Call them “penny stocks” or simply call them cheap stocks under $5; there’s something to be said about trading low-priced equities. The only problem is that if you’re new to trading, you might be limited in which stocks under $5 you can buy and sell.
For this article, we look at the so-called “Robinhood penny stocks,” which refers to companies listed on the NASDAQ or NYSE with share prices at or below the $5 threshold. Since millions of traders use the popular mobile app, it’s worth getting some insight into the types of stocks that can be traded. Unlike what popular opinion might suggest, “Penny” or “cheap” stocks aren’t solely limited to the Over-The-Counter exchange.
Not only will we discuss high-volatility stocks, but we’ll also look at ones that have a high short interest. It’s usually the first piece of data traders will search for when looking for ‘short squeeze stocks’ to buy. These “short interest stocks” are usually under heavier selling pressure thanks to a combination of retail traders shedding their positions in a downtrend and other traders taking out short positions on the same tickers.
The exciting part is that if or when the price starts moving up instead of moving down, short traders have to cover their shorts to either break even or ensure they don’t take massive losses. Let’s explain.
What is Shorting?
Shorting, also known as short selling, is a technique for betting against stocks. The process involves selling securities that the seller does not own with the intention of repurchasing them at a lower price. Traders will borrow shares from their broker to do this. The difference between the selling price and the price of the repurchase is the profit (or loss) for the short seller.
What Happens During a Short Squeeze?
A short squeeze happens when the price of a heavily shorted stock rises unexpectedly. This leads to short sellers being forced to buy back the stock quickly and minimize losses. The increased demand from short sellers, in addition to retail traders, to buy the stock drives up the price even further, creating a snowball effect. Short squeezes can occur for various reasons, including positive company news, market sentiment shifts, and speculation.
Short Interest Stocks To Watch
Tellurian Inc. (TELL)
TELL Stock Short Interest: 17.91% Fintel, 17.28% TDAmeritrade
Energy stocks have experienced a topsy-turvy last few months, at the end of 2022 and the start of 2023. Nevertheless, with the new year here and countries like China beginning to reopen from lockdowns officially, the energy discussion is coming back into the spotlight. Whether it’s alternative energy like nuclear power, green energy like solar, or something in between, traders are starting to take notice of a few names still trading near their 6-month lows.
Tellurian is one of these companies, and shares sit roughly 50 cents above their 52-week lows. The company specializes in liquified natural gas sales, marketing, and distribution. Last quarter the company logged a 25% increase in natural gas production, stating the underlying market fundamentals “strongly support” a strategy of seeking value between domestic and international natural gas prices for shareholders.
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What’s happening with TELL stock right now? This week, BlackRock Inc. filed a new 13G, showing a 6.1% stake in the company. An amended 13G from State Street Corp. showed an increase in its holdings of TELL stock to 7.99%.
Faraday Future Intelligent Electric Inc. (FFIE)
FFIE Stock Short Interest: 18.36% Fintel, 29.20% TDAmeritrade
Like energy stocks, EV stocks have also gained some much-welcomed bullish sentiment. Thanks to the general outlook on the stock market in 2023 following the January/February FOMC meeting, the “risk-on” appetite has grown. Faraday Future is one of the small EV companies that has continued keeping retail investor interest in the last few quarters. This year has been one of the strongest few months stretches the stock has seen in a while.
Most of the attention is on the company’s commercial rollout of its flagship EV, the FF 91 Futurist. In addition, Faraday reworked its leadership and funding plans, which has helped bring more reassurance to traders. Most recently, Faraday appointed its GLobal Executive VP of Global User Exosystem, Tin Mok, to the Board of Directors.
Faraday’s production launch for the FF 91 Futurist has been set for the end of March. April (or before) is when it plans to start rolling out deliveries.
Invitae Corp. (NVTA)
NVTA Stock Short Interest: 17.14% Fintel, 17.47% TDAmeritrade
Invitae is coming off of a challenging 2022 but has maintained its stance in committing to its mission of bringing genetics to mainstream medicine. Despite the lower revenue expected for the fourth quarter of 2022, Invitae anticipates higher revenue for the full year.
In its last preliminary financial update, Ken Knight, president and CEO of Invitae, also explained, “Our company is also building on a new foundation grounded on achieving profitable growth. And as we move forward, we’re excited about what lies ahead for our company, our partners and millions more patients. We’re looking forward to our opportunities in 2023 and beyond, unlocking the value that Invitae holds.”
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With that, the company has appointed a new board member, William Osborne, who has prior experience at companies including Boeing, Navistar, and Federal Signal Corporation.
Other than recent fundamental developments, retail has focused on technical elements of the market. These include the short interest in NVTA stock. Fintel and TDAmeritrade show that figure hovering around 17%.
List Of Robinhood Stocks Under $5 To Watch
- Tellurian Inc. (NYSE: TELL)
- Faraday Future Intelligent Electric Inc. (NASDAQ: FFIE)
- Invitae Corp. (NYSE: NVTA)