Today, I’ll share 10 of the best cheap stocks under $10 to watch in 2020.
Penny stocks are on fire lately. There are SO many great opportunities in the market right now.
Even while traveling around the world, I still made approximately $125,000 in 2019.** And with the stock market at all-time highs, hopefully, the opportunities will continue into the new year.
[**My results are NOT typical. I’ve spent years developing exceptional skills and knowledge. Always remember trading is risky. Never risk more than you can afford.]
In the list below I’ll include some of the best cheap biotech stocks to watch (biotechs are trending lately) and some of the best cheap stocks under $1. Read on…
Table of Contents
- 1 What Are Cheap Stocks?
- 2 How to Find the Best Cheap Stocks
- 3 Cheap Biotech Stocks Under $10 to Watch
- 4 The Best Cheap Stocks Under $1 to Watch
- 5 Do Cheap Stocks Pay Dividends?
- 6 Conclusion About Cheap Stocks
What Are Cheap Stocks?
Cheap stocks are stocks that trade between 1 cent to $10. You can trade sub-penny stocks too. But they’re not my favorite.
Cheap stocks are typically smaller companies that may only have one or two products. They’re typically developmental-stage companies trying to get a product or technology to market.
Most of these companies fail in the long run. Which makes them some of the most hated stocks in the market. Investors, hedge funds, and institutions don’t care about penny stocks.
And I like it that way…
Why? Because it creates more opportunities for the rest of us. There’s less competition in this little niche market. By trading cheap stocks, you don’t have to compete with professional traders and algorithms.
How to Find the Best Cheap Stocks
The best way to find cheap stocks to buy in 2020 is to use your stock screener. Search for the biggest percent gainers each evening and morning. Check for any news catalysts or reasons for price increases. Then check the chart for patterns.
I recommend all my students use StocksToTrade. It blows my mind when students ask me how I find stocks because I say it over and over: use StocksToTrade.
StocksToTrade has 40+ built-in scans based on my criteria. They were designed specifically to help you find the best cheap stocks to trade. (Of course, you can always use the custom screener to create your own. You can use it to find and trade higher-priced stocks, too.)
I always check the biggest percent gainers throughout the day. I’ll also look back on any recent runners to see if there’s potential for dip-buying a morning panic. That’s one of my favorite patterns right now.
The best cheap stocks to trade are ones that provide predictable chart patterns. I don’t base my trades on a company’s fundamentals. If I’m in a trade, it’s because I like the chart pattern, volume, and volatility. And hopefully, there’s an exciting news catalyst.
The cheapest stocks trade on the Nasdaq, OTCBB, or Pink Sheets exchanges. I prefer stocks listed on Nasdaq and OTCBB. They have enough volume and liquidity for the type of plays I like. Pink Sheets … not as much.
Once you have a list of stocks from your scanner, you can create a watchlist of potential cheap stocks to trade. Sort your watchlist based on the potential plays you’re looking for, whether it’s a morning spike, a morning panic, or a short squeeze.
You also need the right broker to execute your trades. Some of the bigger firms won’t even show cheap stocks on scans or let you buy them. They think they’re too risky. Executions can also be tough if a stock is moving quickly.
Pre-Market Penny Stocks
It’s possible to trade prior to the market open for regular hours. That’s called pre-market trading. Pre-market trading is typically available starting around 4 a.m. up until the market opens at 9:30 a.m. Eastern.
One advantage of trading in the pre-market is that you can take advantage of new information. If exciting news comes out, you can be one of the first to buy. But you want to be really confident that the stock will spike quickly at the open…
Just because a stock spikes in pre-market doesn’t mean it will continue during regular hours. That’s why I don’t trade in pre-market often. There’s less volume, so it’s not necessarily an accurate reflection of overall market sentiment.
That’s one of the risks of pre-market — there’s less volume. Also, the bid and ask spread can be very wide. With wide spreads and the lack of volume, executions can be difficult and the price movements can be even more volatile.
