Volatility rose sharply in the first half of February, driven by rising Treasury yields and growing odds that the Federal Reserve will raise interest rates. It’s projected that the Fed will increase rates at least three times in 2018. Major stock indices plummeted in early Feb but eventually found their footing and have now recouped the majority of losses. Even so, it’s likely the broad market has entered a correction or rangebound phase that encourages profit-taking and rotation into new instruments.
The Russell-2000 small-cap index fell more than 11% during the selloff and has now settled in the upper half of a trading range in place since September. Selling pressure spared the majority of penny stocks and low-priced stocks, with profit-taking focused on high growth plays that rallied to unsustainable levels in the January uptrend. A healthy share of freed up capital could rotate into these issues in coming weeks, as speculative appetite returns to normal levels.
) was a top penny stock pick and advanced by 30%. Digital Turbine, Inc. (APPS) added more than 16% during the month while Safe Bulkers, Inc. (SB) rose more than 10%. These issues have returned in the March list, along with two February plays that have drawn bullish consolidation patterns. Given the relatively strong performance of industrial plays, the new penny stocks to watch list also includes two stocks that should benefit from new infrastructure spending and the strengthening world economy.
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Penny Stocks to Keep Watching
) posted an all-time high at $10.23 just a few sessions after coming public at $8.50 in April 2015. The junior biotech stock then turned sharply lower, losing ground into the second half of 2017 when it posted an all-time low at 88-cents. The stock finally ended the multi-year downtrend when it broke out above a trendline of lower lows in September and has now entered a healthy uptrend that could eventually reach the IPO print above $8.00. ) topped out at an all-time high in the low-50s in 2012 and rolled over, entering a brutal decline that continued into March 2017’s all-time low at 82-cents. A bounce into October stalled at $4.09, giving way to a rectangular trading range that’s holding support at the 200-day EMA near $2.70. The next bounce could gain traction, lifting the stock back to range resistance, ahead of a breakout that targets the 2015 high at $6.74. ) ended a multi-year uptrend in the low-20s in the fourth quarter of 2014 and entered a decline that reached a 9-year low at $1.60 in June 2017. The stock built a basing pattern at that level and turned higher in August, stalling…