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Penny Stocks Struggle In November, Creating Opportunity For Gains

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Penny stocks weakened beginning in October, with market players focusing on tax cut legislation hoping to boost blue-chip earnings in upcoming quarters, according to the Investopedia Stocks to Watch for November. The Russell-2000 small-cap index suffered, while the S&P 500 and Nasdaq Composite rose to all-time highs.

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Speculative fervor through year’s end is expected to push penny stocks, although improved returns may need to wait until the 2018 January Effect.

Plug Power Inc. had the best group performance in October, lifting more than 18% to a 2-year high, while other picks built basing patterns that signal a balance between buyers and sellers. Such issues are expected to gain ground as market players take profits in tax-sensitive blue chips and move into other opportunities.

Biotech stocks appeared to have topped out for the year after Celgene Corp. triggered a broad-based decline after withdrawing a critical drug application. As a result, the November list focuses on suffering technology stocks that could take advantage of broad fourth-quarter market leadership.

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The top three penny stocks in November returned from the October list.

1. Plug Power, Inc. (PLUG)

Source: Investopedia

Plug Power, Inc., a manufacturer of fuel cells, rose from number seven in October to lead the November list.

The company sold off from a split-adjusted $1,565 in 2000 to an all-time low at 12 cents in 2013. The stock turned higher in March 2014, then stalled at $11.72 before falling to 83 cents in March 2017.

In the last seven months, the price spiked to $2.70, before suffering another fall. A breakout should target the May 2014 low at $3.65, which would mark a high percentage rally from the current level.

The company delivered a record third quarter this year, deploying nine GenKey sites, comprising 2,753 GenDrive units, and a unit increase of over 200% from the previous quarterly record.

Fulfillment of multi-site deals announced in the second and third quarters with Amazon and Walmart comprised the majority of order volume for the third quarter.

The company continued the expansion of its blue-chip customer base, successfully securing contracts with two large manufacturing clients in the U.S. automotive industry and one new customer in Europe. It completed $44 million in new bookings, bringing the year-to-date total to nearly $160 million.

2. MicroVision, Inc. (MVIS)

Source: MicroVision

MicroVision, Inc., a provider of ultra-miniature projection display and sensing technology, rose from the number 9 spot in October to number two in November.

The stock topped out at a split-adjusted $548 in 2000 before entering a downtrend that continued into a 2012 low at $1.11.

A 2013 bounce to $3.49 carved resistance, ahead of multiple reversals that have outlined a rectangular basing pattern. The stock rebounded in October 2016, entering an uptrend that has reached the upper half of its persistent trading range.

The stock broke out to a 22-month high in September and has since settled near $2.75, signaling an upside that could reach the 2015 high at $4.23.

The company in August sold 1.5 million unregistered shares to a private investor who is also a current shareholder at a price of $2.10 per share, for aggregate consideration of $3.15 million. MicroVision intends to use the proceeds from the issuance for general corporate purposes.

MicroVision’s display and sensing solution can be adapted to an array of applications and form factors. The company’s business model and product line offering includes display and sensing engines, licensing its patented technology and selling components to licensees for incorporation into their scanning engines.

In September, MicroVision and WPG Holdings, a distributor of semiconductor components in Asia, entered into an agreement for distribution of MicroVision’s line of PicoP scanning engines across Asia.

3. BioDelivery Science International, Inc. (BDSI)

Source: Investopedia

BioDelivery Science International, Inc. rose from the number 10 spot in October to the number three spot in November.

The stock broke above 7-year resistance at $8.26 in 2014, then rallied to an all-time high of $18.48 a few months later. A pullback in 2015 triggered a failed breakout, delivering a decline that continued into a November 4-year low at $1.50.

The stock tested that level in April 2017 and turned higher, supporting an uptrend to a 52-week high oof $3.60 in July. The stock fell in September, finding support at the 200-day EMA. It could bounce back to the third quarter high.

