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The Dow Jones Industrial Average popped more than 500 points after the U.S. Federal Reserve said it would start buying individual corporate bonds in addition to the exchange-traded funds it already buys.
The added stimulus for the markets could be a 190% catalyst for our best penny stock to buy.
You see, penny stocks trade for under $5, according to the U.S. Securities and Exchange Commission. Because their share price is so low, a small move in dollars can be a huge percentage change for the stock.
What's more, the catalyst for a penny stock can be anything from an announcement to a shift in the broader market.
For example, we recommended Inovio Pharmaceuticals Inc. (NASDAQ: INO) in February. It gained 139% by March, after announcing progress in its coronavirus vaccine trials.
But our top penny stock today doesn't even need a scientific breakthrough to pop. It's simply riding the momentum of the broader market.
That's why the Federal Reserve's purchasing activity is a big reason for penny stock investors to pay attention this week. It comes right as economies across the country are reopening after lockdown. And those two things together are launching the major indexes sky-high.
Penny stock investors have more options when the broader market is up like this. But that doesn't mean you go buying just any penny stock you find. Keeping an eye on the trend is still vital to choosing the best penny stocks.
And we've been doing just that. We're going to show you what we've uncovered as the top penny stock this week. But first, here's how we found it...
How to Spot the Best Penny Stocks
Typically, you'd be left to your own devices if you wanted to find the best penny stock to buy. There are thousands of penny stocks to choose from. And penny stock investors have to separate the good from the bad.
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Not to mention, penny stocks move fast. Imagine researching a single penny stock for days only to find that it's gained 200% already.
Luckily, there's a way to do that without diving too deep into the weeds.
The Money Morning Stock VQScore™ system uses a proprietary algorithm to study the financials underlying thousands of stocks. And it tells you whether the stock is primed to rocket higher or fall flat.
It does this by giving the stock a score from 1 to 4.9 - a 4.9 is a perfect score, meaning the stock is on the verge of soaring.
About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.