Post-Market Penny Stocks
It’s also possible to trade in the post-market hours — after the exchanges close at 4 p.m. Eastern. Post-market trading is typically available from 4–8 p.m. EST.
Just like in pre-market trading, there’s the same risk and reward. A lot of companies release news or earnings after the market close. If you think the news or earnings report is good, you can buy in early and wait for the gap up in the morning.
But the risk is the same. There’s less volume, and with a large spread on prices, you could take a bigger loss if the stock doesn’t do what you expect.
In both pre- and post-market, you have to specifically route your orders through an electronic securities exchange for execution.
OK … now let’s get to the good stuff…
Below I’ve divided the top 10 best cheap stocks to watch into two categories…
Cheap Biotech Stocks Under $10 to Watch
Personally, I don’t like trading biotech stocks. I find them too choppy. But that doesn’t mean they don’t create opportunity. You just have to know what you’re good at. And I know I’m not good at trading biotechs.
That said, I can’t ignore a perfect pattern. I traded CYDY when the perfect multi-day breakout pattern presented itself. Biotech stocks got a nice boost at the end of 2019. I don’t know how long it’ll last, but when a stock sector is trending, I can’t ignore it.
As a teacher, I have to provide information and alerts to my students, so I can’t ignore possible opportunities. My goal is for my students to be better traders than me.
So here are some of the best cheap biotech stocks to watch in 2020.
Oncolytics Biotech Inc. (NASDAQ: ONCY)
This Canada-based company is a development-stage pharmaceutical company that focuses on drugs for treating cancer.
ONCY started moving near the beginning of December, following a press release highlighting preclinical data for a drug treatment for multiple myeloma. The stock then had a few technical multi-day breakouts and a huge short squeeze on December 31.
It also announced another upcoming conference in late January where the company will present data from a study on treatment for pancreatic cancer. I won’t try to guess whether the data will be good or bad. I’ll watch for the market’s reaction to any news.
CytoDyn Inc. (OTCQB: CYDY)
This American company focuses on the clinical development of treatments for human immunodeficiency virus (HIV) infection. Its lead product is a therapeutic anti-viral agent that’s in multiple phases of testing for other treatments, including a Phase 1b trial for breast cancer.
The company released news about a definitive agreement with another company to market and distribute its lead product (which doesn’t even have FDA approval yet).
The news brought in the hype and volume … and an increase in price. I bought just before the market close on December 26, after the stock broke the area of consolidation on the daily chart. It was a technical breakout.
I held this one overnight for a morning gap up. And I sold the next morning for an 11% gain.
Cassava Sciences, Inc. (NASDAQ: SAVA)
Cassava Sciences, Inc. is a clinical-stage drug development company. Its lead product is in Phase 2 clinical trials for the treatment of Alzheimer’s disease.
The company released some news that clinical results from its Phase 2 study were presented at an international conference.
This creates hype and excitement in the stock, which brings in volume. It started gaining momentum after the news. And the company recently disclosed that the CEO bought additional shares of the company in December. (That’s also good news.)
Savara, Inc. (NASDAQ: SVRA)
Savara Inc. is an orphan lung disease company. They have two main products in various phases of trials for the treatment of lung infections.
The stock started moving on news that the FDA granted Breakthrough Therapy designation for its lead product Mogradex, an inhaled treatment for lung infections.
The volume is fading since the day it had a gap up on massive volume. If it breaks through a support level, it could be a good shorting opportunity. But be careful. Shorting is a crowded niche right now. Don’t ever short a stock on its first green day with large volume or news.
Wait for the stock to crack a support level. This stock has a history of huge gap downs, so be careful with any long position.
Iveric bio, Inc. (NASDAQ: ISEE)
Iveric bio, Inc. develops treatments for retinal diseases. Its product is in Phase 2b trials for the treatment of age-related late-stage macular degeneration.
The stock originally started gaining momentum after it released its earnings report two months ago. Earnings winners can run farther than you think. Earnings are added value based on fundamentals. Don’t trade them the same as fluff news.