The company announced in September that Health Canada granted market authorization to formally transfer the Drug Identification Number (DIN) ownership of Belbuca (buprenorphine) buccal film in Canada to BDSI’s commercial partner, Purdue Pharma in Canada. This approval triggers a milestone payment to BDSI.

Belbua incorporates BDSI’s BioErodible MucoAdhesive (BEMA) drug delivery technology and is the only long-acting opioid that uses novel buccal film technology to deliver buprenorphine for appropriate patients living with chronic pain.

Belbuca was approved in Canada in June 2017 for the management of pain severe enough to require daily, continuous, long-term treatment and that is opioid-responsive and for which alternative options are inadequate.

4. Lightpath Technologies, Inc. (LPTH)

Source: Investopedia

Lightpath Technologies, Inc., a provider of optics, photonics and infrared solutions for the industrial, defense, telecommunications, testing and measurement, and medical industries, hit an all-time low at 30 cents in February of 2009 after a multi-year fall that began with the dot.com bubble in 2000.

The stock bounced to $3.67 a few months later, establishing a resistance level that lost in breakout attempts in 2010, 2013 and 2016.

An upturn in December 2016 hit another barrier in March 2017, giving way to a rounded base followed by an October breakout. The bullish price action opens the door to potentially rapid gains into 2006 resistance at $7.87.

Revenue for the first quarter of fiscal 2018 was approximately $7.6 million, an increase of approximately $2.6 million, or 51%, as compared to the same period of the prior fiscal year. The increase from the first quarter of the prior fiscal year is attributable to an approximately $3.1 million increase, or 579%, in revenues generated by infrared products.

Total cost as a percentage of revenue continues to decline, improving to 41% in the first quarter of fiscal 2018, compared to 49% in the first quarter last year.

Net income for fiscal 2018 first quarter was approximately $218,000, compared to approximately $140,000 for the first quarter of fiscal 2017.

5. Medical Transcription Billing Corp. (MTBC)

Source: Investopedia

Medical Transcription Billing Corp., a healthcare information technology company that provides a fully integrated suite of proprietary web-based solutions, together with related business services, to healthcare providers practicing in ambulatory care settings, went public in July 2014 at $5.00 and suffered an immediate downtrend that continued to the April 2017 all-time low at 29 cents.

The stock improved a few sessions later, topping out at $3.84 and falling into a broad basing pattern at the 200-day EMA.

The stock bounced off that level in early October, lifting to $5.44 and pulling back in a shallow trading range with support at $2.40. A breakout through the range top could build momentum buying interest that could lift the stock into the IPO print.

The company recently reaffirmed its 2017 revenue guidance of $31 million to $32 million, representing year-over-year revenue growth of approximately 30%. The recent signing of the largest client in the history positions MTBC for additional revenue growth in 2018.

During fourth quarter 2017, the company anticipates reporting record adjusted EBITDA in excess of $1 million for the quarter, together with continued improvement in GAAP net income and positive cash from operations.

6. Mannkind Corp. (MNKD)

Source: Investopedia

Mannkind, which focuses on the development and commercialization of inhaled therapeutic products for patients with diseases such as diabetes and pulmonary arterial hypertension, entered a shallow but persistent downtrend in 2004, posting a series of lower highs into 2015. Then the bottom dropped out, dumping the stock through 2012 support at $8.00 into a May 2017 all-time low at 67 cents.

The stock built a 3-month basing pattern above that price level and took off in a new uptrend that hit a 17-month high at $6.96 on October 10. The stock has since been pulling back and could reach strong support between $2.20 and $2.50, offering a low-risk trade entry ahead of a high bounce.

For the third quarter of 2017, net revenue for the company’s flagship Afrezza product grew 28% to $2 million, compared to the second quarter.

As of Sept. 30, 2017, the amount of Afrezza shipped to the wholesale and retail channels, but not yet recognized as revenue, was $3 million, an increase of $0.4 million from June 30, 2017.

