Best Penny Stocks for August 2024, Using Technical Analysis

These are some of the penny stocks with the most interesting charts using technical analysis over the past month

Penny stocks are stocks of small companies that trade for less than $5 per share. For that reason, a small movement in the price of a penny stock can produce a large percentage gain. The low price can be attractive to smaller investors, especially given the easy access to many trading platforms. But while penny stocks offer the potential for big 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 a portfolio, but given the greater risks, there is also the potential for large losses.

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

Absci Corporation (ABSI)

• Price: $4.48
• 30-day return: 13.4%
• Average daily trading volume: 2.18 million
• Exchange: Nasdaq

Absci Corporation (ABSI) is a biotechnology company using artificial intelligence (AI) and synthetic biology to create protein-based drugs. A successful test of support at the 50-week moving average for the stock completed recently at $2.80. That low established a higher swing low and the first pullback following a bull breakout above the 50-week line. It shows improving demand and a chance for the stock to break out above $6.72. The $2.80 swing low must be retained as support for a bullish scenario to continue to unfold.

Hyliion Holdings Corp. (HYLN)

• Price: $2.38
• 30-day return: 46.9%
• Average daily trading volume: 393.32 million
• Exchange: New York Stock Exchange (NYSE)

The stock of Hyliion Holdings Corp. (HYLN)—which manufactures hybrid and electric powertrains for trucks—triggered a bullish reversal off a trend bottom recently, as it rallied above the March swing high of $1.96. A bullish trendline break initially indicated improving demand in late June. That was the first rise above a prior swing high since a blow-off top of $58.66 was hit in September 2020. Support is likely around the 50-week line, currently at $1.25.

NN, Inc. (NNBR)

• Price: $4.08
• 30-day return: 34.2%
• Average daily trading volume: 385,600
• Exchange: Nasdaq

NN, Inc. (NN) designs and manufactures metal and plastic components in 26 facilities across four continents. Signs of a bullish trend reversal in the stock are heating up, as it has rallied back above its 200-week moving average for the second time recently. If the stock can remain above the 200-week line at $3.83, it has a good chance of continuing to strengthen, initially with a bullish breakout above the most recent swing high of $5.40.

Nuvation Bio Inc. (NUVB)

• Price: $3.74
• 30-day return: 25.1%
• Average daily trading volume: 1.91 million
• Exchange: NYSE

Nuvation Bio Inc. (NUVB) is a biopharmaceutical company developing therapeutics to target cancers that are among the most difficult to treat. The stock looks like it may be preparing to launch higher following recent signs of a bullish trend reversal. The stock triggered a bullish breakout above its 50-week moving average in the second half of January 2024. That was followed by a sharp advance to a swing high of $4.16 near the end of March. Its trading range during that week was 151%. Subsequently, a bull pennant pattern formed, and a breakout triggered in late July above $3.20.

The Honest Company (HNST)

• Price: $3.88
• 30-day return: 33.3%
• Average daily trading volume: 1.64 million
• Exchange: NYSE

Stock of The Honest Company (HNST)—which sells non-toxic, natural baby products—triggered a bullish reversal above a prior swing in late November 2023. It continues to show signs of strengthening. A couple of days earlier, a successful breakout above the 50-week moving average occurred. The 50-week line should continue to hold as support during weakness, while a breakout above the recent swing high of $4.89 confirms a rising trend.

What to Know About Penny Stocks

Many penny stocks trade via over-the-counter (OTC) markets, which means they have minimal regulatory oversight and little analyst coverage, making it difficult to access accurate company information.

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

While penny stocks are a riskier investment than established stocks due to their volatility, the potential for high returns is attractive to some investors.

How We Chose the Best Penny Stocks

There were a few criteria used to find the stocks listed in this article. Of course, the price of the stock needed to be below $5 per share. The stocks needed to have a minimum average daily trading volume of 100,000 shares—used to help ensure liquidity. The stock also had to have at least 24 months of trading history.

Then, the charts were reviewed for bullish patterns, including breakouts above trendlines, key resistance, and moving averages. Candlestick patterns were also considered, as we looked for signs that pointed to a bullish trend reversal or indications that a trend was strengthening. Still, no one can predict what will happen in the future, and past performance is not a guarantee of future performance.

Penny Stock Advantages and Disadvantages

The low price of penny stocks offers investors high potential for growth, and they can give smaller businesses a platform to access funding. But while these stocks can bring investors significant gains, they also carry the risk of significant losses.

There are greater risks associated with investing in penny stocks than with more established stocks. One disadvantage is that most institutions, including mutual funds and many ETFs, are prohibited from purchasing stocks below $5 per share. Penny stocks usually don’t have much liquidity. It can also be difficult to find solid public information about penny stock companies that trade over the counter. Given the additional risks, penny stocks are not suitable for all investors, especially those with a low risk tolerance.

There are ways to mitigate the added risks, starting with raising the minimum price and average trading volume and selecting penny stocks that trade on the NYSE or Nasdaq. Overall portfolio risk can be contained by allocating only a small amount of total capital to the penny stock market.

The Bottom Line

There are some benefits but also significant risks associated with investing in penny stocks. Investors can mitigate those risks by allocating only a small portion of their total portfolio to penny stocks and using technical analysis to assess stock performance. Here, we screened for penny stocks that had a high return over the last 30 days and displayed bullish technical patterns.

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As of the date this article was written, the author does not own any of the securities listed above.

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