One of the best moving penny stocks over the last week or so has been Groupon, Inc. (NASDAQ/GRPN), which has been in the doldrums for quite a while. The company was first listed on the stock market for $20.00 a share, but it dropped to penny stock status this summer after struggling to meet expectations.
After news of a large investment from a well-known New York hedge fund, the stock improved considerably. Groupon turned out to be a solid piggyback trade, and it might even see continued momentum going into next week.
This is obviously a tough stock market for investors. We have low interest rates and a very accommodative monetary policy, but what we don’t have is growth, and the lack of momentum in the economy translates into a lack of momentum in the stock market. Event-driven trades among penny stocks are still worthwhile in this market, but you have to be nimble with your positions; a buy-and-hold strategy just doesn’t cut it in this kind of market.Groupon’s stock chart is below:
Chart courtesy of www.StockCharts.com
Another penny stock that’s experienced tough times but recently turned higher is Commtouch Software Ltd. (NASDAQ/CTCH). This penny stock is a technology company based in Israel whose latest quarterly results showed a rebound in business conditions. I’ve noticed quite a few small- and micro-cap technology companies reporting better financial results, although large-cap technology companies are mostly reporting flat numbers. Commtouch Software’s chart is featured below:
Chart courtesy of www.StockCharts.com
As I’ve said, there isn’t very much momentum in the stock market these days, so you certainly can’t fall in love with any positions. There is value in this market, and there are event-driven trades in penny stocks, but you have to be willing to sell off quickly. The stock market’s recent bounce-back definitely lacks conviction, and I think we’ll get more downside soon. The stock market isn’t overvalued, which is beneficial, but there is no real reason why the indices should be advancing.
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