Cap Stocks Are On Fire In 2021
Does this mean we’ll never see another breakout like that? In my opinion, no, and we see plenty of other massive rallies this week already. Cassava Sciences (NASDAQ: SAVA) was a clear example of that. Within about 2 weeks, shares jumped from around $8.30 to highs of $138.50 during premarket trading on Thursday.
Yet again, this was a valuable lesson in why you should take some profit off the table as a trade works in your favor. SAVA fell more than 50% from its premarket high. What’s more, is that SAVA was also considered a penny stock not that long ago. In fact, the first time it was mentioned by PennyStocks.com, shares of SAVA were trading around $3.70.
What should be the glaring indication that traders are favoring small-cap stocks is exemplified in the Russell 2000 Small-Cap ETF (NYSE: IWM). On Thursday alone, the ETF jumped more than 1.9% to new, all-time highs of $218.76. Furthermore, since the end of last week, IWM has climbed 6.4% so far.
Compared to the S&P 500 ETF (NYSE: SPY) and the Nasdaq (NASDAQ: QQQ), the argument is even more in favor of small-cap stocks. Neither of these larger-cap ETFs reached new, all-time highs on Thursday, nor did they rise more than 1% for the day. What’s more, since last Friday, the SPY has only risen by about 4% and the QQQ by only 4.5%. Though the IWM isn’t made up of all penny stocks, it has become a benchmark to gauge interest in smaller companies. Obviously, most penny stocks fit that mold.
Are Penny Stocks Worth It Right Now?
This begs the question, “Are penny stocks worth it?” Are they worth the risk, and should you trade them? There’s no substitution for education, and I wholeheartedly support learning before jumping in head-first. But I know how hard that might be when you have people talking about penny stocks on Reddit and apparently making a boatload of money in a few hours.
My suggestion is to cut out the noise and focus on what you’re comfortable with. Learn how to day trade before opening a trading account, throwing money in it, and buying some random stock that a mysterious Reddit user mentioned.
The fact of the matter is that there will always be another trade to focus on. The fear of missing out, or “FOMO,” can be a hard emotion to fight. But look at this week alone. Cassava broke out huge. Was that the last time we’ll ever see a move from a stock like that? Clearly, the answer is no, because there was another round of penny stocks that jumped more than 200% today, alone. So, taking some time to learn how to day trade can be more valuable in the long-term than just guessing or relying on the word of someone you met online.
If you are getting started with penny stocks, the best thing to do for yourself is research. I don’t mean spending hours and hours pouring through years of documents. But take the last few weeks, at least, and see what’s going on with a company. Use that information to understand why a certain stock may be moving the way it is.
It could be an upcoming catalyst, industry or sector speculation, and even certain corporation filings that haven’t been posted as a formal press release. Also, monitor things like company tweets, patent grants or submissions, FDA data, or even rumors. All of these things can help you formulate a thesis on certain companies.
Top 10 Penny Stocks On The NYSE & Nasdaq
As of 1 PM EST on Thursday, 9 of the top 10 most active NYSE and NASDAQ stocks were trading below $5. Of the top 20 most active stocks in the stock market today, 14 started the day below $5. Here are the top 10 most active penny stocks on the NYSE & Nasdaq at that time:
- Sundial Growers Inc. (NASDAQ: SNDL)
- Zomedica Corp. (NYSE: ZOM)
- Onconova Therapeutics (NASDAQ: ONTX)
- ATA Creativity Global (NASDAQ: AACG)
- Nokia Corporation (NYSE: NOK)
- Naked Brand Group Limited (NASDAQ: NAKD)
- Atossa Therapeutics (NASDAQ: ATOS)
- Tonix Pharmaceuticals (NASDAQ: TNXP)
- Castor Maritime Inc. (NASDAQ: CTRM)
- Tyme Technologies (NASDAQ: TYME)
Does this mean that all of these penny stocks are ones to buy right now? I’ll leave that up to you, but it is a list made of many that are having strong sessions on Thursday. With attention on small-cap stocks, will penny stocks begin making their way onto your daily watch lists?