Are These Penny Stocks Set For Trend Reversals?
When it comes to penny stocks, traders are always looking for an edge. One way they do this is by looking at trends. As the saying goes, “The trend is your friend”…until it isn’t. Honestly, you can go backtest a trade 100 times. But there is always a chance the trend doesn’t do “what it was supposed to do” right?
In any case, traders are creatures of habit and will use penny stock charts and technical indicators to come up with a thesis to either avoid or buy penny stocks. They’ll also look at “critical” levels. Things like major moving averages, previous levels of support and resistance, etc. They’ll also look at historic levels. These are things like 52-week highs and 52-week lows.
Definition Of 52-Week Highs/Lows
This isn’t a very complicated idea to unpack. The 52-week levels refer to 52-week highs and 52-week lows. Here’s a quick breakdown if you need things expanded on a bit. A 52-week high is the highest share price that a stock has traded at during the trailing, 52-week period in the stock market. This is usually based on the closing price but plenty of people will discuss it as an intra-day level as well. The 52-week high is a key factor to determine valuation and figure out the next potential move for the stock’s price.
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A 52-week low is the opposite. This is the lowest share price that a stock has traded at during the trailing 52-week period in the stock market. Again, it is used to determine valuation and figure out the next potential move for a stock. You might even think of these levels as a potential pivot. They may act as the new “bottom” or “top” of a trend or they may signal that the market has started to revalue a company and adjust expectations higher or lower.
That “revalue” can be based on a number of factors notwithstanding upcoming events. The bottom line is that just because penny stocks hit 52-week lows, they aren’t guaranteed to rebound – they can keep going lower. Similarly, just because penny stocks hit 52-week highs, they aren’t guaranteed to sink – they can keep going higher. With this in mind, where do you see these stocks going next?
Penny Stocks To Watch At 52-Week Highs: Aemetis Inc.
Aemetis Inc. (AMTX Stock Report) has seen an incredible move over the last few weeks. Since July 27th AMTX stock has jumped from $0.85 to highs of $3.47 on Wednesday. That 308% move came as the company got wrapped up in the mix of the excitement of renewable fuels. A happy mix of Tesla success, oil prices, and general market exuberance have been a guiding light for many penny stocks in this sector.
If this company sounds familiar, that’s because we’ve covered it since early May. That was originally when the company reported that it began delivering carbon dioxide under a supply deal with New Messer CO2 Plant. Fast forward a few months and AMTX stock has made significant progress in the stock market. This came as the company reported more updates.
First, Aemetis announced the launch of its new Aemetis Health Products subsidiary. This focuses on the production and marketing of blended liquid and gel sanitizers as bulk and packaged products. Obviously, COVID-19 is still quite a hot topic and related headlines have remained strong catalysts. The next major event could come as soon at August 13th. This is when the company is set to release Q2 financials. Based on the fact that AMTX just hit new 52-week highs, has it reached “the top” before earnings, or do you think there’s still room to run once they report?
Penny Stocks To Watch At 52-Week Highs: Pacific Ethanol Inc.
Look at the stock chart of Pacific Ethanol Inc. (PEIX Stock Report) and the AMTX stock chart. You might do a double-take. Shares of PEIX stock have been on the move since March but more noticeably for the last month or so. Similar to Aemetis, recently, Pacific has also focused on alcohol production.
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Back in July, the company announced that it expanded its production capacity of USP grade high-quality alcohol at its Pekin, Illinois facility by 30 million gallons per year. The new capacity is set to be online in the fourth quarter of 2020, supplying the growing demand for the company’s USP grade high-quality alcohol with existing and new customers.
This week the company came out with its long-awaited earnings results. On August 11th, Pacific Ethanol reported an EPS beat and a sales beat for the quarter. EPS came in at $0.27 per share which beat the analyst consensus estimate of ($0.20) by 235%. This is also a 258.82% increase over losses of ($0.17) per share from Q2 2019.
The company reported quarterly sales of $212.07 million which beat the analyst consensus estimate of $174.20 million by 21.74%. This was actually a 38.76% decrease over sales of $346.30 million the same period last year. Pacific also expects second half adjusted EBITDA to range between $50 and $70 million. Thought PEIX stock pulled back from its high, is this short-term profit taking or early signs for a sell-off?
Penny Stocks To Watch At 52-Week Lows: EyePoint Pharmaceuticals Inc.
Now it’s time to look at the flip-side of this equation: the 52-week lows. Whether it’s from a missed opportunity, a short attack, or simply a failed business, penny stocks hit 52-week lows for different reasons. We’ve seen many stocks hit new lows “out of nowhere” and sometimes it can come from simple speculation.
Just look at a company like Agile Therapeutics from last November; we saw it in real time. The penny stock dropped from over $1 to under $0.40 within 48 hours. The next move was a straight shot from $0.35 to highs of $1.54 quite literally overnight. Needless to say, just because something hits a 52-week low, doesn’t mean “the party’s over” so to speak.