For the nine months ended Sept. 30, 2017, total net revenue of $7.2 million was comprised of $4.7 million of Afrezza net sales, $1.7 million from the net sales of surplus bulk insulin to a third party, $0.6 million from the sale of certain oncology intellectual property, and $0.2 million from collaboration net revenue.

7. Kingold Jewelry, Inc. (KGJI)

Source: Investopedia

Kingold Jewelry, Inc., one of China’s leading designers and manufacturers of 24-karat gold jewelry, ornaments, and investment-oriented products, posted an all-time high of $11.95 in 2010, then fell into a decline that ended at 88 cents in 2011.

The stock broke that support level in the second half of 2015, falling to an all-time low at 49 cents, then turned higher in a recovery wave that remounted broken support. This launched March 2016 buying signals, delivering an advance to a 4-year high at $2.84 in August 2016.

The stock carved a higher low in March 2017 and is now testing multi-year resistance, with a breakout above the 2016 high favoring upside that could reach $7.00.

For the three months ended Sept. 30, 2017, the company sold a total of 30.1 metric tons of gold, of which branded production was 14.6 metric tons, representing 48.6% of total gold sold, and customized production was 15.5 metric tons, representing 51.4% of total gold sold in the third quarter of 2017.

In the third quarter of 2016, the company sold a total of 20.6 metric tons, of which branded production was 10 metric tons, or 48.3% of the total gold sold, and customized production was 10.6 metric tons, or 51.7% of total gold sold.

For the nine months ended Sept. 30, 2017, the company sold a total of 72.2 metric tons of gold, of which branded production was 34.7 metric tons, representing 48.1% of total gold sold, and customized production was 37.5 metric tons, representing 51.9% of total gold sold for the period.

In the nine months ended Sept. 30, 2016, the company sold a total of 55.7 metric tons, of which branded production was 28.6 metric tons, or 51.4% of the total gold sold, and customized production was 27.1 metric tons, or 48.6% of total gold sold.

8. Alaska Communications Systems Group, Inc. (ALSK)

Source: Investopedia

Alaska Communications Systems Group, Inc., a provider of advanced broadband and managed IT services for businesses and consumers in Alaska, topped out in the upper teens in 2007, then began a downtrend that found support near $5.00 in 2009. The stock then broke that low in 2011, falling into a test of the 2002 low near $1.50.

The stock then built a 5-year basing pattern at that level and is now trading near a 2-year high. Its 2015 resistance around $2.50 marks the final barrier, ahead of a rally that tests long-term range resistance at $3.90, which it posted in 2013.

The buying impulse could offer high percentage gains.

Total revenue for the third quarter increased to $56.7 million, up 0.4% from $56.5 million.

Total broadband revenue reached $31.3 million, representing 55.3% of total revenue and up 6.8% from $29.4 million.

Operating income for the quarter was $3.5 million, compared to $4.1 million.
Net income was $0.3 million in both periods.

Net cash provided by operating activities was $8.6 million for the third quarter, compared to $9.5 million.

Capital expenditures were $13.5 million for the quarter, compared to $8.7 million.

9. Limelight Networks, Inc. (LLNW)

Source: Investopedia

Limelight Networks, Inc., a digital content delivery provider, ended a decline at $1.75 in 2008, then bounced to $8.97 in 2010. It returned to support in 2011 before breaking down four years later, dropping to an all-time low at 90 cents in February 2016.

The stock remounted broken support after the presidential election, beginning an uptrend that has reached a 6-year high of $5.18. The October breakout above the June 2015 high of $4.43 will likely get tested in coming weeks, with a pullback as low as $3.50 offering a buying opportunity, ahead of a trend advance near the 2010 high around $9.00.

Revenue for the third quarter was $46.1 million, the highest in 19 quarters, up 17% year over year.

GAAP gross margin was 48.4%, the highest in company history.

Gross margin expanded by 730 basis points year over year. Cash gross margin of 58.9% was the highest since 2008.

Non-GAAP net income was $2.2 million, the highest third quarter since 2007.

