As we enter March, fears surrounding the spread of coronavirus and an impending recession have been resulting in massive market sell-offs. In my opinion, over the next few years, we may be seeing as much as an 80% reduction in the value of most equities trading on the markets right now. That's why it's more important than ever that investors hone their technical analysis expertise and set those skills to work.
Below, I've listed a few penny stocks that look like they could see tremendous jumps in value over the short to medium term. As always, the world of penny stocks is a high-risk and dangerous one, particularly in an economic environment such as this one – so quick thinking, stop losses, and room to maneuver will be your best friends here.
Due to the time constraints inherent to technical analysis, some of the patterns, signals, and set-ups I describe below may no longer be relevant or intact as of the time you read this article. Please ensure you conduct your due diligence when looking at the trading charts and data for the following stocks.
Many of the stocks mentioned here were also profiled, traded, or otherwise discussed in the Peter Leeds Newsletter. Peter may furthermore own shares in some of the investments mentioned, in which case that fact will be clearly indicated. (See below for an additional disclaimer regarding penny stocks.)
Grupo Supervielle S.A. (SUPV)
Argentinean banking stock Grupo Supervielle S.A. (SUPV), also one of my "Penny Stocks to Watch for March 2020," has been hit hard by various political and economic concerns over the past year. However, a triple bottom appears to be in the works, with the stock hitting equal troughs in September 2019, November 2019, and now potentially again in March 2020.
In technical analysis, this chart pattern typically suggests that, after the third bottom, the stock will reverse course and see an uptrend. A relative strength index (RSI) reading of 32.40 likewise suggests that a trend reversal is in the cards. However, if that third bottom doesn't manifest in March or April, this will mean that the pattern is weaker than I had thought, and – based on the technical signals alone – I might exit the position.
Benitec Biopharma Limited (BNTC)
The stochastic oscillator for Benitec Biopharma Limited (BNTC) at only 10.90 suggests that the stock is oversold and that it could see higher prices around the $6 level again soon. Combine that with the possible beginnings of a bullish or white Marobuzu at the very end of February (as of the time I was composing this article), and Benitec Biopharma stock may be on the cusp of a turnaround.
Trinity Biotech plc (TRIB)
As of the last trading day of February, Trinity Biotech plc (TRIB) had gapped up an incredible 34% to $1.43 from the previous day. If this is the kind of gap we can classify as a breakaway gap, then it signals that Trinity Biotech's erstwhile price pattern of trading sideways is finished and that the stock will only move up from here.
Breakaway gaps must be supported by a large number of investors jumping on the stock. Certainly, this would appear to be supported by the intense trading volume I'm seeing here, with 59.30 relative volume. However, readers should also be wary of irrational exuberance and move quickly if needed.
One other technical indicator is backing up my generally optimistic thesis on Trinity Biotech: the moving average convergence divergence (MACD), which is sending highly bullish signals at the moment. The exponential moving average (EMA), for example, is at $1.17. For me, this cancels out some of my concern around the fact that the stock has a high RSI reading of 74, which could suggest that it's overbought.
China XD Plastics Company Limited (CXDC)
I won't usually include Chinese stocks in the Peter Leeds newsletter because the regulatory landscape there is so different from the U.S. one. And looking purely at the fundamentals here, China XD Plastics Company Limited (CXDC) makes me a bit nervous.
However, a hammer candlestick at the end of February following an epic month-long downtrend, which saw the stock spiral down 46%, leads me to believe that China XD Plastics shares could be heading toward a bullish trend reversal. The RSI level of only 19.17 also suggests that China XD Plastics stock could be highly oversold.
ClearOne, Inc. (CLRO)
Leaving aside the terrible human tragedy of the coronavirus for one moment, companies that sell online conferencing solutions such as ClearOne, Inc. (CLRO) could see revenues increasing over the next few months as the virus spreads and workers scramble to stay inside their homes.
ClearOne stock's moving averages are also making a strong buy case, with the EMA (5) currently sitting at $1.83 and simple moving average (5) at $1.82. A hammer candlestick at the end of February may also indicate the end of the downtrend, to the tune of a 24% drop over the past six months, which has been plaguing ClearOne stock.
Make sure to look for confirmation here at the beginning of March in the form of higher prices for ClearOne shares than you've seen over the past few months or so.
The Bottom Line
The emperor has no clothes. The smoke and mirrors are no longer fooling anyone. Whichever way you want to put it, more and more people are catching on that the irrationally bullish stock market of yesteryear is no more, and the global economy is in big trouble. Only the strongest investors will survive in such a volatile environment, and a mastery over the discipline of technical analysis will, in my opinion, be key to that survival.
Penny stocks are volatile and can generate catastrophic losses. Price levels in this article are hypothetical and do not represent buy recommendations or investment advice. Keep in mind that it's your responsibility to make trading decisions through your own skilled analysis and risk management.
Peter Leeds is the author of several books, including the international bestseller, "Penny Stocks for Dummies." He and his team also issue a newsletter devoted exclusively to penny stock picks and analysis, as well as a popular YouTube channel PeterLeedsPennyStocks.