Broader markets are battling with the banking crisis and this week’s Fed meeting. But retail traders are hunting for the top penny stocks to buy. We’ve discussed several niche trends playing a role in the stock market right now, including sentiment-based sympathy trades. The general idea of these types of trades is that specific stocks experience surges in buying due to another company’s successes, milestones, or increase in attention. One of the more notable examples of this is AMC Entertainment (NYSE: AMC) when the “Ape Movement” first materialized.
Traders “fought” for the beaten-down company that had fallen victim to heavy shorting from “the suits,” aka hedge funds. This triggered a tidal wave of interest in other companies with similar traits. Many ended up exploding higher in price for weeks on end. Others saw very short-lived excitement due to one reason or another. This “follow-through” or lack thereof is one of the main reasons anyone trading penny stocks based on sympathy catalysts either makes bank or holds the bag.
This week we saw a growing interest in low-float, China-based penny stocks. That was thanks to an initial breakout from a newer IPO stock, TOP Financial (TOP Stock Report). TOP stock exploded from penny stock levels to highs of over $250 within days as a mix of short squeezes and unbridled exuberance took hold. That move is one reason stocks with similar traits are doing what they’re doing right now.
How To Find Penny Stocks
This is just one way traders find penny stocks to buy. Using data like social sentiment levels can be valuable to your research process. Traders are also putting together their list of penny stocks to watch by looking at alternative data like insider reporting and, as we will observe today, unusual activity in the options market.
Using Options Activity To Find Penny Stocks To Watch
One of the primary benefits of tracking unusual options volume is that it can reveal the “smart money” or institutional investors’ moves in the market. These large investors often have access to better information and research resources than the average retail investor, and their moves can provide valuable insights into potential market trends. By observing unusual options volume, investors can potentially “follow the smart money” and potentially capitalize on emerging opportunities.
Another advantage of monitoring unusual options volume is that it can help investors identify sectors or industries experiencing heightened interest. This can be particularly valuable during periods of market rotation or when specific sectors outperform others.
By focusing on securities with unusual options activity within these sectors, investors can potentially identify the market’s next leaders. Here are a handful of penny stocks with above-average options volume in the stock market today.
Penny Stocks To Watch
BlackBerry Ltd (BB)
Most people have heard of BlackBerry, but they might not know it’s a penny stock. Heavy selling pressures over the past year have led to a lower stock price for BB shares. However, that hasn’t pushed investors away from trading the communications company stock.
This week, BlackBerry announced the start of a portfolio review and business configuration. This helped push the stock higher on Tuesday. According to the company, this will help the Board as it accounts for strategic alternatives to drive shareholder value.
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Executive Chairman & CEO John Chen explained, “The review aims to identify and evaluate opportunities to further enhance shareholder value. As we undertake this review, we remain fully focused on delivering our plan and remain committed to our customers, partners, and employees.”
As for the options activity in BB stock, the January 19, 2024, $6 Calls came into focus today. That’s because of the 1,001 in volume compared to just six contracts of Open Interest.
Phoenix New Media Ltd (FENG)
Media company Phoenix New Media has seen an uptick in trading activity over the last few weeks. This momentum seems to have come on the heels of the underlying bullishness in China-based companies and their associated penny stocks. Phoenix hasn’t reported much news since it announced the appointment of its new CEO in March.
Phoenix has built a base around multimedia services and solutions, including an integrated internet platform and mobile channels for news and video. This week the company announced that it filed its annual report on Form 20-F for the fiscal year ended December 31, 2022. Phoenix stated, “In 2020, 2021, and 2022, we generated 92.1%, 90.3%, and 88.7% of our total revenues from advertising services, respectively. Going forward, we expect our net advertising revenues to continue to contribute the majority of our total revenues.”
As for the options action, the May 19, 2023, $2.50 Calls experienced a significant increase in volume compared to open interest. Over 9,800 contracts were traded compared to just 206. Meanwhile, it may be worth noting that the strike price is considered ‘in the money’ as of the time of this update.
Workhorse Group Inc. (WKHS)
EV stocks have seen a recharge of interest in recent weeks. Workhorse Group is part of this movement developing a zero-emission commercial vehicle line. This week, the company announced it would attend the upcoming Advanced Clean Transportation Expo and highlight its commercial readiness of the W56 van.
“Today, commercial vehicle operators are one step closer to having the W56 in their fleet,” said Workhorse CEO Rick Dauch. “This vehicle incorporates the extensive on-road learnings of our legacy vehicles and improves upon those models with a new custom-designed chassis. The early feedback on the W56 has been encouraging as we’re seeing real interest start to build ahead of official production start in the third quarter of this year.”
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What does the options market look like in WKHS stock? This week’s May 5th $1 Calls have gained the most attention today. More than 1,500 contracts traded compared to just 369 of Open interest.
List Of Penny Stocks
- BlackBerry Ltd (NYSE: BB)
- Phoenix New Media Ltd (NYSE: FENG)
- Workhorse Group Inc. (NASDAQ: WKHS)
