Are High Volume Penny Stocks Part Of Your Strategy?

The wild world of penny stocks has so many different factors to think about. First, you’ve got highly volatile stocks to watch that jump 100% or more within days or even hours. You’ve got things like news, filings, and secular trends that become catalysts for these big moves. But then you’ve got to factor in the hype surrounding individual stocks. It’s this last topic I’d like to dive in more on right now.

If you look at where the millions of new traders are spending their time, it’s mostly on social media. Whether it’s Twitter, Facebook, Reddit, or countless other platforms, the rumblings tend to begin on social media outlets. This has come to light in a major way in 2021, thanks to the spark from GameStop that lit a big fuse for retail traders. The massive short-squeezes that have ensued since then have been some of the most epic moves traders have ever seen.

At one point, GME shares were trading at $483 per share. Just a few short weeks before that, the GME stock price was sitting around $17. The crazy part is that GameStop was only a penny stock not that long ago. We even reported on it as a famed investor, Michael Burry, took his initial position calling for a bullish move.

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But for a $17 stock to not only become a 10 bagger but one that rose over 2,700% is quite remarkable. That last part is important – the 2,700%+ move – and there’s a reason why. Those looking for “Reddit stocks” to trade just became aware of the potential things like day trading has. But if you’ve been trading penny stocks for a while, you know the potential all too well.

What’s more, is that for those who like to take on enormous risk, there’s an even crazier class of stock penny stock. I’m talking about sub-penny stocks, and they’ve been wildly popular among a small group of traders. These are some of the highest risk stocks in the market. A move of less than half of a penny can equate to a dramatic percentage change.

High Risk Penny Stocks

These high-risk penny stocks aren’t for the faint of heart. They also aren’t for anyone using apps like Robinhood or Webull. The vast majority of cheap stocks under $0.10, let alone under $0.01, are usually OTC penny stocks. Many of the companies behind these stocks are also either early-stage or non-existent. It isn’t uncommon to see sub-penny stocks without filing or news for years at a time.

We put together an article earlier this month talking about these “Ghost Ship” stocks. See: Penny Stocks Are Hot, Will Ghost Ships Force Traders To Walk The Plank?. This article explained how OTC Markets identify this new group of OTC penny stocks with “Yield” and “Stop” signs. These two monikers show a company is either late or has not given any financial data in a long time.

In the case of “stop sign penny stocks,” these are basically dark and defunct companies. Most haven’t put a press release out or filed a document in months, some even years. There’s no way for traders to get a fundamental overview of a company’s financial wellbeing. But for traders who are buying them, they aren’t likely buying to invest in the next Apple.

Are Penny Stocks Worth The Risk?

When you’re talking about sub-penny stocks, the stakes couldn’t be higher. They’re well-known for being heavily manipulated, sporadic in liquidity, and, of course, have underlying companies that are either very early stage or non-existent. So why do people still trade them? In short, these traders think the risk is worth the reward.

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While this may be true for some, novice traders are likely to get caught holding the bag in the end. Most of the stocks under $0.01 tend to fall just as quickly as they rise or even quicker. As they say, bulls take the stairs, and bears take the window. This saying has been proven time-and-time-again. This week alone has given plenty of examples of this happening.

So whether or not they are “worth it” has a lot to do with your trading style – in this case, it may be more of a gambling style altogether. But this hasn’t stopped traders from looking for penny stocks to buy under $0.01. Not only that, but penny stocks, in general, have become some of the most actively traded equities in the stock market this year.

Buy Penny Stocks

Thursday was no different. Among the top 10 most active stocks on the NYSE and Nasdaq before 2 PM EST, 8 of them were stocks under $5. The highest volume penny stock on the major exchanges was Sundial Growers (NASDAQ: SNDL), with just over 2.45 billion shares traded at the time of this article. The next-most-active stock in the NYSE/NASDAQ top 10 hadn’t traded 500 million yet, so SNDL was an apparent outlier.

What may not be so much an outlier in the top 10 penny stocks under $0.10. Not one of them had traded less than 1 billion shares by 2 PM. Furthermore, most of them were stocks under $0.01. But keep in mind that the vast majority of these stocks (8 out of 10) either are defunct in their filings and/or have a “caveat emptor” designation or “buyer beware.”

Top 10 Penny Stocks Under $0.10 By Volume

Now, you may have read this article and wondering what the heck “stop sign” penny stocks are and why they’re risky. Aside from the fact that they’re heavily manipulated, they’re also at risk of having trading halted. Why in the world should a company without news or financial reports in years be trading billions of shares per day? Where is the fundamental value? In my opinion, there isn’t. But when it comes to these “ghost ship” types of stocks, it’s the wild west. Overseeing bodies of the market have a lot to look at.

[Read More] 5 Hot Penny Stocks With Big News This Week, Are They A Buy Now?

What’s more, the OTC Markets group has even gone a step further in putting warnings on these stock types. They say, “Buying or selling a security on the basis of material nonpublic material information is prohibited under Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b5-1 thereunder. Violators may be subject to civil and criminal penalties.”

Again, this is a list of penny stocks under $0.10 and it’s important to understand the risk that these stocks carry. Regardless, on Thursday, these are some of the most active names in the market:

  1. For The Earth Corp. (OTC: FTEG) – Stop Sign
  2. Ecosciences, Inc. (OTC: ECEZ) – Stop Sign
  3. North American Cannabis Holdings Inc. (OTC: USMJ) – Stop Sign
  4. All Grade Mining Inc. (OTC: HYII) – Caveat Emptor
  5. Amazonas Florestal, Ltd. (OTC: AZFL) – Stop Sign
  6. MMEX Resources Corporation (OTC: MMEX)
  7. Affinity Beverage Group, Inc. (OTC: ABVG) – Stop Sign
  8. Sunrise Consulting Group, Inc. (OTC: SNRS) – Caveat Emptor
  9. Saddle Ranche Media, Inc. (OTC: SRMX)
  10. Garb Oil & Power Corporation (OTC: GARB) – Stop Sign

Like the last article about these types of stocks, by no means is this list a suggestion to buy, sell, or hold. It’s showing some of the most actively traded penny stocks in the market on Thursday.

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