Happy Monday Everyone!
The so-called Meme stocks – with AMC and GME being two absolute superstars – gave incredible opportunities both ways…
Then there was the small cap action: MEDS, LEDS, AMST are just a few out of many!
I often say – stick to what’s working.
Momentum names have so far not shown any signs of exhaustion, so why would I reinvent the wheel?
Here’re 3 small cap stocks I’m keeping on my watch this week:
- Market Cap: 137.11M
- Free Floating Shares: 14.07M
- Short Interest: 2.18%
- ATR: 1.72
Summary: After a major crash following a disappointing trial in early 2020, NOVN, a biotech stock, has lived a life relatively obscure and forgotten.
There was an attempt at a run up in February – March, but that didn’t really lead anywhere either.
All of this changed last week – the company put out promising updates on 2 of its ongoing trials: Phase 3 trial for treatment of Molluscum Contagiosum and Phase 2 trial for treatment of COVID-19.
This could be what I like to call a “changing fundamentals” trade. The name speaks for itself – a new piece of information comes out that gets investors excited about the company. I also like the fact the stock just had a 1:10 stock split, reducing the number of shares in circulation.
The action will likely be wild – to consider a long, I’d like to see clear support above $17 for a potential move into $25.
Vinco Ventures – BBIG
- Market Cap: 129.11M
- Free Floating Shares: 19.08M
- Short Interest: 23.92%
- ATR: 0.63
Summary: I’ve been keeping the name on my watchlist ever since the incredible move in early January: the stock jumped from ~$1.5 to a high of nearly $10 in a matter of 1 day. It’s given most of it back, but gained some traction over the past 2 weeks.
The company has historically been pretty active putting out PRs – coupled with its short interest and current position on chart, this can be one explosive combination.
I don’t want to get ahead of myself and need confirmation first – if the stock holds the $4.5 area well, I would consider a long position for a move into the $7 area.
TRxADE Health – MEDS
- Market Cap: 54.20M
- Free Floating Shares: 3.28M
- Short Interest: 0.1% – likely, inaccurate given last week’s action
- ATR: 0.76
Summary: Similarly to NOVN, MEDS is a name that likely hasn’t been on many watchlists.
Last week the company announced it’s COVID-19 Health Passport App and it sent shares ecstatic – from $4 to a high of $10.82 in a matter of one session.
While one may argue how significant the news is, I do need to go by price action – the stock has retraced a lot of its gains very quickly and I won’t be surprised to see at least a bounce from current levels.
I like any hold above $5 and then above $5.50 to consider a long trade against these levels with a target at $7.
Pro Tip: Confirmation is Key
Even if this is the very first time you’re seeing a watchlist by me, you might’ve noticed common language between all three picks – to consider a trade I want a stock to “hold above” a key level.
In trading we call this “confirmation” – the key decision making component that may convert a name from one of the many you’re watching into an actual trade.
Confirmation “validates” your thesis.
If you would like to go long – seeing all dips get bought and a stock hold a support area cleanly may “Confirm” to you that there is significant demand
Conversely, if you want to be short – failure to hold higher and continuous push backs from a resistance area may rightfully confirm there’s overhead supply.
Patiently waiting for confirmation vs entering just because something looks good – is one of the keys to becoming a skilled trader.