My conclusions: while the S&P 500 Index was up approximately 25% over the year, this in no way indicated that widespread rumors of recession were false. Instead, as I discuss on the Peter Leeds YouTube channel, I believe that the U.S. Federal Reserve simply managed to postpone the inevitable a little while longer by pumping more money into the financial system.
But the mess can only be swept under the carpet for so long, and 2020 will see some massive changes in corporate earnings, in my opinion. The good news is that technical analysis can help smart investors navigate even the bumpiest economic terrain, alerting them when a stock is oversold, overbought, or poised to skyrocket in the near future.
The following equities, all priced under $5.00, are commonly known as "penny stocks," and they're often the most volatile and risky trades in the market. My team and I believe, however, that based on various technical metrics, the stocks listed below have the potential to be stellar outperformers.
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.)
Apex Global Brands Inc. (APEX)
This Japanese candlestick pattern is often a good indicator that a stock will be reversing course in the short term – and after a devastating 72% drop from its 52-week high, Apex Global Brands sure could use a change in fortunes.
If share prices continue to go south, then the inverted hammer pattern has failed, and I would cut my losses as quickly as possible.
Data I/O Corporation (DAIO)
Data I/O Corporation (DAIO) charts showed two bullish Marubozu candlestick formations as of the second half of December 2019. If trading volume is able to pick up for the stock, then this could be a strong indication that Data I/O prices will be rising in the weeks ahead. Investors will no doubt be pleased given the stock's near-20% drop in value over the past year.
Because trading volume is quite low at the moment, however, I would watch this one extra carefully and set firm stop-loss levels in place. Low volume can sometimes send false signals about the course a given stock will take, but once the winter holidays are done, I wouldn't at all be surprised to see renewed interest in Data I/O shares again.
Yamana Gold Inc. (AUY)
Full disclosure: as I've discussed on the Peter Leeds YouTube channel, I’m extremely bullish on gold, and Yamana Gold Inc. (AUY) has been a frequent subject of discussion in the Peter Leeds newsletter based on its fundamentals alone.
But even if its fundamentals weren't extremely promising, its technicals would have my team and me sitting up and taking notice. Since June 2019, Yamana Gold prices have gapped up repeatedly – a very bullish indication that the general uptrend (with 70% growth over the past year) is likely to continue.
While a few dojis (cross-shaped Japanese candlestick formations) over the past few days suggest some short-term volatility on the back of investor uncertainty, I feel pretty confident that Yamana Gold stock still has substantial growth ahead.
Turquoise Hill Resources Ltd. (TRQ)
My team and I picked up on a Multiple Bottom for copper miner Turquoise Hill Resources Ltd. (TRQ) earlier in the fall of 2019, which is manifesting now in the form of a sustained (albeit bumpy) move upward.
I expect this climb to continue over the next few weeks and months, even if volatility impedes the stock's progress here and there on a short-term basis.
GenMark Diagnostics, Inc. (GNMK)
Astute readers will realize that GenMark Diagnostics, Inc. (GNMK) was also one of my Penny Stocks to Watch for January 2020. The reason I also included it in this technical analysis-focused article is simple: its relative strength index, or RSI, of 25.06 indicates that the stock is greatly oversold.
Translation: if the RSI's signals are correct, then we should see GenMark Diagnostics stock rising again in price very soon.
IMV Inc. (IMV)
Canadian biotech firm IMV currently not only has a bullish double bottom pattern going, but it ended 2019 with a hammer candlestick pattern supported by strong trading volume. These signals both suggest much more upside for IMV stock over the next month or so, after a disappointing year-to-date performance of -46%.
Note that the biotech equities are even riskier and more volatile than the other penny stocks, which are already recognized as the least safe bets on the market. This means that you'll want to keep a close eye on IMV in case the patterns don't play out as I expected, i.e. prices decline instead of rising.
The Bottom Line
No matter what 2020 entails for the global economy, if you have a strong grasp of technical analysis, you should be able to profit from that knowledge. A keen eye for detail combined with strong research abilities should hold you in good stead when other investors are going under.
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.