Penny Stocks to Buy Using Technical Analysis for April 2019

The majority of retail investors believe that the markets are soaring higher. Yet, if you look at the broader major indexes (Dow Jones Industrial Average, NASDAQ, Russell 2000), you'll see that they were all higher six months ago than they are now. With the exception of the NASDAQ, the others were trading above current levels even if you look back a few weeks.

At the same time, there has been a rise in various types of volatility: intraday swings, bid/ask spreads and price move magnitudes. Even some theoretically and historically stable equities have been whipsawing by the hour.

Increased volatility often points to a market top or bottom, thus implying an upcoming trend reversal. We saw it first among individual stocks like Tesla, Inc. (TSLA), Carnival Corporation (CCL), Coty Inc. (COTY) and Xerox Corporation (XRX), but that eventually spilled over to the broader exchanges.

Increased volatility all adds up to one thing for active traders: opportunities. For profits. So, I'll just call them profitunities. We have been having some pretty strong results, but let's see if we can keep that momentum going with a few of the equities we discuss below. You have heard the phrase, "The trend is your friend." Well, for active traders, volatility is your friend.

I often use phrases such as "imperfect" when I discuss specific patterns on the chart. My approach to candlestick charts is quite different than most super-technical traders, since I use them mainly as a tool to understand the psychology of investors (and thus gain an enhanced understanding about which direction the shares will travel next).

The captain of the high school Japanese Candlestick Charting Team may tell you the exact percentages of any set-up for it to be considered "official." For example, does the three white soldiers pattern require the stock to gap down to start each of the three days? Yes, it does, for the pattern to be official. However, if the shares open flat on one or two of the days, I may still trust the pattern if various other factors lead me to that conclusion.

If my results are not what I'd want, I would become more detail oriented. Until then, I find that staying out of the weeds results in better returns and an improved understanding of the psychology of investors.

Playing a game of "Clue" will not help you figure out an actual crime scene. Others can do the rolling of the dice and tap pieces around the board … I just want to catch the perp. If my superior approach ever stops working, you will be the second to know.

<Disclosure: Many of the stocks mentioned below were also profiled, traded or otherwise discussed in the Peter Leeds Newsletter. As well, Peter may own shares in some of the investments mentioned, in which case that fact will be clearly indicated. See below for an additional important disclaimer regarding penny stocks.>

I selected VEON Ltd. (VEON) last month, and it did poorly. However, I don't think I am done with this one quite yet. Recent activity is suggesting that it will have a nice move higher in the short term.

Over the past three trading days (March 27 through March 29), VEON has displayed two spinning tops after a significant price drop. What do spinning tops represent? Indecision among investors … and thus an increased likelihood of a trend reversal. That trend since March 19 has been decidedly down.

As a bonus, that declining price has seen mind-blowing trading volume. What does trading volume represent? Commitment among traders, the trustworthiness of the pattern and momentum of the move.

Think of a gas pedal – that represents the same thing to a car as trading volume represents to any candlestick charting patterns. Hit the gas, and you go faster, whether in drive or reverse. See increased trading activity? The pattern is more likely to play out, whether that means the shares will climb or fall.

After falling for seven (of the past eight) trading days, KemPharm, Inc. (KMPH) just Friday formed a perfect doji pattern. The implication is that this downtrend will be reversing higher from here.

In addition, Thursday showed a textbook spinning top, displaying that the negative move is losing momentum. Combined with super-high trading activity every day since April 25 (which was the day after the tweezer bottom I told you about last month), frustrated shareholders have dumped shares aggressively.

At this point, I doubt there is anyone left who wants out of KemPharma stock who has not already sold his or her shares. My premise is given support by the oversold level of the relative strength index (RSI), which is just below 30, and the Money Flow indicator suggesting that $3 million has come out of shares on a downtick, over and above any money going in on an uptick.

Last month, I told you about the morning star pattern setting up on the chart of WidePoint Corporation (WYY). It played out well, with shares hitting 52 cents within two weeks (for a 20% climb).

Since WidePoint has given back most of that gain and is now setting up another morning star pattern, we may be able to take the stock for another ride. The set-up is not perfect – the first day of three should be a bearish/negative candle, not a bullish/positive candle. Also, shares ideally would gap higher into day three of the pattern, rather than start flat.

This is an example of what I was talking about in the note about candlestick chart patterns in the earlier part of this article. This is by no means a textbook morning star pattern, yet it is revealing the exact same psychology. As such, I believe that even this loose and imperfect on-chart indicator is implying a price increase.

This is not under $5 per share (the definition of a penny stock), but in my defense, it used to be when it was first profiled by our analysis team. Coffee Holding Co., Inc. (JVA) stock even rose as high as $7.79 about six weeks ago, and because we spoke about it through my newsletter, my team and I need to keep an eye on this stock on an ongoing basis.

