New Year’s Day signaled the start of the January Effect, the traditional period when market timers scoop up value plays that get sold into year’s end due to tax selling pressure. Many penny stocks (stocks under $5.00) have gained significant ground in this buying wave, with energy and metals leading the pack, along with junior biotechs run in place, held down by President Trump’s comments about escalating drug costs.
|Symbol||Company||Feb. 1 Price|
|TGB||Taseko Mines Ltd.||$1.46|
|RTTR||Ritter Pharmaceuticals Inc.||$3.42|
|NAK||Northern Dynasty Minerals Ltd.||$2.85|
|AREX||Approach Resources Inc.||$3.34|
|GSV||Gold Standard Ventures Corp.||$2.68|
|NTIP||Network-1 Technologies Inc.||$3.75|
|LGCY||Legacy Reserves LP||$2.35|
Gold and industrial metals also emerged as big penny stock winners, led by January’s pick to watch: Taseko Mines Ltd (TGB) up 117%, and December’s top penny stock: Northern Dynasty Minerals Ltd (NAK) up 150%. Both issues could add to gains in coming months, especially if commodity futures turn higher. Mid-Atlantic bank Xenith Bankshares (XBKS) that we picked as a penny stock to watch in November offered another highlight, lifting more than 25% in a rally that’s featured a 1 for 10 reverse split.
Risk appetite may contract in February, but penny stocks can do well in adverse markets because few are listed as components in exchange-traded funds and indices that get targeted for declines when volatility rises. Also, the recently underperforming Russell-2000 index looks close to issuing a new buy signal, with small-cap speculation often expanding into the low-priced stock universe.
February’s watch list includes six new entries while retaining four picks from prior months that show additional upside or are still working through bullish breakout patterns. New and recurring picks have popped to the top of market scans that search for unusual market strength in low-priced stocks, with a second visual filter seeking narrowly-defined breakout or pullback levels that favor lower-risk trade entries. Below are the top ten penny stocks to watch this month.
Note: It's important to note that because penny stocks are volatile, one needs to employ scrupulous risk management strategies when investing. Do your research before investing, and learn more about penny stock trading strategies here: The Lowdown on Penny Stocks.
Penny Stock Picks to Keep Watching
1. Taseko Mines Ltd (TGB)
Taseko Mines Ltd (TGB) (January pick) broke out above a multi-year trendline in December 2016 and took off in a powerful rally that eased into a rising channel in January. Strong resistance between $1.75 and $2.00 could end the upside, marking poor reward: risk when taking new positions at the current level. However, the next pullback may offer an excellent second chance to get on board, with a downdraft that finds strong support at the top of the December high and 50-day EMA near $1.00.
2. Ritter Pharmaceuticals Inc. (RTTR)
Ritter Pharmaceuticals Inc (RTTR) (January pick) continues to fill out a broad ascending triangle pattern, with resistance at $3.25. The stock came public in June 2015 in a 4-million share IPO that opened at $5.00. It immediately entered a steep downtrend, reaching an all-time low at 98-cents in February 2016. The subsequent recovery wave stalled at the 50% selloff retracement in October, yielding the triangular range, which targets $4.50 to $4.75 following a breakout.
3. Northern Dynasty Minerals Ltd (NAK)
Northern Dynasty Minerals Ltd (NAK) (December pick) ended a steep downtrend at 20-cents at the start of 2016 and turned higher in a recovery wave that picked up steam in December and January. It’s entered a rising channel with excellent upside potential, considering the next major barrier lies above $5.00. Even so, waiting for a pullback that shakes out weak hands marks the best strategy, with the 50-day EMA rising into the blue trendline at $2.30 set to attract sidelined buying interest.
