New month, new chances to profit from penny stocks… With major indexes like the S&P 500 tumbling close to 4% year-to-date, the environment for investors is anything but auspicious right now. That said, it’s important to remember that the big, broad-based indexes only average the performance of the market’s biggest blue chips – leaving small-caps with the biggest gain potential up to us.

One again, investing in our small-cap watchlist would have left you well ahead of the S&P 500 last week, with the potential for 32.7% net gains. Not too shabby for five bear-market trading days…

In case you’re not familiar, each week, we take a look at a list of penny stocks that are exhibiting abnormal volume, strong technicals, upcoming news, or another catalyst that suggested they might be making a material move in the coming week.

As usual, while our Watchlist errs on the safe side of small-caps, using technical analysis to tell us where a stock is headed, we opened the comments up to readers again this week, giving you the chance to offer up more speculative penny stock plays.

Check out the comments after this article to get a glimpse at a slew of new user-submitter penny stock picks — and the chance to submit your own!

First, though, let’s take a look at this week’s breakout penny stocks worth watching…

R. G. Barry Corp. (NASDAQ:DFZ) – If you’ve been following our daily penny stock watchlists at the bottom of each day’s Penny Sleuth, the name R.G. Barry shouldn’t be new to you: we took a look at it in Thursday’s issue. But with its bullish ascending triangle continuing to form perfectly, I couldn’t help but bring this small footwear maker back to your attention. The buy signal is a breakout above the horizontal blue line.

Cubist Pharmaceuticals (NASDAQ:CBST) ­– While we’re big fans of speculative pharmaceutical plays here at the Penny Sleuth, the pattern forming in biopharma firm Cubist Pharmaceuticals is even more promising than most. Shares are forming a pennant pattern, which suggest they’ll start a second leg of their rally in the coming days.

j2 Global Communications (NASDAQ:JCOM) – The market hasn’t been kind lately to investors in this tiny company, which specializes in helping small businesses streamline their electronic communications. But a recent breakout in j2’s share price past a key resistance level signals a buy if the stock can manage to bounce off of the blue line.

NTELOS Holdings (NASDAQ:NTLS) – Our sole downside play this week is NTELOS Holdings, a communications provider that services customers in Virginia and West Virginia. The company got hit late last month by a downgrade, followed by a breakdown below its support levels. Expect to see shares continue to struggle into this week.

Share Your Penny Stock Picks…

Once again, we’re going interactive this week…

Just post your recommendation in the comments section of this article between now and the market’s close on Friday, February 5 to share your favorite penny stock play with the rest of the world.

Cheers,

Jonas Elmerraji