We talk about penny stocks all day, every day. Sure, there are stocks that breakout 50-100% daily. Many of these are short-lived and end up coming back down almost immediately. Whether it’s due to a discounted share offering or sell-off because a speculative event didn’t happen, the reason why they drop is secondary. Traders want to know why penny stocks are breaking out, first.
With the case of SGOCO Group Ltd. (NASDAQ: SGOC), the now-former penny stock took to the skies two days in a row. Albeit, day two was the highlight, unusually higher volume began coming in earlier this week. Also, for those “playing” at home, you might remember SGOC stock from earlier in July when it had its first “unusual” trading day. At the time, shares “only” jumped from $2.45 to highs of $3.75. Sure the 53% move was great for traders on July 1st. But the days to follow didn’t yield the same type of momentum. In fact, SGOC stock price ended up pulling back to as low as $2.09 during that time.Why Is SGOC Stock Running?
We mentioned SGOC stock on Thursday (7/8) in our article, “8 Top Tech Penny Stocks to Watch in July 2021.” As a tech company, SGOCO focuses on myriad products and solutions for its customers. These range from LCD and LED products to green energy solutions. It also has a VR tech offering, a money lending service, and even a fintech solution. The bulk of its revenue, according to the Hong Kong-based company, comes from its money lending services.
Not much has been released in the form of news headlines from SGOCO. However, a few days ago on the 7th, the company filed its Form 20-F. This is a form submitted by “foreign private issuers” with listed stock on US exchanges. This Form 20-F is submitted to show a company’s annual report. In SGOCO’s case, the company’s filing showed 2020 revenues coming in at $4.29 million, which was down from 2019’s $5.11 million. But by the look of the chatter online, the Form 20-F is probably not what’s triggering the massive spike.Penny Stocks Without News Can Run
The fact of the matter is penny stocks are usually different from higher-priced stocks like blue chips. While news events & corporate filings can play a very large role, so can other factors. In this case, we’ll look at some of the structural factors of the company. As far as total outstanding shares go, it isn’t the largest we’ve seen, sitting around 100 million. Furthermore, the float isn’t the smallest either with most places showing roughly 30 million. Needless to say, interest surrounding Chinese issuers lately could also be a factor to consider.
At the end of the day, this could simply be another one of the short-term momentum trades that high-volatility traders try to capitalize on. Will it become the next AMC Entertainment (NYSE: AMC)? Personally, there’s not a whole lot to discuss besides what’s happening in the stock market today. So if you’re asking “Is SGOCO Group Ltd (SGOC) a good stock to buy right now,” I would say it comes down to your personal trading style.
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This stock is no stranger to big breakouts. But it also isn’t a stranger to big breakdowns either. If you take a look at an 8-month chart, you’ll see it’s had plenty of 1-day jumps. But look at what has followed? SGOC stock fell and continued sliding during the days and weeks to follow. If you’re trading penny stocks like this, that’s one thing. You can plant yourself in front of your trade desk and play the volatility.SGOC Stock & High Volatilty
However, if you can’t spend time watching this trade, then it may be much more high risk than anything else. Case in point, Friday afternoon the SGOC stock price jumped from $8.59 to $12.33. It then fell to $7.50, then jumped back up to highs of $18.80. It dropped once again after that to nearly $10 before bouncing back up to $15.80. We’re talking swings of 50% or more within a few hours and even minutes depending on when you look at the SGOC stock chart.
Clearly, if you’re not a high-volatility trader, SGOC could be hard to approach. Also, for those searching for a fundamental catalyst, there isn’t one immediately apparent so far. Technical breakouts like this are more common when it comes to penny stocks. Meanwhile, it wasn’t that long ago when SGOCO Group announced receipt of deficiency from the Nasdaq for failing to submit its Form 20-F. Now that this is no longer the case, has this given traders some sense of “security” that the company plans on continuing operations?Is SGOC Stock A Buy Or Sell?
Time will obviously tell when it comes to finally understanding what triggered this spike. Was it just a technical breakout sparked by retail interest? On the other hand, is there something more to point toward since the company recently filed this Form 20-F? I’m more in the first camp and in that case, if SGOC stock is on your list right now, be well aware that moves like this can move in both directions very quickly.
We can look back at countless penny stock breakouts to confirm similar trends. Companies like Eastman Kodak (NYSE: KODK) last July, Liberty Trip Advisor B shares in March (NASDAQ: LTRPB / LTRPA), and even OTC penny stocks like Delphax Technologies (OTC: DLPX), which is a dark and defunct company that hasn’t filed publicly since 2009. Regardless, traders have a penchant for momentum. Is SGOC stock a buy now? After today, I’ll leave that answer up to you.