4. Approach Resources Inc. (AREX) (January)
Approach Resources Inc (AREX) (January pick) reversed at 2014 resistance at $4.30 in September 2016 and tested that level in December. The subsequent pullback extended through January, but the price has settled on deep support at the 200-day EMA and could turn higher soon. Aggressive traders can buy a buying spike above the 50-day EMA at $3.30 while more conservative market players sit on their hands, waiting for a breakout above 2-year resistance. That larger-scale uptrend has the potential to reach the 2015 high just above $9.50.
New Penny Stock Picks for February
5. Transgenomic Inc. (TBIO)
Transgenomic Inc (TBIO) peaked near $7.50 in 2013 and entered a downtrend that reached an all-time low at 15-cents in November 2016. It turned higher into year’s end and took off in a high percentage breakout on Jan. 12, lifting to a 17-month high at $1.59. A 2-week decline has dropped price into the top of the breakaway gap, which also marks the .618 Fibonacci rally retracement. It’s held that support level for the last seven sessions, raising odds for a bounce that ends the pullback and starts a rally wave into June 2015 resistance at $3.75.
6. Gold Standard Ventures Corp. (GSV)
Gold Standard Ventures Corp. (GSV) topped out at $3.05 in 2012 and entered a downtrend that continued into the July 2015 low at 26-cents. It turned higher into 2016, with upside accelerating into the prior high in August. The stock has been pulling back since that time, filling out a rounded correction that may complete a multi-year cup and handle breakout pattern. It’s now testing multi-year resistance and could pull back in coming days, offering a lower-risk entry at the 50-day EMA, currently rising from $2.30.
7. Valhi Inc. (VHI)
Valhi Inc (VHI) broke down from a 3-year double top in March 2014 when it cut through support at $11 and entered a vertical decline that finally came to rest at 85-cents in February 2016. The subsequent bounce stalled at the 50% selloff retracement in early January 2017, yielding a pullback that found willing buyers at the 50-day EMA. Constructive action into month’s end sets the stage for a continued advance that could reach 2015 resistance between $5.00 and $5.50.
8.Network-1 Technologies Inc. (NTIP)
Network-1 Technologies Inc (NTIP) broke out above 2007 resistance at $2.35 in May 2016 and entered an uptrend that reached a 12-year high at $4.15 on Jan. 23. It’s been pulling back since that time and could reach moving average and trendline support (blue line) at $3.50 in coming days, offering a buying opportunity ahead of continued upside. A risk-conscious entry will place a stop loss under that price because a breakdown opens the door to a selloff into the 2016 breakout level.
9. Mobileiron Inc. (MOBL)
Mobileiron Inc (MOBL) came public at $10 in June 2014 and ground sideways into a 2015 decline that persisted into the September 2016 all-time low at $2.56. It charged higher in October, filling the May 2016 gap before stalling in November just 20-cents below 17-month base resistance (blue line) at $4.70. Two fourth quarter lows at the 200-day EMA have added to a rounded correction that now favors a breakout toward intermediate barriers at $6 and $7.10. The Feb. 7 earnings report may act as a catalyst for higher prices but also adds risk to the trade setup.
10. Legacy Reserves LP (LGCY)
Legacy Reserves LP (LGCY) tested the 2012 high at $33.71 in 2014 and sold off, entering a downtrend that ended at 61-cents in March 2016. It rallied into the 200-day EMA at $3.90 in April and pulled back into October, ahead of a bounce that pierced the moving average in December. The rally then stalled once again, yielding a 2-month base that now favors a quick run into the 2016 high at $3.89. The upside could escalate above that resistance level, opening the door to 2015 resistance between $7.50 and $8.00
The Bottom Line
Junior metals dominate the February penny stocks watch list, which also includes several tech plays in emerging uptrends. Buying pullbacks offer the best strategy for the majority of these penny stocks. While jumping on breakouts may work well with proactive risk management techniques. As mentioned earlier, trading penny stocks is not for the novice investor. Such low-priced stocks carry unique risks, so exercises caution when investing in penny stocks. (For more, see: The Risks and Rewards of Penny Stocks.)
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>