As we push for a new high on the Dow Jones Industrial Average and NASDAQ, a few things have been quietly growing behind the scenes. Specifically, both uncertainty and volatility have been on the rise, and you can add to that historically high levels of complacency.  

Typically, each of these three metrics signal a market top. However, with near-zero interest rates, massive bouts of money creation, and share buybacks still going strong (despite slowing down a little), we may still see even higher levels yet.

This may be a time for caution among long-term investors, but it does set up a few opportunities for swing trades and short-term plays. A few of my favorites are detailed below.

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.)

Sunworks, Inc. (SUNW)

After hitting $13.79 (last May), Sunworks, Inc. (SUNW) shares have declined significantly, and the price is now sitting at $2.07. In fact, this stock has seen one of its largest declines just today, as this price has dropped by 35% today alone (as of the time of writing this analysis).

Poor financial results just came out, causing Sunworks shares to gap down from yesterday's $3.15 close to where they opened after the release of the report at $2.00. Buyers have already begun moving in, pushing the stock back as high as $2.30 at its peak.

There has been massive trading activity (over 7 million shares traded over the past seven days), which compares to Sunworks' typical 250,000 shares per day. As explained in my latest YouTube video, trading volume is much more important than the stock's price, and with the sudden spike in the buying and selling of Sunworks shares, you can be more confident that this stock may be finding bottom at these levels.

I do believe that today's sell-off has been overdone, and if Sunworks begins to recover, there could be respectable gains from the shares over the coming few weeks.

Chart showing the share price performance of Sunworks, Inc. (SUNW)

General Electric Company (GE)

Disclosure: Peter Leeds owns put options on this stock. ("Puts" are bets that the price of the stock will decline.)

Given many of the concerns surrounding General Electric Company (GE), from pension freezes to questions about its financial reporting practices, shares of the conglomerate were nonetheless able to buck their recent trend of downward price momentum. Their Q3 results were released yesterday, which pleasantly surprised most investors, sending GE shares 11.5% higher.

However, I expect that this reactionary jump was overdone, and in fact, we are already seeing this stock give back a few percentage points of the gains. At just above $10, it may take a lot to justify these valuations – a "Doji" trend reversal signal (as of the time of writing this analysis) typically indicates a high likelihood of the direction of the shares shifting from an upward bias to a downward drift.

In my opinion, this is an investment that is over-extended, and it could be facing some declines. Whichever share price direction GE stock displays over the next four to eight trading days, that will likely become the trend for the price looking forward over the coming few months.

Chart showing the share price performance of General Electric Company (GE)

CHF Solutions, Inc. (CHFS)

Nine straight negative/bearish days on the Japanese candlestick chart typically imply that the sellers have had plenty of opportunity to dump their shares. Most shareholders who may want to sell shares of CHF Solutions, Inc. (CHFS) have now done exactly that.

In addition, a gap down seven trading days ago adds weight to my theory that the selling is pretty much finished. This may be especially true when also considering the strongly oversold position of CHF Solutions – the relative strength index (RSI) comes in at 21.

In terms of timing, a weak hammer signal on the chart suggests that CHF Solutions stock will begin an extended uptrend from this point. Protect your downside with a stop-loss order, but expect higher prices to come if my theories hold up.

Chart showing the share price performance of CHF Solutions, Inc. (CHFS) 

Key Takeaways

  • A penny stock refers to a small company's stock that typically trades for less than $5 per share.
  • Although some penny stocks trade on large exchanges such as the NYSE, most penny stocks trade via over the counter (OTC).
  • While there can be sizable gains in trading penny stocks, there are also equal risks of losing a significant amount of an investment in a short period.
  • Technical analysis techniques can help spot potentially profitable trades in penny stocks.

Ideanomics, Inc. (IDEX)

Ideanomics, Inc. (IDEX) stock may be about to bounce off a triple bottom. In December, then again in February, shares showed support as they dipped toward $1.15. After rising from those lows, the stock has declined right back to that same level once again.

Either Ideanomics breaks down and declines to new lows, or the stock will start moving back toward a range closer to $1.50. Experienced swing traders will know to wait on the sidelines until the direction of this investment becomes clear.

Chart showing the share price performance of Ideanomics, Inc. (IDEX)

Universal Logistics Holdings, Inc. (ULH)

Five trading days prior, Universal Logistics Holdings, Inc. (ULH) stock gapped down from above $25 to open at $22.50, only to fall even further over the subsequent few days. Shares bottomed out at $17.75, and there are now increasing signs that this one may begin to recover.

Universal Logistics stock is oversold, and trading volumes have increased significantly (approximately three to four times greater over the past four trading days). Long-tailed candlestick chart patterns show you that investors are seeing value at these lower levels, and as such they are buying every dip relatively strongly.

Universal Logistics' strong fundamentals, solid financial position, and respectable dividend payments all conspire to put a floor beneath this stock's price. Using a proper stop loss will mean jumping ship if Universal Logistics stock dips beneath $18.25 or so, but getting involved may open you up to potential gains of much more than 15% in the coming weeks.

Chart showing the share price performance of Universal Logistics Holdings, Inc. (ULH)

Resonant Inc. (RESN)

There has only been one positive day/bullish candle over the most recent 16 trading days. Over that time, Resonant Inc. (RESN) shares have declined over 40% under slightly greater-than-average trading activity.

This investment will be a high-risk, high-reward play. By keeping a stop loss just above $2.00, which is not far from where Resonant stock trades right now ($2.06), you may be able to protect your downside while opening yourself up to potentially strong recovery gains.

Chart showing the share price performance of Resonant Inc. (RESN)

The Bottom Line

Short-term traders will have the advantage in the current market environment. Things like a global slowdown, the approaching recession, and such high levels of complacency can be largely ignored if your trades are done over brief periods (a few days or weeks).

However, one aspect to watch is the increasing volatility. The larger the day-to-day swings, the more potential profits for swing traders, but also the greater the risks. Be extra diligent in the coming weeks, at least until a few of these looming uncertainties get resolved.

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.