Penny Stocks, What Are The Current Market Trends That Investors Should Watch For?

Understanding Penny Stocks in 2021 And How to Use Trends to Your Advantage 

With penny stocks, staying ahead of the competition is one of the most important steps to being a profitable trader. The first step in this process is thinking outside of the box. For example, if you're trying to make a penny stock watchlist, it might be prudent to consider what events are going on in the world, and how they will affect the stock market as a whole. 

An example of this could be; given the current shortage of microprocessors, utilizing supply and demand would mean that companies producing these products may see bullish interest. This is a very broad way to look at it, but the idea is still the same. 

With penny stocks, investors have to also consider the high amount of volatility that is inherent to all stocks under $5. But, there are plenty of ways to use this to your advantage. 

If risk isn't necessarily your thing, you might want to look for a more stable, long-term penny stock to buy. In short, it's important to align your portfolio with your investing goals. A good way to think about this is to consider the financials of a company, its past performance, and any plans it has moving forward. These factors can help to identify how volatile a penny stock may be. 

Now, this is a very abridged version of how to find penny stocks to watch. But, it can create a launching point for both beginner and advanced investors to start considering additional factors. With all of this in mind, let's look at the current state of investing in penny stocks in 2021, and how to use trends to your advantage. 

Investing in Penny Stocks in 2021 

1. The Most Popular Penny Stock Industries Right Now 
2. What Trends Are Penny Stock Investors Seeing?
3. A Brief Overview of Trading Penny Stocks 

1. The Most Popular Penny Stock Industries Right Now 

Cryptocurrency and Blockchain 

Cryptocurrency and blockchain penny stocks have become some of the most popular securities over the past few months. While crypto has been around for years, the rise of assets like DogeCoin has helped to draw parallels between both crypto and penny stocks. Additionally, the potential for blockchain is huge and largely untapped. 

A few companies like Hall of Fame Resort & Entertainment Co. HOFV and Liquid Media Group Ltd. HTTPSYVR, have become synonymous with the entire blockchain ecosystem. And while crypto is highly volatile, and can come with a high-risk profile, many companies are still working out how to utilize crypto as an advantage. Because of this, cryptocurrency and blockchain penny stocks have continued to reach new heights in the past few months. 

Biotech 

Another trending sector for penny stocks right now and in the past year is biotech. Biotech penny stocks have become notable due to the Covid pandemic, but it extends far beyond this. While Covid-19 may have highlighted the biotech industry, investors are also searching for companies that have little to no involvement in the pandemic. Aside from this, companies that are working on vaccines or treatments for the coronavirus, have also seen major increases in value. 

With any biotech company, it's important to consider a few things. For one, what does its pipeline look like and how far along are its compounds in the approval stages? Additionally, what is its financial situation, and has it undergone any recent capital raises? A few examples of popular biotech penny stocks to watch right now include Invivo Therapeutics Holdings Corp. NVIV and Onconova Therapeutics Inc. ONTX. This is not an exhaustive list by any means, but it should give you a good place to start creating a watchlist. 

Tech 

Tech penny stocks are another popular sector for a few distinct reasons. When the pandemic hit last year, many tech penny stocks dropped swiftly in value. Soon after, however, widespread stay-at-home and work-from-home orders meant that technology needed to adapt to the current environment. Because of this, many companies swiftly began creating products and software to help aid the pandemic-ridden economy. 

A company like Zoom Video Communications Inc. ZM while albeit not being a penny stock, is a good example of a company that has benefitted from the pandemic. In terms of penny stocks, companies like Digital Ally Inc. DGLY and Celsion Corp. CLSN have become extremely popular in the past few months. Considering this, it’s a no-brainer that tech has become such a popular industry for investors to take a closer look at. 

2. What Trends are Penny Stock Investors Seeing?

There are a few distinct trends that penny stock investors should keep track of. First and foremost is the high volatility at play in the market. While part of this is due to the nature of penny stocks, there are other factors to consider. 

One major aspect right now is the influence of retail traders and those trading penny stocks on Robinhood. Robinhood has helped to diversify and decentralize the world of investing. While the impact of this may not have been much in the past few years, it is largely at play right now. 

Consider the situation surrounding Gamestop Corp. GME. When investors banded together for the first time in retail trading history, we saw GME stock shoot up in the triple-digit percentage points in a matter of days. Now, this shouldn't serve to incite fear. Rather, it should offer an idea on how to align your investment strategy to fit the stock market in 2021. 

While this isn't the only trend right now, it is one of the most important ones that investors are seeing. A lot of the other trends at play are aspects that have largely remained in place over the past few years. So in short, consider the effect that retail traders have on penny stocks right now.  

3. A Brief Overview of Trading Penny Stocks 

When looking to trade penny stocks, there are a few things that investors need to know. We can separate this into two main categories: speculation and fundamentals. On one hand, speculation is the impact that outside factors like news and press releases have on a penny stock.

Because penny stocks are under $5, they are subject to more speculation than any other asset. To use this to your advantage, investors need to stay as up-to-date as they can on all of the current events going on. This means checking the news at all times and using this information to craft a penny stock watchlist. 

The next thing to consider is the fundamentals. While fundamentals have a large role in the price of penny stocks, some investors would argue that it is less impactful than speculation. However, it is an important aspect to consider. When looking at fundamentals, investors need to think about revenue, profitability, YoY growth, cash balances, and more. These numbers can identify what a company looks like from an overall perspective. 

With this information, we see that it is a careful balance between the two. But, using them to your advantage can help to make your portfolio competitive with the most profitable penny stock traders out there.