Trillium Therapeutics Inc. (NASDAQ: TRIL)
This Canadian company develops therapies for cancer treatment. Its lead product is in Phase 1b clinical trials.
The stock had a small increase in volume when it released earnings in November. But it really started moving when there was a technical breakout over the 52-week high of around 43 cents. Since then it’s had two more multi-day breakouts and a huge short squeeze on January 9.
I traded this stock twice recently, dip-buying morning panics. Check out all my trades on Profit.ly.
The Best Cheap Stocks Under $1 to Watch
All the stocks listed here were featured on my watchlist that I send out to subscribers. Join our trading community to get the alerts. Here are some of the best cheap stocks to watch under $1.
OWC Pharmaceutical Research Corp. (OTCQB: OWCP)
OWC Pharmaceutical Research Corp. is an Israel-based company that researches and develops cannabis-based medical products to treat various conditions through its subsidiary One World Cannabis Ltd.
Cheap marijuana stocks got a boost of interest at the end of 2019. I’ll be watching to see if the trend continues.
South Beach Spirits, Inc. (OTCPK: SBES)
South Beach Spirits Inc. is a Florida-based company that develops, manufactures, and markets alcoholic beverages.
This is an ultra-low-priced stock that’s been running on increased volume. I bought this on December 27, before the market close. It’s was a recent runner having a first green day. I held overnight and sold into the morning gap up.
Texas Mineral Resources Corp. (OTCQB: TMRC)
Texas Mineral Resources Corp. is an exploration-stage mining company. It explores, acquires, and develops mineral properties in the U.S.
The stock’s been running on increased volume after an announcement that its pilot processing plant will be operational within 90 days. The news was released on December 16.
Inpixon (NASDAQ: INPX)
Inpixon is an analytics company that offers security solutions and context-based marketing services. It services shopping malls, airports, and government agencies.
The stock started seeing higher-than-normal volume after the company’s CEO provided a business recap and outlines plans for 2020. The company was also featured on a Yahoo Finance video showing its technology that could help shoppers find what they’re looking for in a store faster and easier.
Do Cheap Stocks Pay Dividends?
The simple answer to this question is yes. You can find cheap stocks that pay dividends. You can even find cheap stocks with high dividends.
To receive a dividend, you have to be holding the stock before the record date. If you purchase it after that date, you’re not entitled to it.
Dividends can come in the form of cash or more stock. Either way, dividends are taxable income. Consult your accountant about any tax concerns.
Since I don’t hold stocks long term, I don’t really concern myself with cheap stocks that pay dividends. It’s not something I look for specifically.
If finding cheap stocks that pay dividends is part of your strategy, do your research.
And here’s an important lesson I learned the hard way … if you have a short position in a stock on the record date, you’re responsible for paying the dividend. That sucked. Learn from my mistake.
Conclusion About Cheap Stocks
I trade cheap stocks because they can follow predictable patterns. These stocks can really gain momentum when they’re hyped up on product releases, earnings, or an exciting contract announcement.
These news catalysts bring in volume, which can create volatility and bigger price moves.
Remember, most of these companies are junk. No matter how exciting the news is, the price will almost always eventually come down. If it’s a paid promotion, the stock price can fall quickly, so I’m not patient with these trades…
If you want to find cheap stocks to buy, look for those that have a big daily range in price. I don’t trade stocks that only move a couple of cents a day. I want big, meaty moves.
A lot of these plays can go farther than you think — especially in this market. The markets are at all-time highs and there are way too many newbie short-sellers trying to short any stock that’s up.
When the momentum continues up, all the short sellers get squeezed and it forces the price up even higher. Be careful trading short squeezes. The stock can tank quickly when the forced buying stops.
If you want to learn more about the best cheap stocks to trade and how to trade them, apply for my Trading Challenge.
Check out this video for exciting news about my trading and teaching in 2020.
👉🏼SUBSCRIBE to my FREE weekly stock watchlist here.
What do you think about this post? Let me know in the comments … I love to hear from my readers!