2 Penny Stocks Setting Off Bullish Signals

Penny stocks Hovnanian Enterprises, Inc. (NYSE:HOV) and W&T Offshore, Inc. (NYSE:WTI) just sent up historically bullish signals

by Andrea Kramer |

Published on Mar 17, 2017 at 2:50 PM

Here at Schaeffer's, we look at several technical indicators to help identify bullish and bearish stock picks. Over the past year, one of the most successful predictors of an uptrend has been when a stock crosses north of its 50-day moving average, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. While no single indicator has a 100% success rate, our Expectational Analysis® methodology -- which takes into account technical, fundamental, and sentiment analysis -- gives us a leg up in finding stocks that could be ripe for more upside. Using this approach, we've identified two "penny stocks" that could be a bargain for bulls right now: homebuilder Hovnanian Enterprises, Inc. (NYSE:HOV) and oil-and-gas stock W&T Offshore, Inc. (NYSE:WTI).

HOV Stock Hops On Hot Housing Data 

Homebuilders have been in the spotlight this week, with February housing starts hitting the second-highest level since the Great Recession, and the NAHB housing market index surging by more than expected last month. Against this backdrop, HOV shares retook their 50-day moving average for the first time since late January, essentially negating last week's post-earnings slide. The stock is also trading north of the $2.40 area, which represents a 38.2% Fibonacci retracement of HOV's post-election rally to $2.96.

Hovnanian Enterprises HOV stock chart

Should this upside momentum translate into a bullish signal, as it has historically, HOV could benefit from a round of short-covering. Short interest represents nearly nine sessions' worth of pent-up buying demand, at the stock's average daily trading volume -- plenty of fuel for a short squeeze. Likewise, not one of the three analysts following HOV considers it worthy of a "buy" or better endorsement. Future upgrades or bullish initiations could also lure more buyers to Hovnanian Enterprises, Inc.'s (NYSE:HOV) bandwagon.

Fibonacci Retracements Come Into Play for WTI Stock

WTI recently retook its own 50-day moving average for the first time in about a month. Despite crude oil's recent struggle, the company on March 1 reported its first adjusted quarterly profit in at least two years, and WTI stock is up 15% month-to-date. The shares are now sitting north of a 23.6% Fibonacci retracement of their own post-election rally, after finding a springboard at the 38.2% Fibonacci retracement marker.

W&T Offshore WTI stock chart

As with HOV, there's plenty of sideline cash to fuel W&T Offshore, Inc. (NYSE:WTI) stock even higher, if the retaking of the 50-day proves to be a "buy" signal. Short interest accounts for 9.1% of WTI's total available float, and would take about seven days to buy back, at the equity's average pace of trading. And again, just three analysts follow WTI, but not one deems it worthy of a "buy" rating.

 

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