How to Actually Buy Penny Stocks
The process of buying penny stocks is similar to purchasing any other stock shares. The main difference is penny stocks are often not listed on major exchanges like the NYSE and Nasdaq. Here are the key steps to buying penny stocks:
- Find a broker that allows trading over-the-counter bulletin board (OTCBB) and pink sheet stocks. These platforms list many penny stocks. Make sure your broker allows purchasing these types of securities.
- Research penny stock companies thoroughly. Look at their financials, products, management, market opportunity and catalysts. Identify solid companies to invest in.
- Place a market order for your desired position size through your brokerage account. Expect to pay higher commissions for penny stock trades.
- Use limit sell orders when selling to lock in profits. This prevents having to sell at an unwanted low bid price later.
Following best practices like avoiding emotional trading is critical when investing in penny stocks. Making penny stocks a small portion of your overall portfolio is wise as well.
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Finding Top Penny Stocks Ahead of Earnings Season
Earnings season is when companies announce their quarterly and annual financial results. This can be a prime trading opportunity for penny stocks. Here are some tips for finding top penny stocks leading up to these earnings catalysts:
Target Rumor-Driven Penny Stocks
In the days before earnings, rumors may circulate about penny stocks. For example, you may hear chatter about an upcoming partnership or acquisition. Buying ahead of the official announcement can lead to fast gains when the news becomes public.
Follow penny stock forums and news sites to identify these opportunities. But verify information sources and critically evaluate rumor credibility before investing.
Screen for Strong Earnings Growth
Search for penny stock picks with excellent earnings growth over the past year. Rising profits indicate a company is executing well and demand is increasing for their products. Upcoming earnings could match or exceed expectations, prompting breakouts. Strong revenue growth, expanding margins and low debt levels also indicate quality penny stocks.
Find Relatively Unknown Penny Stocks
Look for penny stocks in growing industries that most traders do not know. These hidden gems may offer enormous upside potential if their upcoming earnings put them on investors’ radars.
Research to uncover promising penny stocks with innovative technologies, products or services that are relatively obscure. Their anonymity can mean huge profits if earnings prompt investors to notice them.
Study how a penny stock has reacted to past earnings reports. Stocks prone to major price swings around earnings may be good candidates for trading. Use historical price charts to identify these patterns. Earnings surprises could trigger similar breakouts again.
Consider Trades Around Earnings Dates
Some penny stocks make big moves in the days before or after earnings, rather than during the actual announcement. Watch for increased trading volume ahead of the report. Plan trades accordingly to profit before or after the announcement rather than directly at it.
Not all earnings-related penny stock gains occur immediately when reported. Planning trades around earning dates rather than just the exact release time can improve outcomes.
Massive Rewards, But Use Caution When Trading Penny Stocks During Earnings
Penny stocks carry substantial risks that require thorough research and disciplined trading plans to manage. But for enterprising investors willing to do the legwork, they also bring opportunities to realize huge returns.
Using strategies like targeting lesser-known stocks, trading around earnings catalysts, and screening for fundamental growth allows tapping into penny stocks’ upside potential. Follow sensible portfolio allocation and always exercise due diligence when trading penny stocks. In this article we’ll look into a handful of penny stocks to buy for under $5 that are gaining momentum in the stock market this week.
Penny Stocks To Watch
- JetBlue Airways Inc. (NASDAQ: JBLU)
- Standard BioTools (NASDAQ: LAB)
- Seelos Therapeutics (NASDAQ: SEEL)
JetBlue Airways Inc. (JBLU)
We wrote about JBLU stock (See: Will JetBlue (JBLU) Be On Your List Of Penny Stocks In 2023?) before gracing the penny stock stage and as share prices took a nosedive last quarter. Now, it may seem that some hope for the penny stock to finally take flight. As share prices rebound, options action has picked up. More than 3,400 contracts have traded in the 10/27 $5 Calls in the stock market today, which is where the bulk of the action appears.
JetBlue recently announced the record and payment dates for October’s prepayment to Spirit stockholders. This is related to the plan of merger with Spirit Airlines. The end of September saw JetBlue announcing it would raise flight attendant pay next year and provide other bonuses, which appealed to the unions. Flight attendants will get 5% raises starting in November. A JetBlue spokesman said, “Because our inflight crewmembers play a significant role in delivering the JetBlue experience, it’s important that we’re able to attract and retain high-quality crewmembers with competitive pay and benefits.”
