Navigating the world of penny stocks can often feel like a dance, full of rhythm, calculated movements, and unexpected twists. One of the popular styles in this domain is swing trading, a strategy where investors profit from the ‘swing’ or fluctuations in stock prices over a short period.
Swing trading involves holding stocks for a short period, typically from a few days to a few weeks, with the intention of capturing the potential price swings within that period. The goal is to buy at a low point in the price cycle and sell at a high point, capitalizing on the stock’s momentum.
Penny Stocks: The Perfect Dance Partners?
Penny stocks, with their low prices and high volatility, are often excellent candidates for swing trading. Their ability to make significant price moves within a short time frame can lead to substantial gains if executed correctly. However, it’s important to remember that with high reward potential comes equally high risk. Penny stocks are often issued by small, less-established companies, making them susceptible to market manipulation and pump-and-dump schemes.
Identifying Potential Swing Trades
The key is to look for penny stocks that demonstrate a slow and consistent uptrend. These are stocks that, over time, have shown a pattern of steadily increasing prices. To identify these, you’ll need to become comfortable with analyzing stock charts and identifying trends. Technical analysis tools like moving averages and trendlines can be your allies in this endeavor. Stocks exhibiting an ascending trendline, where the lows get progressively higher, may be good candidates for swing trading.
Why Caution is Your Best Friend
While the prospect of rapid gains is enticing, it’s vital to tread carefully. Here’s why caution should be your dance partner when swing trading penny stocks:
- Research thoroughly: Always conduct comprehensive research before investing. Don’t get swayed by hype or promising stories. Instead, scrutinize the company’s financial health, industry position, and recent news.
- Manage your risk: Use risk management tools like stop-loss orders to protect yourself from significant losses.
- Diversify: Don’t bet all your money on one stock. Spread your investments across different stocks and sectors to reduce risk.
- Keep emotions in check: Swing trading can be thrilling, but it’s crucial not to let your emotions control your decisions. Stick to your trading plan and resist the temptation to chase losses or become overly greedy.
Today we look at a handful of penny stocks to watch, which have experienced a steady uptrend in the market recently.
Hot Penny Stocks
Sirius XM Holdings Inc. (SIRI)
A recent gust of momentum has breathed life into the satellite radio company, Sirius XM Holdings. This was following several days of downward pressure. SIRI stock, which lingered below the $3.70 mark a few weeks ago, experienced a steep downturn at the beginning of this year. It was primarily due to an economic slump and unimpressive earnings, which sent some investors scurrying for safer grounds.
Although there hasn’t been a significant improvement in earnings, the overall sentiment in the stock market appears to have lightened, at least for the time being. In an interview with CNBC in April, CEO Jennifer Witz said that the quarter itself was expected and the rest of the year is expecting growth.
“Really what we’re trying to do is set the company up for future growth…The economic model is robust as ever.”
Attention has primarily been focused on the short interest in SIRI stock. The most recent data from Fintel reveals a short float of about 31.7% on the penny stock. However, TDAmeritrade data paints a slightly different picture, indicating a marginally higher figure at approximately 32.6%.
Talaris Therapeutics Inc. (TALS)
Despite a brief pullback in May, shares of TALS stock have maintained a general uptrend since the beginning of the year. Earlier this year the company completed a review of its business and program prospects. Based on the review, the company discontinued its FREEDOM-1 and -2 clinical trials. These were evaluating its FCR001 in inducing tolerance in living donor kidney transplant recipients. As a result, a strategic alternative was sought out and, formally identified.
Earlier this month Talaris announced plans to merge with Tourmaline Bio, which is developing medicines for treating immune diseases. It the merge will be accompanied by a symbol and name change with the company shifting focus to advancing Tourmaline’s lead program, TOUR006. This is its treatment candidate for thyroid eye disease and atherosclerotic cardiovascular disease (ASCVD).
Mary Kay Fenton, Interim Chief Executive Officer of Talaris said, “TOUR006 is a promising clinical asset with near-term, value-creating milestone opportunities. We look forward to its future success.”
There are plans to begin a Phase 2b trial of the treatment next quarter, and a second indication for the platform is ASCVD. Plans are to begin a Phase 2 trial in that indication next year. With this backdrop, traders await the official close of the deal, which Talaris anticipates making a cash dividend of up to roughly $64.8 million to shareholders before the merger. According to the company, it expects Q4 as the target to close the deal.
MultiPlan Corporation (MPLN)
MultiPlan hit fresh 52-week lows at the start of May but, since then has been in a strong uptrend. The company provides data analytics and cost management, payment, and revenue integrity solutions to healthcare organizations.
Earlier this month the company announced it would partner with ECHO Health to push down health plan admin costs. In the June update, CEO Dale White said, “This partnership enables us to reduce overall administrative costs by offering our customers and providers easy access to provider payment services from a company with decades of experience and the scope and scale to make a lasting impact on the industry…Our companies share a philosophy that our customers are better served when their health plan members’ providers also are valued. ECHO’s provider-forward payment services and recent innovations in combating payment fraud make them the ideal partner for MultiPlan.”
For those looking for any upcoming catalysts, August could be an important month. MultiPlan will hold its shareholder meeting on August 4th.