March's volatile 'whipsaw' environment undermined penny stock performance, with major benchmarks losing ground after bouncing strongly off February’s corrective lows. The Russell-2000 small-cap index neared month’s end at the same price level as March’s first trading day, highlighting the power of political cross-currents that have dominated price action since the announcement of tariffs that have the potential to ignite a trade war.

The Russell-2000 ended the third month of 2018’s most positive seasonality with little or no upside, raising a red flag for small caps as we head into the second quarter. A weak U.S. Dollar is driving this bearish behavior, with the technical tone improving when it finally ends its persistent decline and lifts off a 3-year low. Penny stocks usually have trouble attracting speculative capital when this index is acting poorly, highlighting the need for strict risk management. 

February's Penny Stocks to Watch pick, Tuesday Morning, Corp. (TUES) rose nearly 27% in March while Civeo, Corp. (CVEO) gained more than 12%. Both stocks have returned on April’s penny stocks to watch list. Several other picks added to bullish consolidation patterns during the month and have returned as well. New picks include the relatively strong junior biotech and gold stocks, with both groups acting better than the majority of single-digit plays. 

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Penny Stocks To Keep Watching

1. Civeo, Corp. (CVEO)

Civeo, Corp. (CVEO) ended a multi-year downtrend at 75-cents in January 2016 and bounced up to $3.70 in February 2017.  It then eased into a rounded correction, finding support in August at $1.57, ahead of a strong recovery wave that reached resistance in January 2018. The stock pulled back to the 50-day EMA and turned higher into March, breaking out to a 2-year high in an uptrend that could test or fill the December 2014 gap between 5 and 8. A final pullback to $3.50 is possible, with that level offering a potential buying opportunity. 

 

2. Tuesday Morning, Corp. (TUES

Tuesday Morning, Corp. (TUES) topped out in the low-20s in 2014 and entered a steep decline that continued into the second quarter of 2017, reaching an 8-year low at $1.60. It doubled in price into October, stalling at $3.30 and dropping into a rectangle pattern that oscillated across the 200-day EMA. A mid-March breakout signals a new uptrend that could reach 2015 resistance between $5.00 and $5.30. The most advantageous trade entry should come if the stock pulls back to test the 50-day EMA, now rising from $3.35.

 

3. Digital Turbine, Inc. (APPS

Digital Turbine, Inc. (APPS) topped out above $5.00 in 2012 and failed 2013 and 2014 breakout attempts. It broke range support at $2.30 in 2015 and entered a downtrend that hit an all-time low at 56-cents in November 2016. The subsequent uptrend has gained ground at a steady pace, reaching the 2015 breakdown level in February 2018. It stalled and sold off in March but has now reached support at a 6-month rising trendline. A reversal here could gain traction, triggering a breakout that opens the door to $3.50.

 

4. Gerdau SA ADS (GGB)

Gerdau SA ADS (GGB) topped out at $26.22 in 2008 and posted a lower high in the upper teens in 2010. The subsequent downtrend escalated through 2015, dumping the stock to a 12-year low at 79-cents in January 2016. A bounce into 2017 stalled at $4.30, giving way to an inverse head and shoulders pattern that broke to the upside in January 2018. The rally peaked at $5.32 in early March while the subsequent pullback has now reached support at the 50-day EMA, setting up a potential low-risk buying opportunity. 

 

5. HTG Molecular Diagnostics, Inc. (HTGM)

HTG Molecular Diagnostics, Inc. (HTGM) hit an all-time high at $19.75 in June 2015 and entered a steep decline that posted an all-time low at $1.20 in February 2017. It lifted vertically in a one-day wonder rally a month later, reversing in the low teens and giving up the majority of gains into the second half of the year. The stock entered a new uptrend in January 2018, stalling above $5.75 and pulling back into late March. It needs to hold support near $4.00 to set the stage for continued upside that could eventually reach the 2017 high. 

 

New Penny Stock Picks For April

6. Legacy Reserves LP (LGCY)

Legacy Reserves LP (LGCY) stalled in the low-30s in 2011 and tested that level for more than three years, ahead of a vertical decline that bottomed out at 61-cents in March 2016. It bounced to $3.89 a month later and eased into a broad consolidation pattern, finally turning higher once again in December 2017. The stock finally broke out above the April 2017 high this week, entering a trend advance that could now reach the broken January 2015 low just above $8.00. Pullbacks to the $4.00 to $4.10 zone should offer potential buying opportunities. 

 

7. Luna Innovations, Inc.(LUNA)

Luna Innovations, Inc. (LUNA) bounced to $5.00 in 2010 after hitting an all-time low at 26-cents during last decade’s economic collapse. It spent the next six years carving a rounded correction that found support just under a buck in early 2016. The stock turned higher into January 2017, stalling at $2.33, ahead of a December breakout that’s now reached a 4-year high. This positive price action may now support a critical test at 2010 resistance. Conservative players looking for a low-risk entry may need to wait for a decline into the 50-day EMA, now rising from $2.50.

 

8. Harmony Gold Mining ADR (HMY)

Harmony Gold Mining ADR (HMY) nosedived in the second quarter of 2012, entering a significant downtrend that posted an all-time low at 53-cents in November 2015. It surged higher into August 2016, reversing at $4.87 and rolling into an intermediate correction that bottomed out above $1.50 in the second half of 2017. The stock just broke out to an 11-month high above $2.50 and could eventually lift into the 2016 high, rewarding patient bottom fishers with opportune profits. 

 

9. Quest Resource Holding, Corp. (QRHC)

Quest Resource Holding, Corp. (QRHC) hit an all-time high at $49.60 in June 2014 and pulled back into the upper-20s. It then lost 14-points in a September gap, entering a brutal decline that continued into September 2017 when it hit an all-time low at $1.03. The stock gapped higher on November 15, lifting to a 52-week high at $2.91 and entered a trading range between $1.90 and $2.65. It’s now pulling back from range resistance and could find support at the 200-day EMA just above $2.00, ahead of a more forceful breakout attempt.

 

10. Histogenics, Corp.(HSGX

Histogenics, Corp. (HSGX) came public near $12.00 in December 2014 and posted an all-time high in the first session. It then entered a persistent decline, finally bottoming out at $1.39 in May 2016. The stock tested that support level three times in 2017 and turned higher in January 2018, reaching a 52-week high at $3.35 in March. It could build on those gains in coming months, initially targeting the September 2016 high near $4.50. Declines should hold above $2.30 at this point, with that level marking a potential buying opportunity. 

 

The Bottom Line

When investing in penny stocks always employ conservative risk management skills. Wait for pullbacks to support and take trade entries with relatively tight stop losses when trading low-priced securities. Penny stocks are high-risk investments that can sometimes yield significant rewards.

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

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