Reddit Penny Stocks Continue Surging But Are They Worth The Risk?
The stock market continues selling off today and many penny stocks weren’t immune to this drop either. Even some of the sectors that tend to perform well in environments like this were seen pulling back during Friday’s morning session. There’s no single root cause but several moving parts to consider.
First, the most recent reaction or lack thereof by Federal Reserve Chairman, Jerome Powell didn’t warm the hearts of investors this week. His commentary on the economic outlook did very little to quell fears of rising rates. Friday morning another bomb was dropped as bond yields continue surging. The 10 year note was trading at 1.57% at 10:30 a.m. EST. This came after reaching an intraday high of 1.626%. The 30-year Treasury bond yield rose to 2.34%. These higher yields triggered more fears on the interest rate outlook and, in turn, markets continued sliding.
Tech helped lead the charge lower on Friday. One of the benchmark Technology ETFs (NYSE: XLK) posted its 4th consecutive day of losses dropping to levels not seen since December. Thursday’s sell-off, by far, was one of the highest days of trading volume for the XLK in almost a year. In fact, the last time the ETF traded 38 million shares or more was March 23rd of 2020. So it makes sense that some traders have experienced some flashbacks to when the pandemic began hitting stocks last year.
Where Should Traders Look Next?
In an email to CNBC, Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said, “This should continue to push treasury yields higher and will present a headwind to those sectors that did so well last year like Technology, Communication Services and, to a lesser extent, Consumer Discretionary (particularly because of Amazon).”
While this doesn’t necessarily mean all penny stocks in these sectors are selling off, it could mean there’s a more negative sentiment to fight through than other sectors. Traders will likely need to be a bit pickier when it comes to making money with penny stocks while markets trade lower. For instance, one of the standout penny stocks this morning was Second Sight Medical (NASDAQ: EYES). Shares gapped up early after the company made premarket headlines. Second Sight announced that it received FDA approval for its Argus 2s retinal prosthesis system.
Right now, Second Sight is working on completion of its business combination with Pixium Vision. So as to when or if the company begins production of the newly approved hardware is still up in the air. if the combination goes through, obviously the new management will have to review the viability of the platform as it pertains to its business model. While EYES stock surged over 100%, many biotechs were getting hit hard. My point is that just because a sector is getting…