3 Industries That Penny Stocks Investors Watch When Markets Take a Bearish Turn
Trading penny stocks in 2021 has not been easy. With major ups and downs, it has become increasingly difficult to predict where the market is headed in either the short or long term. And while trading has been mostly sideways for the past few months, investors got a major wake-up call on Monday, July 19th.
On Monday, the S&P 500 dropped by over 700 points, indicating the biggest stock market drop since October of 2020. We all knew that the pandemic was worsening, however, the effects on the market were no where near reflective of the current situation. And, when Monday came around, major increases in Delta-variant related Covid cases sparked fear in investors leading to this large selloff.
While Tuesday, July 20th, saw a solid turnaround, many investors are still wondering how to find penny stocks when the market is down. Now, there are plenty of strategies to use to avoid losing money when stocks take a negative turn. But, let’s focus on a few industries that can be decent options when all else fails.
One thing to keep in mind is that investors should understand why the market dropped. This can completely shift the type of industry or individual companies that could benefit when we see a crash. So, with all of this in mind, here’s where to find penny stocks to buy when the market is down.
Where to Find The Best Penny Stocks to Watch During and After a Market Crash
- Which Industries Perform Well When The Market Is Down?
- What Caused the Stock Market to Drop?
- Trading Penny Stocks During a Correction
Which Industries Perform Well When The Market is Down
Mining Penny Stocks
Mining penny stocks are considered to be some of the least volatile stocks under $5. This is due to the relative stability of the mining industry. And often, when the overall market is down, mining stocks will remain at a consistent price, or fluctuate in small amounts. Of course, there are plenty of stocks in the mining industry that are volatile, but there are also a handful that are not.
Some popular mining penny stocks include Denison Mines Corp. (NYSE: DNN), Gran Tierra Energy Inc, (NYSE: GTE), and Yamana Gold Inc. (NYSE: AUY). With mining, it is important to consider what the company explores for, and how stable that material is as a whole. But at the end of the day, mining stocks usually can be decent safeguard options for investors to watch.
Energy Penny Stocks
Another similar market to that of mining stocks is energy penny stocks. Because the energy industry is usually quite stable, these companies can be great choices when the market dives. As with mining stocks, it is important to consider what area of the energy industry a company is in. Does it produce uranium for nuclear energy, oil, and gas, renewables, or a different form of energy?
This will help to tell you what its potential is for both the short and long term, and how volatile it may be during either time frame. Some popular energy penny stocks right now include Uranium Energy Corp. (NYSE: UEC), Ocean Power Technologies Inc, (NYSE: OPTT), and United States Antimony Corp. (NYSE: UAMY).
What Caused the Stock Market to Drop?
In the case of Monday, July 19th’s market drop, it was a clear result of increasing Covid cases due to the Delta variant. While cases did not randomly spike on Monday, many investors believe that the realization of a potential fourth wave could be setting in.
And, this fear combined with less-than-stellar inflationary data, resulted in the massive drop we saw. But, to use this as an advantage, investors need to consider what causes the market to drop in a general sense, and how we can benefit in that situation.
If the market crashes due to a certain event, are there opposing penny stocks or blue chips that could benefit? Take the early stages of Covid for example. When the market dropped, as a result, many companies providing services to benefit the public such as biotech penny stocks or online communication stocks, shot up substantially.
And while each market crash is vastly different from one another, we can see similarities in how certain industries trade. So, to stay ahead and have the best chance of making a profit during a drop, investors should thoroughly understand the underlying cause, and which stocks, if any, can benefit.
Trading Penny Stocks During a Correction
Trading penny stocks during a correction can be either a profitable method or a way to quickly add up losses depending on your experience. While it isn’t easy to make money with penny stocks when the market drops, if you have a trading education to back your strategy, it can be done. Because penny stocks don’t like to play by the rules, even when the market drops, there are plenty of small-caps that push up. Knowing how and where to find them, however, is the challenging part.
As always, investors should look for technical indicators that can show a stock may be ripe for an upswing. Many of these are listed in the ‘Penny Stocks for Beginners’ section. In addition, traders can consider the aforementioned, reasons why the market dropped, to see which stocks could benefit.
When stocks take a fall, it is extremely important to stick to your strategy. This is the best way to avoid FOMO and mitigate any potential losses you could accrue. And as always, investors should never trade with emotion, as that will almost always lessen your chances of success. So, if you’re looking to trade penny stocks during a correction, consider your experience and which stocks could benefit depending on the circumstance.
Are Penny Stocks Worth Investing In?
The short answer to this question is that it is up to you and your investing style. If you are averse to risk, you may want to look for less volatile penny stocks that are more likely to succeed in a long-term time frame. However, if the opposite is true, then you should search for more volatile penny stocks with short-term gaining potential.
No matter what type of trader you are, buying and selling penny stocks in 2021 is challenging. But knowing how to mitigate risk and where to find value, will always be the best way to avoid unnecessary losses. So, what do you think? Are penny stocks worth investing in or not?