Penny stocks are well known for their high risk and high reward potential. There aren’t many places where you can buy into an early-stage company, see shares rise 100% or more, and take profit all within a single day or week. Traders seek catalysts for potential moves then speculate on that catalyst ahead of time, in many cases. This can be something like upcoming earnings results, pending retail data, or, in the case of biotech stocks, upcoming FDA decisions, or trial data.
Compared to companies in the materials sector, retail, or even energy, biotech companies tend to pre-announce news. What I mean by this is that you’ll frequently see these companies release news of when they expect to report an event. Again this might be an FDA decision, trial data, “additional trial data,” an industry presentation, or something else. It’s one of the unique things about biotech that attracts momentum hunters.