While doing that, I noticed a turning of the sentiment tide over the past two trading days.  Two dojis in a row tell of an upcoming shift in the downtrend. The expected trend reversal might be the beginning of a rise back above $7.00 and certainly past $6.00.

It is important to note that any candlestick patterns make me nervous with this one, since the trading volume is much lower than I would typically like to see (to give any weight or reliance to the patterns). Just be ready to jump ship immediately if these shares dip below $5.24. Of course, that is only an opinion of what I would do – it is not trading advice.

After a hanging man pattern on March 12, shares of The Goldfield Corporation (GV) have slid all the way down from $2.87 to $2.21. Friday showed a jump of five times in trading activity, which often signals a bottom after a long slide when combined with other factors.

The downward momentum has shown signs of slowing over the past two days. Furthermore, the RSI value of approximately 25 indicates a significantly oversold situation. Four months ago, Goldfield stock had a support level right at $2.00. The shares climbed from there, all the way to the trend reversal hanging man pattern mentioned above.

The shares may see support at the threshold price of $2.20, and if that fails, look for the $2.00 price point to hold its ground. You may want to treat any prices of $1.99 or lower as a stop-loss trigger price, although those with tighter stop-loss orders may decide to use $2.10 or even $2.15.

Note and disclosure: While I understand the confusion, Goldfield is not a mining company. However, it does most of its electrical work for precious metals producers and explorers. And in terms of disclosure, Goldfield was one of our former features from the Peter Leeds Newsletter.

The past three days have established a very bullish three white soldiers pattern on the chart of AcelRx Pharmaceuticals, Inc. (ACRX) … almost. I say "almost" since (if you want to be annoyingly technical) day two did not gap down from the day one open. However, in my view, this won't make a difference – it is another good example of what I am talking about in the note above about candlestick patterns.

As of Feb. 14, trading volume exploded due to Credit Suisse Group initiating analyst coverage. The firm rates AcelRx stock an Outperform and slapped a $7.00 price target on the shares. The much higher trading volume has remained lofted ever since, and there are a lot of eyeballs on this one now.

There is a support level at $3.00, but I doubt that level will get tested any time soon. Be quick to jump ship if this one breaks down below your stop-loss prices, but if it does indeed trade in the direction that the three white soldiers are pointing, I believe that AcelRx stock will hit $3.80 very soon.

This may be a fun trade with a compelling risk/reward profile. It is my belief that there is a support level at $1.00 even. Right now, shares of Regulus Therapeutics Inc. (RGLS) are trading at $1.02.

This is not trading advice – it is just one possible example! If you were to use a stop loss just beneath the support/threshold level, using for example $0.98 as your trigger price to sell the shares, you would be facing potential downside risk of only a few percentage points. If the shares climbed instead, you may see quite significant short-term gains of many times more than the small possible loss.

Besides the big one-day decline on March 15 from the $1.60 intraday top all the way down to $1.17, there really was not a lot that stood out to me on this chart. However, with the compelling risk/reward ratio, I believe that Regulus Therapeutics stock may be one that some traders want to grab a piece of.

After publication last month, Uranium Energy Corp. (UEC) immediately formed an "imperfect" tweezer bottom, after what had been a long downtrend. Needless to say, the shares climbed from there, and as of yesterday (Friday), the stock had touched $1.45.

Looking back over the most-recent six weeks, if you squint your eyes just a bit, you may see a poor man's cup and handle pattern. The most significant part of that set-up is always the handle – specifically, the level of trading volume along it, which represents both consolidation and shareholder turnover.

From my fundamental perspective, I do believe that the stock price is going to go a lot higher in the very long term, especially as (and if) the underlying precious metals increase in value. Of course, that is irrelevant for the purposes of this technical analysis (short-term) article, as is the company's excellent management team, strong operational and respectable progress – sometimes I just can't help mentioning a few fundamentals.

I never give trading advice, but if I were to tell you what I would do personally, I would suggest a stop loss at prices somewhere between $1.29 and $1.33. If Uranium Energy continues its move higher, you may benefit by letting your gains run.

Be extra alert and quick with your trades. We are at a turning of the tide with the markets, and when shares bounce around now, they tend to do it more significantly and quickly than usual.

Are your trades going the wrong way or not playing out like your original expectations? Rip them off in one motion, like a band aid. However, if your trades are cooperating with your investing view, let your gains run, rinse and repeat.

Peter Leeds is the author of several books, including the international bestseller, "Penny Stocks for Dummies." He and his team also issue a newsletter devoted exclusively to penny stock picks and analysis, as well as a popular YouTube channel – PeterLeedsPennyStocks.

<Important disclaimer: Penny stocks are volatile and can generate catastrophic losses. Price levels in this article are hypothetical and do not represent buy recommendations or investment advice. Keep in mind that it's your responsibility to make trading decisions through your own skilled analysis and risk management.>