Penny stocks performance was less strong in October, with market players turning their attention to tax cut legislation that could underpin blue-chip earnings in upcoming quarters. The Russell-2000 small-cap index lagged during the period, stuck within a broad congestion while the S&P 500 and Nasdaq Composite rallied to all-time highs. Speculative fervor from now until the end of the year from should benefit penny stocks, but stronger returns might have to wait until the 2018 January Effect.

October’s penny stocks rallied hard, dropping many issues off 2017 and multi-year highs. Plug Power, Inc. (PLUG) posted the best group performance, lifting more than 18% to a 2-year high, while other picks continued to build basing patterns that signal a balance between buyers and sellers. These issues should gain ground as market players take profits in tax-sensitive blue chips and rotate into other opportunities.

Biotech stocks may have topped out for the year after sector giant Celgene Corp. (CELG) triggered a broad-based decline in reaction to its withdrawal of a critical drug application. Selling pressure expanded into all capitalization levels following the news, posting tops that may limit penny stock gains into 2018. As a result, rather than focusing on biotechs, the November list focuses on beaten-down technology stocks that can take advantage of broad fourth-quarter market leadership.

Penny Stocks to Keep Watching

1. Plug Power, Inc.(PLUG)

Plug Power, Inc. (PLUG) posted an all-time low at 12-cents in 2013, following a decade-long downtrend that started at a reverse split-adjusted $1565. It bounced strongly into the first quarter of 2014, posting a 4-year high at $11.72 and rolled over in a slow-motion decline that finally ended at 83-cents in February 2017. The stock tested resistance at the 200-day EMA in March and gapped up on heavy volume, entering a new uptrend. It built a rounded consolidation pattern at new support and is now testing the October breakout above April resistance at $2.70.

2. MicroVision, Inc. (MVIS)

MicroVision, Inc. (MVIS) sold off from $46 to $1.11 between 2009 and 2012 and bounced into a broad but shallow basing pattern that undercut range support in November 2016. The decline posted an all-time low at 89-cents, ahead of a buying wave that mounted resistance at the 200-day EMA in March 2017. It hit a 2-year high at $3.25 in September and rolled over in a pullback that’s now reached strong support at the moving average. A bounce off this level could gain traction, generating an uptick that finally breaks long-term range resistance at $4.23.

3. BioDelivery Sciences International, Inc. (BDSI)

BioDelivery Sciences International, Inc. (BDSI) posted an all-time high at $18.48 in September 2014 and entered a decline that continued into the fourth quarter of 2016, dropping the stock to a 5-year low at $1.50. It tested that level in April 2017 and bounced into an uptrend that reached a 15-month high at $3.60 in July 2017. A decline into September shook out weak hands with a quick plunge through the 200-day EMA while basing action since that time sets the stage for renewed upside that could reach 2015 resistance between $4.50 and $5.00.

New Penny Stock Picks for November

4. Lightpath Technologies, Inc. (LPTH)

Lightpath Technologies, Inc. (LPTH) hit an all-time low at 30-cents in February 2009 following a multiyear downtrend that started when the Dot.com bubble burst in 2000. It bounced to $3.67 a few months later, establishing a resistance level that failed breakout attempts in 2010, 2013, and 2016. A fresh upturn starting in December 2016 reached the barrier once again in March 2017, giving way to a rounded base followed by an October breakout. This bullish price action finally opens the door to potentially rapid gains into 2006 resistance at $7.87.

5. Medical Transcription Billing Corp. (MTBC)

Medical Transcription Billing Corp. (MTBC) came public at $5.00 in July 2014 and entered an immediate downtrend that continued into the April 2017 all-time low at 29-cents. The stock turned sharply higher a few sessions later, topping out at $3.84 and dropping into a broad basing pattern at the 200-day EMA. It bounced off that level in early October, lifting to $5.44 and pulling back in a shallow trading range with support at $2.40. A breakout through the range top could generate strong momentum buying interest that lifts the stock into the IPO print.

6. MannKind, Corp. (MNKD)

MannKind Corp. (MNKD) entered a shallow but persistent downtrend in 2004, posting a long series of lower highs into 2015. The bottom then dropped out, dumping the stock through 2012 support at $8.00 into the May 2017 all-time low at 67-cents. It built a 3-month basing pattern just above that price level and took off in a new uptrend that reached a 17-month high at $6.96 on October 10. It’s been pulling back since that time and could reach strong support between $2.20 and $2.50, offering a low-risk trade entry ahead of a high bounce.

7. Kingold Jewelry, Inc. (KGJI)

Kingold Jewelry, Inc. (KGJI) posted an all-time high at $11.95 in 2010 and fell into a steep decline that ended at 88-cents in 2011. It broke that support level in the second half of 2015, dropping to an all-time low at 49-cents, and turned higher in a recovery wave that remounted broken support. This set off March 2016 buying signals, generating a healthy advance to a 4-year high at $2.84 in August 2016. The stock carved a higher low into March 2017 and is now testing multiyear resistance, with a breakout above the 2016 high favoring upside that could reach $7.00.

8. Alaska Communications Systems Group, Inc. (ALSK)

Alaska Communications Systems Group, Inc. (ALSK) topped out in the upper teens in 2007 and entered a downtrend that found support near $5.00 in 2009. It broke that deep low in 2011, descending into a test of the 2002 low near $1.50. The stock has built a 5-year basing pattern at that level and is now trading near a 2-year high. 2015 resistance around $2.50 marks the final barrier, ahead of a rally that tests long-term range resistance at $3.90, posted in 2013. The buying impulse into that level could offer high percentage gains, utilizing tight stops while taking profits aggressively.

9. Limelight Networks, Inc. (LLNW)

Limelight Network, Inc. (LLNW) ended a long decline at $1.75 in 2008 and bounced to $8.97 in 2010. It returned to support in 2011 and broke down 4 years later, dropping to an all-time low at 90-cents in February 2016. The stock remounted broken support after the presidential election, entering an uptrend that’s now reached a 6-year high at $5.18. The October breakout above the June 2015 high at $4.43 is likely to get tested in coming weeks, with an orderly pullback as low as $3.50 offering a buying opportunity, ahead of a trend advance toward the 2010 high near $9.00.

10. Sierra Oncology, Inc. (SRRA)

Sierra Oncology, Inc (SRRA) came public near $29 in July 2015 and entered a downtrend that continued into the June 2017 all-time low at $1.10. It turned higher in July, reaching the 200-day EMA in October and breaking out last week, marking the first time in the stock’s public history it’s closed above this long-term barrier. An extended testing period may now follow, with pullbacks to new support between $1.75 and $2.00 offering low-risk buying opportunities, ahead of penetration into the unfilled June 2016 gap between $3.00 and $6.20.

The Bottom Line

November’s penny stock watchlist offered a balance between junior biotech and beaten down technology plays, with multi-week basing patterns providing low-risk buying opportunities for patient market players.

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

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