Two ASX penny stocks racing higher today

January 27, 2022 01:05 PM AEDT

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Aayush

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Aayush - Research Analyst
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Aayush is a Research Analyst at Kalkine, with rich experience of over 3 years catering to capital markets. He has been a sell side equity advisor for two years and is currently dwelling deep into the equity research. He holds MBA in finance degree an...
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Highlights

ASX small caps have shed a major chunk of gains from the morning session.

AUQ and RBX are two of the top ASX gainers under AU$1.

Due to less earnings visibility and higher stock volatility, investing in penny stocks is a relatively high risk venture.

After a short-lived green run in the morning, the Australian market has declined sharply from the day’s high of 7,042.8, and is currently trading in the red, as of 1:00 PM AEDT. The benchmark ASX 200 index has shed a sizable 5.26% in the last five sessions alone, falling below an important psychological support of 7,000.

Small caps have also shed a major chunk of gains from the morning session and are now trading flat for the day so far. The ASX Small Ordinaries index (ASX:XSO) was up 2% to 3,219.6 in the first hour of trading and is currently trading with a mere gain of 0.1%. However, some ASX penny stocks are still holding their ground despite selling pressure after a one-hour session. Let us have a look at two such stocks.

Alara Resources Limited (ASX:AUQ)

Alara Resources is an ASX-listed mining and exploration company, which has exploration and mineral project licences in Oman. The company has a market capitalisation of AU$19.75 million and clocked a net loss of AU$1.62 million in FY21, over a net profit of AU$0.27 million in FY20.

Today, the company announced the completion the Wash-hi Majaza Copper-Gold Project’s construction phase, with the inauguration of the site accommodation village. The village will house 325 personnel from the construction, mining, and plant operation crews. Soon after the announcement, AUQ shares shot up by 42.86% to a multi-year high of AU$0.04, as of 1:00 PM AEDT.

Resource Base Limited (ASX:RBX)

Resource Base is also a small-cap exploration company, focused on development of mineral projects with a potential for scalable discoveries. Today, the company commenced on-ground exploration works at its Mitre Hill Rare Earths project in Victoria.

The news has cheered investors, who flocked to get their hands on RBX shares, powering the stock to rally 21.05% to the day’s high of AU$0.23, as of 1:00 PM AEDT. The stock also clocked the highest one-day volume for this year, at over 394.1K.

Bottom Line

Investing in small cap companies, especially penny stocks is a risky venture due to less earnings visibility and higher volatility in the stock. Therefore, investors should not get carried away by these lucrative returns and always do their own due diligence before investing.