Penny stocks, also known as micro-cap stocks, are low-priced stocks that trade for less than $5 per share. Despite their low prices, these stocks can be a great way to make money in the stock market. However, they are also high-risk investments that can easily lead to significant lossesToto be successful; it is good to be well-informed, disciplined, and patient.
One of the reasons penny stocks have grown in popularity is the potential for aggressive, short-term gains. Some cheap stocks with higher short interest can experience sudden price increases. Short interest is the number of shares that have been sold short but not yet closed out or covered.
When the short interest is higher, it means many investors are betting the price will fall. However, if the stock price rises, these investors may be forced to buy back the stock to cover their short positions. This can create a buying frenzy and drive the stock price even higher.
When considering investing in penny stocks with higher short interest, it is important to do your research. You can do fundamental analysis and look into things like financials. But technicals tend to take precedence since short squeezes usually don’t last long. Understanding how to trade and read stock chart patterns will help in this case. It also doesn’t hurt to know how to trade high-volatility stocks.
Short-Interest Penny Stocks To Watch
Here are a few penny stocks with higher short interest that traders have put on their watch lists this week.
Heron Therapeutics, Inc. (HRTX)
Shares of Heron Therapeutics got a shot of bullish momentum this week. The move comes after the company reported another milestone development in February. Earlier this month, a 13D filing showed Rubric Capital took a stake in the company. This came as a welcomed sign for traders who’ve watched the medical care innovation company’s stock trade mostly sideways this year. Rubric’s stake equated to 9.9% of the company’s shares.
This week HRTX stock has jumped again after Rubric-related news. In this case, Rubric and Velan Capital entered into a cooperation agreement with Heron. The company agreed to appoint Craig Collard, former President & Chief Executive Officer at Veloxis Pharmaceuticals, and Adam Morgan, Chief Investment Officer at Velan, to Heron’s Board of Directors.
Barry Quart, Pharm.D., Heron’s Chairman and Chief Executive Officer, also expanded on the news in an associated press release. Qart said, “Heron has a strong portfolio of four commercialized products, and we have made important advances in both our acute care and oncology care franchises. In 2023, we expect significant potential growth of ZYNRELEF, the launch of APONVIE in the U.S., and continued growth of our oncology care franchise.”
Is HRTX a short-squeeze stock? According to data from Fintel, the HRTX stock short float sits at around 31.25%.
FuboTV Inc. (FUBO)
Popular sports betting and entertainment company, FuboTV has been in and out of favor with the meme stock crowd over the last few months. The company announced the launch of Bally Sports Regional Sports Networks earlier this month, which has helped boost sentiment in the market. In addition, several upcoming events could be on the market’s radar. These include Q4 and full-year earnings on the 27th. The company also participates in the Deutsche Bank Annual Media, Internat & Telecom Conference on the 28th.
Is FUBO a short-squeeze stock? According to data from TD Ameritrade, the FUBO stock short float sits at around 23.48%.
Rite Aid Corp (RAD)
The 2022 sell-off brought plenty of bearish pressure to the market. That helped push many household stocks into penny stock territory, Rite Aid included. The popular pharmacy stock slipped as low as $3.17 earlier this year but has since rebounded back above $4.
A newly appointed interim CEO has made the market hopeful that Rite Aid can turn things around. Elizabeth “Busy” Burr was already a company board member. Burr’s experience includes plenty of industry involvement at companies such as Humana, Carrot Inc., Citigroup, and eBay. In addition, from a fundamental stance, Rite Aid’s recent affirmation of its 2023 guidance has also helped calm investors’ nerves…for now.
But should RAD stock be on the list of short squeeze names? According to data from Fintel, the short float percentage for Rite Aid sits at around 19.3%.
Stitch Fix, Inc. (SFIX)
Another household name stock in the sub-$5 range is Stitch Fix. The online stylist company has fallen hard over the last few years, and 2023 hasn’t changed much. At least, at this point, SFIX stock doesn’t seem to be making many explosive moves lower (or higher), for that matter.
Earnings season is in full swing, and that seems to be what the market is looking at. Stitch Fix is due to report the second-quarter results of its fiscal 2023 calendar year in March. Earlier this year, it announced plans to cut its workforce and shut down its Salt Lake City facility. Stitch Fix also made a CEO change, which Wedbush analyst Tom Nikic said he thinks, given the company’s developments, “a change in the CEO seat makes sense.”
So does all the bearish selling equate to SFIX being a high short-interest stock? According to data from Fintel, the short float percentage on this penny stock sits at around 17.65%.
Trading Penny Stocks
Now that you have some potential penny stocks to watch let’s discuss five specific ways to make money with penny stocks:
Day Trading: Day trading involves buying and selling stocks within the same day to profit from short-term price movements.
Swing Trading: Swing trading involves buying and holding a stock for a short period, usually a few days to a few weeks, to profit from price swings.
Long-Term Investing: Long-term investing involves buying and holding a stock for an extended period, usually years, to profit from the company’s growth and success.
Contrarian Investing: Contrarian investing involves buying stocks that are out of favor with the market or have fallen out of favor for one reason or another. This strategy can be risky, but it can also be advantageous if you research and find companies that are undervalued and have the potential for long-term growth.
Fundamental Analysis: Fundamental analysis involves analyzing a company’s financials, management, industry trends, and other factors to determine its actual value and growth potential. This strategy requires a lot of research and analysis, but it can be a very effective way to identify solid companies and long-term investment opportunities.
No matter which strategy you choose, it is important to have a well-defined trading plan and stick to it. This means setting straightforward entry and exit points, establishing risk management strategies, and avoiding emotional trading decisions.