In certain pockets of the market, we’re seeing some really interesting price action take shape. Two high-profile penny stocks that have been ripping recently are Hitek Global (NASDAQ:HKIT) and MicroCloud Hologram (NASDAQ:HOLO). Impressively, HKIT stock is up a whopping 175% at the time of writing, with HOLO stock surging another 20% following yesterday’s impressive triple-digit move.
Both stocks are up on very heavy volume, and these returns don’t reflect the surges these penny stocks saw earlier today. In fact, HKIT stock was up more than 500% this morning before giving up some of its gains.
Let’s dive into what’s driving these moves amid a relative lack of news for these two companies today.
HKIT and HOLO Stock: Why Are These Penny Stocks Rocketing Higher Today?
As InvestorPlace financial news writer Eddie Pan pointed out earlier today, Hitek is the “latest Chinese stock to mysteriously surge higher.” Chinese officials have made it clear they’re intent on supporting the stock market and pumping cash into certain key areas. Investors have taken this narrative as a reason to load up on specific Chinese equities, though the capital inflows into this company that still only has a market capitalization of just $50 million after today’s move is unknown.
For MicroCloud Hologram, there was some news yesterday about an industry association partnership, but that shouldn’t have been enough to move the needle for this Chinese company.
We’ve seen other Hong Kong and China-based companies surge in a similar fashion in the recent past. One credible idea floating around in investing circles is that a mix of limited liquidity, the domicile of these companies, and a low share price/low float can lead to short-term squeezes in such stocks. This appears to be the case in both these names once again today.
Personally, I think both stocks are far too speculative and carry far too high of a risk profile for the average investor. While these moves are certainly incredible to watch, I think the viewing is best from the sidelines. When these stocks do eventually settle down toward more reasonable valuations, the market equilibrium price for these stocks will likely be a lot lower.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
