Penny stocks, or “stocks under $5,” tend to occupy volatile territory with occasional meteoric runs. While savvy short-term traders eagerly scan for these explosive upside trades, penny stocks remain extremely high-risk. Their volatility routinely shakes thoroughly unprepared investors out of positions as quickly as they capture their attention. For those willing to learn the ropes to understand how to buy penny stocks, there are opportunities worth tracking.
What Causes Penny Stock Volatility?
Besides company-specific developments, penny stocks also react strongly to macro events driving investor sentiment between euphoria and panic. Economic data releases, Fed policy shifts, and major geopolitical developments (like elections or wars) can either amplify or soothe overall market volatility – with penny stocks acting as the frontline high-beta battlegrounds.
4 Penny Stocks To Watch Under $5; Are They A Buy Now?
Extraordinary global events of recent years – the COVID pandemic, Russia/Ukraine conflict, soaring inflation etc. – exacerbated such turbulence as institutional capital sloshed between risk-on and risk-off directives. Penny stock traders witnessed dizzying stretches of surging volume and “flash crash” breakdowns against this extraordinary backdrop – requiring advanced risk management skills and mental discipline to navigate.
Foundational Strategies for Penny Stock Trading
For most investors without professional volatility hedging mechanisms, some common sense foundations remain key:
1) Position Sizing: Concentration into one or two names concentrates portfolio risk. Even quality penny stocks can drop 50% on unexpected headlines or technical breakdowns. Broad diversification helps smooth volatility spikes across holdings.
2) Stop Loss Orders: Using automated stop-loss orders locks in partial profits if exiting positions and limits trailing drawdowns when holding through turbulent periods. Letting penny stock gains fully retrace stings psychologically and hampers overall portfolio performance.
3) Event Hedging: Around known volatility events like clinical trial data or FDA rulings, options strategies allow capping downside risk. Long puts or put spreads offer protection if the news disappoints.
While risk management tactics require further exploration too complex for this introduction, they hopefully provide a baseline volatility primer for newer penny stock traders. In this article, we’ll look at a handful of penny stocks to watch this week. Once you understand the catalysts in play, you can decide if some of these popular stocks under $5 are worth adding to your watch list or not.
Penny Stocks To Watch
- Opendoor (NASDAQ: OPEN)
- Moneyhero Ltd. (NASDAQ: MNY)
- Outlook Therapeutics (NASDAQ: OTLK)
Opendoor (OPEN)
Opendoor Technologies Inc. specializes in streamlining residential real estate transactions. The company recently reported its financial results for the third quarter of 2023. Despite a significant revenue decrease to $980 million, down 71% from 3Q22 and 50% from 2Q23, the company marked a return to a positive contribution margin.
The quarter saw the sale of 2,687 homes, a decrease from previous quarters. The net loss for the quarter stood at $106 million, an improvement from the $928 million loss in 3Q22. Adjusted net loss was reported at $75 million, better than the previous year’s $328 million. The positive contribution margin of 4.4% reflects operational improvements and cost-saving measures implemented by Opendoor.
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A significant drop in revenue and the decreased number of homes sold might be a near-term concern. However, the improvement in net loss and the positive contribution margin might be seen as signs of effective cost management. Whether these factors lead to cautious optimism in the market is to be seen. However, since the earnings release, OPEN stock has been on the rise, trading back above $2.70 for the first time since early October.
Moneyhero Ltd. (MNY)
Last week we brought attention to MoneyHero Group after a recent IPO flop. It was formerly CompareAsia Group Capital Limited and is a financial products platform in Greater Southeast Asia. The company connects consumers with financial institutions and recently completed its business combination with Bridgetown Holdings Limited, a special-purpose acquisition company. The SPAC is also a blank-check company backed by Hong Kong billionaire Richard Li and PayPal cofounder Peter Thiel.
This merger, approved by Bridgetown shareholders, values MoneyHero at an approximate enterprise value of $310 million and an equity value of around $283 million. Prashant Aggarwal, CEO of MoneyHero, stated that the merger not only provides capital for strategic growth but also strengthens their commitment to simplifying financial decisions.
The partnership aims to enhance MoneyHero’s market position in Greater Southeast Asia, a region experiencing rapid growth. It will also enable continued investment in their financial products platform, serving as a crucial link between consumers and financial institutions.
Higher-profile names combined with penny stock hype have helped fuel speculation in the market.
Outlook Therapeutics (OTLK)
Outlook Therapeutics is a biopharmaceutical company working towards FDA approval for the first ophthalmic formulation of bevacizumab to treat retinal diseases. This week it announced the receipt of Type A meeting minutes with the FDA. This is regarding the Complete Response Letter for ONS-5010, an investigational ophthalmic formulation of bevacizumab.
Management said they are on track to resubmit the Biologics License Application (BLA) for ONS-5010 by the end of 2024. This follows after designing a non-inferiority study evaluating ONS-5010 versus ranibizumab, expected to be a 3-month study with a primary endpoint at 2 months. Russell Trenary, the CEO, expressed confidence in ONS-5010’s potential. Outlook Therapeutics plans to submit a Special Protocol Assessment for FDA agreement on the trial design.
Penny Stocks To Buy Under $1? 3 For Your Holiday Watch List
Obviously, there is caution after the news in August triggered a sell-off in OTLK stock. The FDA acknowledged the safety and efficacy of the NORSE TWO pivotal trial but required additional evidence for approval. Management expressed its commitment to resolving the FDA’s concerns. But it wasn’t enough to help sustain the OTLK stock price at the time.
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