Investing in penny stocks can prove to be one of the most rewarding things. The reason is due to the possibility of making hefty returns on capital. These stocks trade at prices lower than $5 a share. So, it’s possible for an investor to buy penny stocks in large quantities and make a significant profit. Even in cases of a small move in price, the result could be monumental gains. However, it’s also important to note that penny stocks generally experience very low volume. That’s compared to big companies like Twitter or Facebook.
Liquidity is key and there is very little activity in these stocks on a day to day basis. That’s usually one of the big risk factors when it comes time to sell penny stocks. If there isn’t enough volume, you risk the ability to sell stock at higher prices. If the volume isn’t there, a lightly traded stock can decline rapidly especially with sizeable sell orders.
Hence, an investor may not have to wait for a long time for a big move up. But when it comes time to sell, low float penny stocks can pose even greater risks. On that note, here is a look at a (former) penny stock that has gained an incredible 389% in just a week. But just as quickly as it rose, it looks like it’s beginning to tumble just as rapidly.
Penny Stock To Watch – Arcadia Biosciences (RKDA)
Arcadia Biosciences Inc (RKDA Stock Report) has been on an absolute roll over the past 7 trading sessions. That all reached a feverish pitch starting Friday. On Friday it emerged that the drought-tolerant soybeans produced by Arcadia Biosciences’ joint venture had been granted approval by the all-important United States Department of Agriculture. As soon as the news broke, RKDA stock price started rallying.
In addition to that, trading volumes rose significantly to over 50 million shares by the end of the day. In this regard, it’s important to note that the average daily volume of Arcadia stock is only 2 million. This goes to show that investors were piling on to this stock at a breakneck pace.
It’s also interesting to see that the stock rapidly went back to levels it hit back in February/March of 2019. That was after the company had announced a business that was going to be focused on cannabis. However, the Department of Agriculture approval is a huge deal for Arcadia. It will now allow the company to rapidly start commercializing its product.
Having tested the product in Argentina as well as the United States, the company is looking to generate sales in Argentina. In addition to that, it wants to get into China by 2020 as well. Shares of RKDA have since retreated from the post-market Monday highs of $8.90. In fact, Tuesday has seen an ugly pullback in shares of RKDA, which traded lower than $5.50 per share. Could this former penny stock soon become a penny stock once again?