Adjusted EBITDA was $7.4 million, the highest third quarter in company history.

10. Sierra Oncology, Inc. (SRRA)

Source: Investopedia

Sierra Oncology, Inc., a clinical stage drug development company focused on advancing next-generation DNA damage response therapeutics for the treatment of patients with cancer, went public near $29 in July 2015, then began a downtrend that continued through a June 2017 all-time low of $1.10.

The stock turned higher in July, hitting the 200-day EMA in October and breaking out shortly after, marking the first time in the stock’s public history it closed above this long-term barrier.

An extended testing period could follow, with pullbacks to new support between $1.75 and $2.00 offering low-risk buying opportunities, ahead of penetration into the unfilled June 2016 gap between $3.00 and $6.20.

For the three months ended Sept. 30, 2017, Sierra incurred a net loss of $10 million compared to a net loss of $15.2 million for the three months ended Sept. 30, 2016. For the nine months ended Sept. 30, 2017, Sierra incurred a net loss of $31.4 million compared to a net loss of $38.6 million for the nine months ended Sept. 30, 2016.

Cash and cash equivalents totaled $107.8 million as of Sept. 30, 2017, compared to $116.7 million as of June 30, 2017, and $109.0 million as of Dec. 31, 2016. The company believes that its existing cash and cash equivalents will be sufficient to fund current operating plans through approximately mid-2019.

On Sept. 30, 2017, there were 52,268,443 shares of common stock issued and outstanding, and stock options to purchase 7,685,449 shares of common stock issued and outstanding.

The November penny stock watch list provides a balance between junior biotech and depressed technology plays, with multi-week basing patterns offering low-risk buying opportunities for patient market players.

Featured image courtesy of Shutterstock.

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Trade Recommendation: Buy EVHC and EQT on Selling Exhaustion

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The S&P 500 Index (SPX) continues its ascent as it knocks on immediate resistance at 2,660. Currently, the index is traversing overbought territory. Ideally, it takes a dip now and fill the gap between 2,640 and 2,646 which was created on December 8, 2017. That should take the RSI below 70, and give the index room to break 2,660 by next week.   

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Nevertheless, SPX remains aggressively bullish as long as it is above 2,600. For this edition, let’s look at stocks that appears to have found their bottom.

EVHC – Eaton Corporation

EVHC has suffered massive losses in value since it made its 3-year high of 137.57 back in 2015. The stock went on a downtrend when it created a bearish pattern and failed to hold critical support at 110. Bears sent it back to as low as 23.77 which is an astronomical 82.72% drop in value.  It’s all gloom and doom, but the charts show a promising picture.

Technical analysis show that the stock may have recently bottomed out. EVHC generated a massive volume of 50.45 million on November 1st which was coupled by a big gap down. In addition, volume has been decreasing day by day. Lastly, weekly RSI shows recovery from extreme overselling. These indicators tell us that the stock may have found its new support level.

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The strategy is to trade the range by buying as close to 25 and selling as close to 80. Keep in mind, the stock has not flashed any sign of reversal so officially, it’s still on a downtrend. However, there’s opportunity to generate profits here by taking advantage of the consolidation period. Buy low and sell high.

Weekly EVHC Chart

Monthly EVHC Chart

As of December 11, 2017 close, the stock is at 32.90.

Summary of Strategy

Buy: between 25 and 35

Support: 25

Target: 80 but consider lightening positions at 45 and 60

Stop: A close below 23.77 negates this trade call

EQT – EQT Corporation

Just like EVHC, EQT suffered massive losses in value after it dropped to 47.10 from a 5-year high of 111.47. The stock went on a downtrend when critical support at 82 broke down. It lost 57.75% in value before the bulls took strong action and defended support at 50. Since then, EQT has shown signs of life which may prove to be profitable to those who invest in the stock.

