Best Penny Stocks for August 2024 Using Technical Analysis

Penny stocks are small company stocks that trade for less than $5 per share. Because of this, a small move in the price of a penny stock can result in a large percentage of profit. The low price can be attractive to smaller investors, especially given the easy access to multiple trading platforms. However, while penny stocks offer the potential for large gains, they tend to be more volatile than established stocks and are therefore a much riskier investment.

Some investors use penny stocks as part of a portfolio diversification strategy, taking a small portion of a larger portfolio and focusing on high-risk, high-reward opportunities. A small allocation to penny stocks can minimize their impact on the portfolio, but given the greater risk, there is also the potential for large losses.

Below is an analysis of the best penny stocks for August 2024, screened for high returns over the past 30 days and bullish technical patterns. All charts and data are current as of July 26, 2024.

• Price: $4.48
• Return within 30 days: 13.4%
• Average daily trading volume: 2.18 million
• Stock exchange: Nasdaq

Absci Corporation (ABSI) is a biotechnology company that uses artificial intelligence (AI) and synthetic biology to create protein-based drugs. The stock recently completed a successful test of support at the 50-week moving average at $2.80. This low established a higher swing low and the first correction after the bull broke above the 50-week line. This shows improving demand and a chance for the stock to break above $6.72. The swing low of $2.80 must be maintained as support for the bull scenario to continue to develop.

Shares of Hyliion Holdings Corp. (HYLN) — a manufacturer of hybrid and electric truck drivetrains — have recently sparked a bullish trend reversal as they rose above the March high of $1.96. The breakout of the bullish trendline initially indicated improving demand in late June. It was the first rise above the previous high since peaking at $58.66 in September 2020. Support is likely near the 50-week line, currently at $1.25.

• Price: $4.08
• Return within 30 days: 34.2%
• Average Daily Trading Volume: 385,600
• Stock exchange: Nasdaq

NN, Inc. (NN) designs and manufactures metal and plastic components at 26 facilities on four continents. There are increasing signs of a reversal in the stock’s uptrend as it recently rebounded above its 200-week moving average for the second time. If the stock can hold above the 200-week line at $3.83, it has a good chance of further gains, initially with a bullish breakout above the recent swing high at $5.40.

• Price: $3.74
• Return within 30 days: 25.1%
• Average daily trading volume: 1.91 million
• Stock exchange: NYSE

Nuvation Bio Inc. (NUVB) is a biopharmaceutical company developing drugs for cancers that are among the most difficult to treat. The stock looks like it could be getting ready to rally after recent signs of a reversal in its uptrend. The stock produced a bullish breakout above its 50-week moving average in the second half of January 2024. It then surged to a high of $4.16 in late March. The trading range for the week was 151%. A bullish pennant pattern then formed, and a breakout above $3.20 occurred in late July.

• Price: $3.88
• Return within 30 days: 33.3%
• Average daily trading volume: 1.64 million
• Stock exchange: NYSE

Shares of The Honest Company (HNST) — which sells non-toxic, natural baby products — have sparked a bullish reversal above their previous swing high in late November 2023. They continue to show signs of strength, having successfully broken above the 50-week moving average a few days earlier. The 50-week line should continue to hold support on a downtrend, while a break above the recent swing high at $4.89 confirms the uptrend.

What You Need to Know About Penny Stocks

Many penny stocks trade on over-the-counter (OTC) markets, meaning they are subject to minimal regulatory oversight and little analyst coverage, making it difficult to access accurate information about the company.

However, the penny stocks we’ve identified in this article are all listed on the New York Stock Exchange or Nasdaq, meaning they are subject to the same listing requirements as any other company on those exchanges. These requirements are designed to ensure that only high-quality securities are available for trading on the exchange.

Although penny stocks are a riskier investment than publicly traded stocks due to their volatility, the potential for high returns seems appealing to some investors.

How We Picked the Best Penny Stocks

We used a few criteria to find the stocks mentioned in this article. Of course, the stock had to be priced below $5 per share. The stock had to have a minimum average daily trading volume of 100,000 shares — which helped ensure liquidity. The stock also had to have at least 24 months of trading history.

The charts were then checked for bullish patterns, including breakouts above trendlines, key resistance, and moving averages. Candlestick patterns were also considered as we looked for signs that the bullish trend was reversing or signs that the trend was strengthening. Still, no one can predict what will happen in the future, and past performance is no guarantee of future results.

Advantages and disadvantages of penny stocks

The low price of penny stocks offers investors a lot of growth potential and can provide smaller businesses with a platform to access financing. But while these stocks can provide investors with significant gains, they also carry the risk of significant losses.

Investing in penny stocks comes with a higher risk than investing in more established stocks. One drawback is that most institutions, including mutual funds and many ETFs, can’t buy stocks below $5 per share. Penny stocks tend to be illiquid. It’s also hard to find solid public information about penny stock companies that trade over the counter. Given the added risk, penny stocks aren’t suitable for all investors, especially those with a low risk tolerance.

There are ways to mitigate the additional risks, starting with raising the minimum price and average trading volume and choosing penny stocks that trade on the NYSE or Nasdaq. The overall risk of the portfolio can be reduced by allocating only a small portion of the total capital to the penny stock market.

Summary

There are some benefits, but also significant risks, associated with investing in penny stocks. Investors can mitigate these risks by allocating only a small portion of their portfolio to penny stocks and using technical analysis to evaluate the stock’s performance. Here, we have searched for penny stocks that have had a high return over the past 30 days and have exhibited bullish technical patterns.

Comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Please read our disclaimer for more information.

As of the date of writing this article, the author did not own any of the securities listed above.