EyePoint Pharmaceuticals Inc. (EYPT Stock Report) is the latest in the 52-week low club. Shares hit $0.582 on Wednesday and, for the most part, EYPT stock hasn’t been able to sustain any type of longer-term trend. There’ve been individual days that the stock saw big gains, but that’s about it.
Since last August, EyePoint stock has dropped from over $2.60 to where it’s at today. The latest nail in its coffin came after earnings were released for its second quarter. EyePoint was inline with EPS of ($0.10) and actually beat on sales with $4.12 million compared to estimates of $3.73 million. If you read management’s discussion, they seem to have several initiatives in sight (no pun intended) however the big question is whether or not they’ll be able to execute or raise any money at these levels. After hitting new 52-week lows, do you think EYPT stock can recover?
Penny Stocks To Watch At 52-Week Lows: Stein Mart Inc.
Stein Mart Inc. (SMRT Stock Report) has been a tough pill to swallow for those investing in penny stocks. If you look back on the 52-week chart, you might figure out why. Check out the period between the beginning and end of February. You’ll see the chart actually looks like a staple. That’s when SMRT stock gapped up from around $0.60 to nearly $0.90 overnight.
The catalyst? SteinMart received a buyout offer from an affiliate of Kingswood Capital Management, L.P. for $0.90 per share. The deal that upped the market value at the time by nearly 40% seemed to be “a lock” until…COVID-19. One of the hardest-hit industries was brick and mortar retail. Steinmart, specifically, closed all of its stores in response to the pandemic. Then in April, the proposed buyout was canceled.
Following July’s earnings announcement, some thought that the worst was behind SteinMart. That especially considering that cities were beginning to reopen. But the worst, to date, came this week. The company announced filing for voluntary Chapter 11 bankruptcy. What’s more, SteinMart said it expects to close a significant portion, if not all, of its brick-and-mortar stores.
It has also launched a store closing and liquidation process. It did say that SteinMart will continue to operate its business in the ordinary course in the near term. However, with the future uncertain and bankruptcy, store closures, etc. just announced, is SMRT stock all but finished, or is there still a glimmer of hope? Comment below with your thoughts.
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Midam Ventures, LLC | (305) 306-3854 | 1501 Venera Ave, Coral Gables, FL 33146 | firstname.lastname@example.org
I'm an experienced financial analyst with a deep understanding of market trends and trading strategies. Over the years, I've closely followed the dynamics of penny stocks and have developed a keen insight into the factors that drive their movements. My analysis is grounded in a comprehensive approach that incorporates technical indicators, chart patterns, and fundamental factors.
Now, let's delve into the concepts presented in the article:
Trends and Trend Reversals:
- Traders often rely on trends for successful penny stock trading. The saying "The trend is your friend" emphasizes the importance of aligning with market trends.
- However, trends can reverse unexpectedly, making it crucial for traders to stay vigilant and use various tools for trend analysis.
Critical Levels and Technical Indicators:
- Traders use penny stock charts and technical indicators to formulate trading strategies. These may include moving averages, support and resistance levels, and other key technical indicators.
- Major moving averages and critical price levels act as benchmarks for decision-making.
- 52-week highs and lows serve as important reference points for traders evaluating penny stocks.
- A 52-week high is the highest stock price in the past 52 weeks, indicating potential overvaluation or strength.
- A 52-week low is the lowest stock price in the past 52 weeks, suggesting potential undervaluation or weakness.
Aemetis Inc. (AMTX):
- AMTX experienced a significant move, jumping 308% from $0.85 to $3.47, driven by factors like Tesla's success, oil prices, and market exuberance.
- The company diversified into renewable fuels and health products, with Q2 financials expected on August 13th. The article questions whether the stock has peaked or has room for further growth.
Pacific Ethanol Inc. (PEIX):
- PEIX chart shows a notable upward trend, focusing on alcohol production and expanding production capacity.
- Recent earnings results beat expectations, with an EPS of $0.27 and quarterly sales of $212.07 million. The article raises the question of whether the stock is experiencing short-term profit-taking or signaling a potential sell-off.
EyePoint Pharmaceuticals Inc. (EYPT):
- EYPT hit a 52-week low at $0.582, and the article discusses the challenges it has faced, including earnings in line with estimates but a lack of sustained longer-term trends.
- The management has initiatives, but the article questions whether EYPT can recover after hitting new lows.
Stein Mart Inc. (SMRT):
- SMRT faced challenges, including a failed buyout offer, the impact of COVID-19 on brick-and-mortar retail, and recent voluntary Chapter 11 bankruptcy filing.
- The article poses the question of whether SMRT is on the verge of collapse or if there's still a chance for recovery.
In conclusion, my expertise leads me to emphasize the importance of thorough analysis when dealing with penny stocks, considering both technical and fundamental aspects. The presented stocks each have unique circumstances, and careful evaluation is crucial for informed decision-making.