Technical analysis show that the stock has found its bottom at 50. Weekly chart reveal that the stock generated volume of over 60 million on June when the average volume was just below 13 million. This signals selling exhaustion. During the same period, the stock created a hammer which indicates the presence of buyers at 50. More importantly, EQT has tested and successfully defended support level at 50 twice already. This increases the probability that the stock will no longer go below that level.

Similar to EVHC, the strategy here is to trade the range. Buy between 50 and 60 with the intention of selling at 80. As always, buy low and sell high.

Weekly EQT Chart

Monthly EQT Chart

As of December 11, 2017 close, the stock is at 57.13.

Summary of Strategy

Buy: between 50 and 60

Support: 50

Target: 80

Stop: A close below 50 invalidates this trade call

Featured image courtesy of Shutterstock.

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Trade Recommendation: Ride ETN and EW on Breakout

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The S&P 500 Index (SPX) flexed its muscles on Friday, December 8, as it gapped up, opening nearly 10 points higher than its previous close. With volume going below its 20-day average, the market’s telling us that sellers are running out of ammunition. The slowdown in selling has enabled bulls to push the index up, closing almost the same level as the day’s high.

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The price action on December 8 affirms our bullish view. With that sentiment, let’s continue trading stocks that are on the verge of breaking out.

ETN – Eaton Corporation

The stock has suffered as much as a 42.25% loss in value during the course of its 3-year downtrend. It almost touched a high of 80 back in 2014, but bears claimed that level and sent the stock to as low as 46.19 in 2016. Fortunately for the bulls, the stock respected that support and used it to generate one higher low after another. The consecutive rallies has given ETN momentum to beach resistance at 80, albeit briefly.

While the bears continue to own that resistance level, technical analysis reveals that it’s only a matter of time before bulls conquer that level with conviction. Weekly and monthly charts reveal a large bullish reversal pattern that can take ETN to a new five-year high. Breach 80 with heavy volume of 11 million in the daily chart should attract momentum traders and give the stock a clear path to our target of 120. More importantly, breakout of this three-year resistance level should restart the uptrend for ETN.

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Weekly ETN Chart

Monthly ETN Chart

Summary of Strategy

Buy: breach of 80 with volume of 11 million

Support: 76 and 72

Target: 120

Stop: A close below 72 negates this trade call.

EW – Edwards LifeSciences Corporation

While EW technically remains in an uptrend, it suffered as much as a 33.37% loss in value as it went through a massive corrective phase. It went as high as 121.75 in late 2016 before getting sent back by bears to as low as 81.12 in under two months. Just like ETN, however, EW used that support level to rally and post a series of higher lows. Currently, the stock is threatening to finally breach resistance at 120.

Technical analysis reveals a large bullish continuation pattern that can signal the end of EW’s corrective phase. In addition, indicators show that bulls are in a good position to take out 120. The last candlestick on the weekly chart is a hammer which indicates the presence of buyers above 110. In addition, RSI shows that the stock is far from oversold territory, giving it room to make a move up. Lastly, volume has picked up which hints that a significant number of market participants are showing interest in the stock.

The strategy is to wait for the chart to break resistance at 120 with over 9 million in volume in the daily chart. Breach of this level will attract momentum traders and may lift the stock to our target of 160. It is also important to note that there is no known resistance above 120. Hence, the stock may reach our target without much of a struggle.

Weekly EW Chart

Monthly EW Chart

Summary of Strategy

Buy: breach of 120 with volume of 9 million

Support: 112 and 110

Target: 160

Stop: A close below 10 invalidates this trade view.

Featured image courtesy of Shutterstock.

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Trade Recommendation: Buy BBY, ZNH, CLX, and USCR

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The S&P 500 made a new intraday lifetime high on Monday of last week, but it could not sustain the gains. Over the next two days, the index declined, however, the bulls stepped in at 2624.75 levels, as the news flow turned positive. The index gained ground in the last two days of the week and made a new lifetime high on a closing basis.

