Best Penny Stocks for October 2024, Using Technical Analysis

These are some of the penny stocks with the most interesting charts using technical analysis over the past month

Penny stocks are stocks of small companies that trade for less than $5 per share. For that reason, a small movement in the price of a penny stock can produce a large percentage gain. The low price can be attractive to smaller investors, especially given the easy access to many trading platforms. But while penny stocks offer the potential for big gains, they tend to be more volatile than established stocks and are, therefore, a much riskier investment.

Some investors use penny stocks as part of a portfolio diversification strategy, taking a small portion of a larger portfolio and focusing on high-risk, high-reward opportunities. A small allocation to penny stocks can minimize their impact on a portfolio, but given the greater risks, there is also the potential for large losses.

Below is an analysis of the top penny stocks for October 2024, screened for a high return over the last 30 days and bullish technical patterns.

All charts and data are current as of Sept. 26, 2024.

Butterfly Network, Inc. (BFLY)

• Price: $1.52
• 30-day return: 39.4%
• Average daily trading volume: 965,000
• Exchange: New York Stock Exchange (NYSE)

Butterfly Network, Inc. (BFLY) produces ultrasound imaging solutions. Its stock broke out of a bullish inverse head and shoulders formation in early September and took off, leading to a significant breakout of the long-term downtrend line. Strength was confirmed by the crossover of the 20-week moving average above the 50-week line and subsequent weekly closes above the trendline. A high of $2.20 was reached before a pullback began. Once the pullback is complete, the stock looks like it has a good chance of continuing to rise as the long-term bullish reversal may have only just begun.

Dingdong (Cayman) Limited (DDL)

• Price: $3.00
• 30-day return: 175.2%
• Average daily trading volume: 687,600
• Exchange: Nasdaq

The stock of Dingdong (Cayman) Limited (DDL) broke out of an inverse head and shoulders pattern several weeks ago. That, along with the recent bullish crossover of the 20-day moving average rising above the 50-week line, confirmed a bullish reversal of the stock from a long-term downtrend. Also, notice that the 50-week line has started to turn up. The record high following the company’s IPO in 2021 was $46.00. It was followed by a 31-month decline to a low of $1.07 hit in January. If the stock of Dingdong can reach the head and shoulders measuring objective of $3.67, it should have a good chance of testing higher targets starting with the 61.8% retracement at $4.33.

Gevo, Inc. (GEVO)

• Price: $1.46
• 30-day return: 84.8%
• Average daily trading volume: 4.8 million
• Exchange: Nasdaq

Gevo, Inc. develops and commercializes renewable chemicals and biofuels as alternatives to petroleum-based products. In the short term, its stock has stalled and is overbought on the relative strength indicator (RSI) following the recent $1.83 high. After a retracement, it should be ready to continue to progress higher in the new bull trend. In early August, the stock of Gevo found a bottom at $0.4801. That bottom followed a 42-month decline from a high of $15.57 reached in February 2021. The stock is showing signs of a sustainable long-term bullish reversal. One thing that makes it interesting is the potential measured move target. Notice that there was a $15.03 or 2,783% advance in 25 weeks in August 2020. If a similar move occurs on a percentage basis from the August low, the price of Gevo stock would be at $13.37 a share. Moreover, the August low may be the second bottom of a developing long-term double bottom pattern. 

Polestar Automotive Holding UK Limited (PSNY)

• Price: $1.75
• 30-day return: 43.4%
• Average daily trading volume: 10.8 million
• Exchange: Nasdaq

In late August, the stock of Polestar Automotive Holding UK Limited (PSNY), a manufacturer of premium electric vehicles, broke out of a bullish double bottom pattern following a 33-month decline from a 2021 record high of $16.41. A low of $0.6101 was hit in August, and buyers began to take back control, subsequently triggering the double bottom breakout above $1.10. Further confirmation of strength was indicated recently on a breakout above both the 50-week moving average and long-term downtrend line.  

Petco Health and Wellness Company, Inc. (WOOF)

• Price: $4.61
• 30-day return: 44.5%
• Average daily trading volume: 4.4 million
• Exchange: NYSE

The stock of Petco Health and Wellness Company, Inc. (WOOF) is showing the potential for a sustainable bullish reversal following a breakout above a long-term downtrend line in early September. A bullish breakout triggered above the 50-week moving average previously with strength confirmed by the 20-week moving average crossing above the 50-week line. Wide range weekly green candles from the bottom recently pointed to improving demand for the stock. Petco is a provider of pet care and wellness products aimed at improving the lives of pets.

What to Know About Penny Stocks

Many penny stocks trade via over-the-counter (OTC) markets, which means they have minimal regulatory oversight and little analyst coverage, making it difficult to access accurate company information.

However, the penny stocks we’ve identified in this article are all listed on the New York Stock Exchange or Nasdaq, which means they are subject to the same listing requirements as any other company on these exchanges. These requirements are intended to ensure that only high-quality securities are available for trading on the exchange.

While penny stocks are a riskier investment than established stocks due to their volatility, the potential for high returns is attractive to some investors.

How We Chose the Best Penny Stocks

There were a few criteria used to find the stocks listed in this article. Of course, the price of the stock needed to be below $5 per share. The stocks needed to have a minimum average daily trading volume of 100,000 shares—used to help ensure liquidity. The stock also had to have at least 24 months of trading history.

Then, the charts were reviewed for bullish patterns, including breakouts above trendlines, key resistance, and moving averages. Candlestick patterns were also considered, as we looked for signs that pointed to a bullish trend reversal or indications that a trend was strengthening. Still, no one can predict what will happen in the future, and past performance is not a guarantee of future performance.

Penny Stock Advantages and Disadvantages

The low price of penny stocks offers investors high potential for growth, and they can give smaller businesses a platform to access funding. But while these stocks can bring investors significant gains, they also carry the risk of significant losses.

There are greater risks associated with investing in penny stocks than with more established stocks. One disadvantage is that most institutions, including mutual funds and many ETFs, are prohibited from purchasing stocks below $5 per share. Penny stocks usually don’t have much liquidity. It can also be difficult to find solid public information about penny stock companies that trade over the counter. Given the additional risks, penny stocks are not suitable for all investors, especially those with a low risk tolerance.

There are ways to mitigate the added risks, starting with raising the minimum price and average trading volume and selecting penny stocks that trade on the NYSE or Nasdaq. Overall portfolio risk can be contained by allocating only a small amount of total capital to the penny stock market.

The Bottom Line

There are some benefits but also significant risks associated with investing in penny stocks. Investors can mitigate those risks by allocating only a small portion of their total portfolio to penny stocks and using technical analysis to assess stock performance. Here, we screened for penny stocks that had a high return over the last 30 days and displayed bullish technical patterns.

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As of the date this article was written, the author does not own any of the securities listed above.

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