Momentum & Low Float Penny Stocks: Big Risk For Big Potential Reward
Low float penny stocks are some of the most exciting to watch. They’re also some of the most stressful to trade. A few minutes can be the difference between doubling your money or losing your entire position. This also goes for momentum penny stocks; ones that are thinly traded in the market and experience parabolic moves without an apparent catalyst. The sheer amount of volatility in many of these stocks is undeniably greater than most other types of penny stocks. Of course, if you’ve traded small cap stocks, in general, this year, you’re well-aware of the potential of these thinly traded stocks.
In many instances, sympathy sentiment tends to play a bigger role. While news is always a good thing to find as far as potential catalysts, we are dealing with penny stocks, of course. The name of the game for most traders is making money quickly.
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In this light, when discussing momentum and low float penny stocks, the initial focus is on trading; not investing. Do all penny stocks with strong momentum fall apart after the initial run-up? No, but as a rule of thumb, because of the higher volatility, it’s prudent to take a short-term trading approach as opposed to a longer-term investing strategy.
Trading Momentum & Low Float Penny Stocks
Remember all of the big breakouts we saw this year and how quickly many ended up breaking down. Herein lies the risk of penny stocks. If you aren’t able to stay in front of your screen, trading low float stocks can be difficult. It would require proper stops, price alerts, and a bulletproof strategy.
Needless to say, these can be some of the most profitable trades as well. There’s no need to imagine scoring 1,000% in a single day because the fact is, this has been a very real occurrence this year. Again, not all penny stocks with low floats jump quadruple digits but a few hundred percent or even a “small” 50% move isn’t out of the question. This also goes for thinly traded momentum stocks.
These are the stocks that don’t normally trade and due to a lack of general business operations, there might not be an active market. In light of unusual trading volume, these become momentum stocks to watch. Though they aren’t low float, per se, they can respond in a similar manner as low float stocks. Based on the recent trends, are any of these low float names on your list right now?
Momentum Penny Stocks To Buy [or avoid]: Uxin Limited (NASDAQ:UXIN)
If there’s one clear trend we’re seeing right now it’s a focus on emerging markets. In particular, China-based companies with exposure to digital financing and tech. Uxin (UXIN Stock Report) is one of these companies. It operates an online used car dealership in China offering customers a value-based sales strategy and buying experience.
Last week, Uxin launched its used car rating system to the public. It basically analyzes used-car data analyzing things like car age, mileage, exterior and interior condition, etc. It then compares it to pricing. When customers search for used cars on Uxin’s mobile application or website, they will find a “like-new” score placed on each car. This makes it easy for customers to compare based on this score.
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The recent surge in Chinese fintech companies has trickled down into Chinese tech names on Tuesday. Similar to what we explained last week, it will come down to continuity and follow-through to see if UXIN stock remains one of the penny stocks to watch beyond Tuesday’s session.
Momentum Penny Stocks To Buy [or avoid]: Kaixin Auto Holdings (NASDAQ:KXIN)
Kaixin Auto Holdings (KXIN Stock Report) is another one of the China-based companies gaining ground on Tuesday. Kaixin has transformed from a tech-enabled financing platform into a nationwide auto dealer network. The company combines self-owned and affiliated dealers as well as after-sale services.
This is another instance of sympathy sentiment driving momentum in my opinion. There hasn’t been any new updates from the company since an August update. Kaixin announced it had initiated legal proceedings against non-controlling shareholders of three of its dealerships. According to the company, these three dealerships accounted for a majority of Kaixin’s revenues in 2019.
The crazy part is that Kaixin announced earlier this year that it put a pause to its used car business. So where does the business itself stand? As long as you’re aware of the lack of information, overall, KXIN stock has become one to watch on Tuesday simply based on general market momentum and sector sympathy.
Momentum Penny Stocks To Buy [or avoid]: Weidai Ltd. (NYSE:WEI)
Weidai Ltd (WEI Stock Report) surged once again on Tuesday. This came just about a week after the momentum penny stock raced to highs of $5.49 from well-below $1. Following the 4-day slide, WEI stock is back in motion amid excitement across Chinese fintech related companies.
Weidai is an online finance marketplace business in China. The company’s platform connects smaller borrowers with both online investors and institutional funding partners. The unique part about its financing methodology involves auto-backed lending as its preferred method of financing. Since July, Weidai has been cooperating closely with local government authorities in its business operation.
Trading activity has been so wild, the company came out with a press release just to make sure the public new that no material changes have come about that would justify the surge. In light of this, the move that WEI stock has made could be another example of sympathy momentum carrying shares this week. Will it result in another aggressive pullback or will there be some follow-through later this week?
Momentum Penny Stocks To Buy [or avoid]: 9F Inc. (NASDAQ:JFU)
We touched on 9F Inc. (JFU Stock Report) this week. The surge in the price of Bitcoin has brought some attention to crypto and blockchain penny stocks. While JFU stock hasn’t seen as explosive of a move as the other names on this list, shares continued trending higher on Tuesday.
China’s fintech and lending market has gained its share of attention recently. Micro-lending is becoming a bigger thing across the country. Furthermore, in light of coronavirus and social distancing, digital means of financially transacting business is growing more important. The company offers a digital financial account platform. Late last year, the company launched 9F Superbrain.
The product uses artificial intelligence, cloud, and blockchain technologies. The platform provides its financial institution partners and merchant partners with a customized modularized service package. The company hasn’t made any new announcements recently. But sympathy momentum has impacted the penny stock on several fronts. Obviously the recent focus on Chinese penny stocks today adds to the bullishness in crypto-related names.
Low Float Penny Stocks To Buy [or avoid]: BOQI International Medical Inc. (NASDAQ:BIMI)
BOQI International Medical Inc. (BIMI Stock Report) has fewer than 12 million shares outstanding with some reports of a float below 6 million shares. Unlike the other companies on this list, BOQI is not related to finance or technology. The company operates pharmacies and sells medical devices. A few things have come about which may actually be fundamental catalysts triggering some attention on the company; not just sympathy momentum.
Most recently, the company announced a memorandum of understanding with Chongqing Guoyitang Hospital Co., Ltd. The MOU has the two companies moving forward via several stages with the ultimate goal of an equity exchange.
“Our telemedicine system for hospitals has made initial progress. At this stage, we need to expand cooperation with hospitals to support online customers. Chongqing Guoyitang Hospital is one of our strategic partners and can play an important role in our telemedicine system.”
Tiewei Song, Chief Executive Officer and President of BOQI International Medical Inc.
How this translates into momentum during the rest of the week is yet to be seen. However, for Tuesday, the penny stock is trending with mid-day momentum pushing BIMI stock to new intra-day highs.