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Important points

  1. Bulls continue to buy the dips, which suggests further upside to the US markets
  2. We want to ride the move higher through our trading positions
  3. Buy BBY, ZNH, CLX, and USCR

We believe that the bulls will want to end the year on a strong note, hence, the rally is likely to continue in the remaining few days of the year. After all, the index has closed positively in all the first eleven months of the year.

We, therefore, continue to look for trading opportunities on the long side. Notwithstanding, at the current levels, any adverse news, especially on the tax front can start a sharp fall. Therefore, please use a trailing stop loss to protect the position once it moves in our favor.

BBY – Buy 64.2, SL 60, Target 71

Weekly chart

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The stock had risen to a high of $59.5 in April 2006, following which it plunged to $12 by end-2012. Since then, the stock has been on a path to recovery. In May of this year, the stock made a new lifetime high, however, it could not sustain the levels. The bears again pushed the stock lower. In the last few months, the stock made a bearish head and shoulders pattern on the weekly chart.

However, last week, the stock broke out to new highs, thereby invalidating the bearish pattern. This is a bullish development, which suggests further upside. Let’s see the critical levels on it.

Daily chart

On the daily chart, we find that the stock had been range bound since end-May of this year, between $53 on the lower end and $61.95 on the upper end. A couple of attempts to break out of the range faced stiff resistance from the bears. However, on Friday, the stock broke out to new highs with force. This is a bullish sign. We expect the stock to now move towards its pattern target of $71. Hence, we suggest buying it at $64.2, above Friday’s intraday highs with a SL of $60.

ZNH – Buy 46.5, SL 42, Target 53, 59

Weekly chart

The stock has not done much in the past decade. After rallying to dizzying heights a decade earlier, the stock plunged during the global financial crisis. Thereafter, it has been in recovery mode, but it has not been able to make new lifetime highs. Nevertheless, the pattern suggests that a retest of the highs is possible. Therefore, we want to enter this trade.

Daily chart

The stock had been range-bound between $25.6 and $42.6 for about two years. It broke out of the range on November 20. Thereafter, the bulls successfully held on to the $42.6 levels during the pullback. This shows demand for the stock at higher levels. The pattern target following the breakout of the range is $59. Therefore, we propose buying the stock at the current levels of $46.5 with a stop loss of $42.

There is a small resistance at the $53 mark, where traders can book partial profits if the stock struggles to break out of it.

CLX – Buy 146, SL 138, Target 168

Weekly chart

The stock has been in a long-term uptrend since 2009. It entered a period of consolidation/correction in July of last year. Since then, $140.5 had been acting as a stiff resistance. Three attempts to break out of the overhead resistance failed. The stock formed a bullish ascending triangle pattern and the bulls broke out above the overhead resistance last week. Hence, we want to buy the stock, as we expect it to move higher.

Daily chart

The bulls managed to breakout of the ascending triangle pattern on December 04 and have managed to sustain above $140.5 levels for a week, which is a bullish sign. The stock now has a pattern target of $168. Therefore, we want to buy 50% of the allocation at $146 and the rest on a successful retest of the $141 levels. Our stop loss for the trade can be kept at $138. We don’t want to hang on to the stock if it falls back into the triangle.

USCR – Buy 85.25, SL 80, Target 92

Weekly chart

The stock has been in an uptrend since 2012. It has been rising inside an ascending channel for more than a year. Just two weeks back, it had fallen to the trendline support of the channel, which held. We can now expect the stock to rally towards the resistance line of the channel, which is at the $92 levels.

Daily chart

On the daily chart, we find that the stock had been facing stiff resistance at the $80 mark. It broke out of the overhead resistance in end-August of this year, but could not sustain above it. Subsequently, it declined to the lower end of the range at $70. On November 30, the stock again broke out of $80 levels.

The bears again attempted to stem the rally at the $84 levels. However, the stock found support at $80 and rallied to new highs on Friday of last week. We, now, expect the uptrend to continue. Therefore, we recommend a buy at the current levels of $85.25, with a stop loss of $80 and a target objective of $92.

Featured image courtesy of Shutterstock. 

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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