Penny Stocks and Small-Caps, What to Know About Trading This Week

3 Penny Stock How To’s And What To Know About Trading in May 2021

As we enter into the last week of May, penny stocks are heating up. Now, it has been a slow few months, but this can be attributed to a correction as a result of intense gains in the past year. Because of this correction, however, many investors are looking for the best and potentially undervalued penny stocks to watch for their lists. 

And, right now, there are plenty that could be worth buying. But as always, it’s important to do your research and due diligence to make the best list of penny stocks out there. Additionally, investors should always know that buying and selling penny stocks is completely dependent on their investing style and volatility threshold. 

With that in mind, there are a few things that all investors should know about trading right now. This includes the pandemic and reopening penny stocks, cryptocurrency and its relation to small caps, and how to benefit from market corrections. 

[Read More] 5 Hot Penny Stocks To Buy? Check These Out For May 2021

These three items heavily apply to trading penny stocks in May 2021, and they could go even further than that. Additionally, given that this is a short trading week due to Memorial Day, we could see more volume than usual as traders look to find intra-week value. Considering all of this, let’s take a look at three penny stock trading how-to’s and what to know about trading in May 2021. 

3 Penny Stock How To’s For Trading in May 2021 
  1. The Pandemic and Reopening Penny Stocks 
  2. Cryptocurrency and Small Caps 
  3. How to Benefit From Market Corrections 
1. The Pandemic and Reopening Penny Stocks 

During the early days of the pandemic, most blue chips and penny stocks fell sharply in value. This made sense as retail shopping was down, travel was down, and for the most part, the world economy has shut down. However, as we got used to the regulations surrounding Covid, slowly the world began to open back up, while albeit in a different way. 

This resulted in many companies shooting up in value as they related to the pandemic. For example, many marijuana penny stocks climbed, as the demand for cannabis was exponentially higher. In addition, e-commerce companies, and those offering work-from-home and educate-from-home solutions, also pushed up dramatically. 

So now, with vaccine rates higher than ever and increasing by the day, in the U.S. at least, the pandemic seems to be coming to a close. This means that those companies that were severely impacted by the pandemic, are now beginning to shoot back up in value.

reopening penny stocks

This includes travel companies, energy producers, and retail businesses to name a few. Because of this, there are a lot of ways to benefit. And, given that Summer is a time when travel typically heightens alongside retail sales, many analysts expect correlating companies to see higher demand. 

While this may take some time, we will likely begin to see positive economic data in the coming months. And for that reason, it’s important to stay up to date with what is going on in the U.S. as it relates to the pandemic. So this week, penny stock investors should look out for companies that could have a role in economic reopening. 

2. Cryptocurrency and Small Caps 

Ah, cryptocurrency. The future of the transactional economy and a way to invest in an extremely volatile financial instrument. Ever since the rise of DogeCoin this year, many penny stock investors have turned their eyes to cryptocurrency. This includes the likes of Bitcoin and Ethereum, as well as more underground cryptos such as SafeMoon and others. 

While cryptocurrency and penny stocks do not necessarily have a lot to do with one another, because they both tend to be relatively cheap, often they can speak volumes about the other. When penny stocks are up, investors will look to crypto to see if there is a corresponding spike and vise versa. The past week saw a major correction with most cryptocurrencies. This was quickly followed by a large spike, and then mostly sideways trading. 

cryptocurrency and penny stocks

And while it may be difficult to draw comparisons between the two at times, some penny stocks are directly related to crypto. This includes those that mine cryptocurrency or produce the machines that are used in mining.

It’s important to note, however, that the more pure-play a crypto or blockchain penny stock is, the more volatile it will be. This means that if a company has a major involvement in crypto and cryptocurrency holdings, for example, it most likely will rise and fall with the price of popular coins. 

However, there are also a lot of opportunities for investors to find. Many believe that we are just reaching the surface of what crypto can do. And because of this, there could be a lot of growth left to occur with both crypto and penny stocks that relate to it. Considering this, investors should watch out for what cryptocurrencies and small caps do this week. 

3. How to Benefit From Market Corrections 

Benefitting from market corrections is one of the best ways to see short-term gains (or losses) in your portfolio. This goes along with the classic saying of ‘buy the dip’. Because the stock market tends to move up and down in a natural ebb and flow, there are always ways for investors to take advantage. 

[Read More] 7 Penny Stocks to Watch With Crypto News Sparking a Market Dip

The first step is to find companies that could be undervalued or those that have just made sizable downward jumps. On a side note, these downward trends should be only due to volatility and not due to any poor company news.

market correctionp penny stocks

The next step is to make a penny stocks watchlist, consisting of these companies. This is the best way to keep track of which small caps could be worth watching and which are not. Lastly, it’s time to put in the effort and research a company as much as you can. This is the only way to know exactly what you are getting into with a given investment. 

Because a market correction such as the one we are in right now, has not occurred in months, now is the time to brush up on your forward strategy. And as always, things could turn around and come back even stronger than before. With this in mind, using market corrections to your advantage will always be a great tool in your arsenal. 

3 Penny Stocks to Watch
  1. MICT Inc. (NASDAQ: MICT)
  2. BRF S.A. (NYSE: BRFS)
  3. Vinco Ventures Inc. (NASDAQ: BBIG)
Are Penny Stocks Worth It?

At the end of the day, investing in penny stocks is all about your strategy and your threshold for volatility. If you don’t like stocks that swing wildly during the day, penny stocks may not be right for you.

[Read More] 3 Robinhood Penny Stocks Under $2 to Watch Next Week

However, if you are looking to find stocks that make large short-term spikes or drops then stocks under $5 could be worth it. But, knowing where you stand and what your investing goals are will always be the best way to identify which penny stocks, if any, are worth adding to your portfolio. Considering all of this, are penny stocks worth it? The choice is yours. 

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