Strong biotech action underpinned penny stocks in August, lifting many penny stocks to 2017 highs. Other low-priced stocks underperformed, held in check by White House dysfunction and late summer illiquidity that kept speculators on the sidelines, waiting for more bullish buying patterns. Expect headwinds to continue when Congress returns in September and tackles the politically-charged debt ceiling issue, with market players worried about a repeat of the August 2011 government shutdown that generated the biggest decline in the last eight years.

Investopedia's August’s penny picks performed exceptionally well in the mixed environment. RADA Electronic Industries, Ltd. (RADA) was the winning pick, gaining more than 40% to a 2-year high. 22nd Century Group, Inc. (XXII) rallied 23% over the same period while Canada’s Trilogy Metals, Inc. (TMQ) gained nearly 17%. These three winners are on the September list, along with two other August picks that have carved bullish price charts.

Look for large-scale catalysts that can generate fresh speculation in penny stocks. For example, the iShares Nasdaq Biotechnology ETF (IBB) began the last week of August on a high note after mega-cap Gilead Sciences, Inc. (GILD) announced the acquisition of Kite Pharma, Inc. (KITE), triggering a euphoric wave that’s likely to underpin interest at all capitalization levels. These events can have a powerful impact on low-priced issues, which are much easier for small traders to buy and hold than triple-digit drug manufacturers. Here are the penny stocks to watch as of September 2017. Also take a look at Investopedia's broker reviews.

Penny Stocks to Keep Watching

1. RADA Electronic Industries, Ltd. (RADA)

RADA Electronic Industries, Ltd. (RADA) ended a multi-decade downtrend after the 2008 bear market and hit a 10-year high at $12.58 in the second half of 2014. The subsequent decline cut through long-term support at $1.00 in 2015, generating a climactic plunge that ended at 54-cents in January 2016. The stock cleared massive resistance at $2.25 in July 2017, entering an uptrend that’s now filling the July 2015 gap between $2.50 and $3.60. Buying pressure remains exceptionally strong, raising odds it will soon test 2015 resistance near $4.00.

2. 22nd Century Group, Inc. (XXII)

22nd Century Group, Inc. (XXII) topped out at $6.36 in March 2014 and sold off in a persistent decline that finally ended at 56-cents in August 2015. It then bounced into a rectangular trading range with resistance above $1.50 and remained stuck within those boundaries into a June 2017 breakout that’s now gathering momentum. The stock hit the highest high since 2014 on August 7, 2017, and pulled back to the 20-day SMA, testing support near $2.00. This price level could offer a platform for continued upside that eventually reaches longer-term resistance near $4.00.

3. Trilogy Metals, Inc. (TMQ)

Trilogy Metals, Inc. (TMQ) struggled after coming public on the U.S. exchanges at $3.20 in 2012, dropping into a severe decline that ended at 15-cents in January 2016. The subsequent bounce mounted the 200-day EMA a few months later and fizzled out, giving way to narrow range bound action that lasted until July 2017, when it broke out on heavy volume. The rally hit a 3-year high at $1.35 on August 7, yielding a pullback that’s testing 50-day EMA support, with a bounce at or above 90-cents setting the stage for a strong buying impulse.

4. Intrepid Potash, Inc (IPI)

Intrepid Potash, Inc. (IPI) topped out at $76.24 in 2008 and entered a downtrend that broke 2009 support in the mid-teens in August 2015, dropping the stock into a near death spiral that ended at 65-cents in the first quarter of 2016. A stairstep bounce reached a 21-month high at $3.93 on August 3rd, giving way to a rectangular consolidation with support near $3.15. The stock is now testing range resistance, with a breakout opening the door to more upside that could reach the 200-week EMA, now descending from $8.00.

5. Tantech Holdings, Ltd. (TANH)

Tantech Holdings, Ltd. (TANH) entered a strong uptrend after listing on the Nasdaq exchange in March 2015, reaching $33.97 in September and dropping in a brutal decline that bounced at $3.10 just two months later. Buyers failed to penetrate new resistance into the second quarter of 2016, generating intense gravity waves that dumped the stock to an all-time low at $1.00 in April 2017. Bullish action since that time has now reached 2016 resistance, with a breakout raising odds for a rally into the 2016 high at $6.00.

New Penny Stock Picks for September

6. Cancer Genetics, Inc. (CGIX)

Cancer Genetics, Inc. (CGIX) topped out at $23.25 in 2013 and ground sideways into a 2014 breakdown that accelerated into the second half of 2016, dropping the stock to an all-time low at $1.10. It turned higher into 2017, lifting above the 200-day EMA and reaching a 17-month high at $5.30 in March. Price action since that time has carved a long series of lower highs, generating a trendline with resistance at $3.90. A breakout will target the 2017 high while a rally above that level sets the stage for rapid gains that could eventually reach double digits.

7. Moleculin Biotech, Inc. (MBRX)

Moleculin Biotech, Inc (MBRX) came public at $8.99 in June 2016 and entered a downtrend that continued to post new lows into May 2017 when it bottomed out at 71-cents. A June test held support, ahead of an uptrend that completed a high volume base breakout and momentum-fueled rally to an 8-month high at $3.75 at month’s end. A July pullback found support at the 50-day EMA, generating a bounce to range resistance, followed by a bull flag decline that could attract strong buying interest and continued upside toward $6.00.

8. Vivint Solar, Inc. (VSLR)

Vivint Solar, Inc. (VSLR) is benefiting from bullish solar sector action that’s lifted the Guggenheim Solar ETF (TAN) to a 52-week high. An October 2014 IPO opened for trading at $17.01, ahead of a severe downtrend that bottomed out near $7.50 in December 2014. Lower lows into the second quarter of 2016 gave way to a broad basing pattern and June 2017 breakout that’s now testing 50-day EMA support. A bounce at this level could gain traction, testing the 2017 high ahead of additional gains into the $7.75 to $8.00 resistance zone.

9. China Information Technology, Inc. (CNIT)

China Information Technology, Inc. (CNIT) topped out at $16 in 2009 and broke down two years later, entering a major decline that continued into the 2012 low at 71-cents. A 3-year bounce ended in a triple top reversal near $7.00, giving way to November 2015 and March 2017 tests at the deep low. Support held after a final washout, generating a two-legged recovery that’s now reached a 52-week high. Healthy buying volume suggests the current pullback to 98-cents will mark a buying opportunity, ahead of a rally that could reach the 200-week EMA above $2.00.

10. Zynga, Inc. (ZNGA)

Zynga, Inc. (ZNGA) came public with much fanfare in December 2011. The FarmVille creator reached an all-time high at $15.91 in March 2012. It then fell from grace, dropping in a straight line to $2.09 in November, ahead of a bounce that stalled near $6.00 in 2014. The stock found support at the 2012 low in the first quarter of 2016 and turned higher, rallying to a 3-year high in June 2017. Price action since that time has carved a symmetrical triangle on top of the 200-week EMA, predicting a breakout and rally up to the 2014 high.

The Bottom Line

Look for limited speculative capital to move penny stocks in September, with political and geopolitical issues lowering risk appetites. Junior biotech plays look like the best bets in this mixed environment, with that volatile group now engaged in a healthy uptrend.

<Disclosure: the author held no positions in the securities mentioned above at the time of publication. >

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