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With this, JBLU stock has slowly clawed back some of its losses over the last month but is still trading significantly lower than in June. Now, all eyes are on October 31st, when the company is set to report its next round of earnings results.
Standard BioTools (LAB)
Merger news has been a bust and boom for Standard BioTools. Earlier this month, the company announced a definitive merger agreement with SomaLogic that was approved by both companies’ boards. Since the transaction isn’t supposed to close until next quarter, there’s plenty of speculation buzzing about the deal.
The new combined company is expected to have a pro forma equity value of over $1 billion. Commenting on the transaction, Michael Egholm, Ph.D., President and Chief Executive Officer of Standard BioTools™, said, “SomaLogic’s world-class proteomic tools fuel research discoveries with unmatched reliability, and fit well with our life science tools platform. The value of SomaLogic’s technology and expertise is substantiated by elite relationships in the pharmaceutical research space, as well as a developing genomics-proteomics commercial partnership with Illumina.”
Over the last week, shares of LAB stock have promptly turned around. As of this update, prices have bounced back by 35%.
Seelos Therapeutics (SEEL)
Seelos Therapeutics has been in the gutter for the last few months. In September, it reported topline data from a Phase 2 study of its SLS-002 for acute suicidal ideation and behavior in major depressive disorder.
However, despite the “clinically meaningful” treatment effects, the data failed to wow the market. Unfortunately, it did not meet its primary endpoint in the trial, which sent shares much lower than most may have expected. SEEL stock dropped from over $0.80 to as low as $0.15.
Tim Whitaker, M.D., Chief Medical Officer of Seelos explained in a September update, “We believe these results demonstrate the therapeutic potential of SLS-002 to address this huge unmet need and those at risk. We look forward to our discussions with the FDA to align on next steps. In addition, we want to thank the study participants, as well as the clinical trial sites and staff, for their expert and careful care of these high-risk study patients.”
Needless to say, SEEL stock has been more in focus after news that the company retained Canaccord Genuity to help review strategic alternatives. Namely, Seelos is said to be exploring partnerships, collaborations, and similar opportunities for the time being. That has created some speculative momentum in the penny stock this month.
Penny Stocks & Basics Of Trading Cheap Shares
Penny stocks open up a realm where you can snag a share of an aspiring startup for the price of a cup of coffee. They’re the wild youngsters of the stock market, carrying with them a blend of high risks and the promise of exhilarating rewards. For adventurous investors who enjoy unearthing hidden treasures, penny stocks are their treasure chests, especially when the earnings season comes around, unfolding financial tales of these tiny titans. This guide is your map to navigating the waters of penny stocks, showing you how to buy them and hunt down the golden ones as the quarterly earnings reports roll in.
Should You Buy Penny Stocks?
Also known by their nicknames, micro-cap or nano-cap stocks, penny stocks are like the little seedlings in the vast forest of the stock market. They represent small companies, often fresh faces in the market or sometimes older ones hitting a rough patch, with their shares priced typically under $5. Unlike the towering oaks of large corporations with a plethora of financial info out in the open, these small saplings have less publicly available financial data, making them a more mysterious and speculative venture.
Are Penny Stocks Worth It?
The lure of penny stocks is akin to the lure of a lottery ticket. They hold the promise of towering returns, turning a small investment into a small fortune overnight. While the big boys of the stock market may boast a 25-30% return in a good year, penny stocks can dazzle with triple-digit percentage returns in just a day, thanks to their low float—meaning, fewer shares up for grabs, which can cause prices to skyrocket with increased trading.
But, just like a rollercoaster, what goes up can come plummeting down. The limited number of shares makes trading them a tricky affair, often leading to wider bid-ask spreads and higher trading costs. The stormy seas of penny stocks are also fraught with failed ventures and nefarious pump-and-dump schemes, where prices are inflated and then crashed by crafty fraudsters.
However, fear not, for with a trusty compass of thorough research, and by sticking to the more reputable penny stocks, you can steer clear of many pitfalls. Sprinkle in a diverse portfolio, and you’ve got yourself a sturdy ship to navigate the thrilling yet tumultuous waters of penny stocks.
