This High Risk / High Reward Stock Just Broke Out

We recently started a series called “Penny Stock of the Day”. These ideas are geared for traders with an extremely high risk appetite.

Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.

Penny Stock of the Day: PyroGenesis Canada Inc. (NASDAQ: PYR)

Today’s penny stock pick is PyroGenesis Canada Inc. (NASDAQ: PYR).

PyroGenesis Canada Inc. designs, develops, manufactures, and commercializes advanced plasma processes and systems in Canada and internationally.

It offers DROSRITE, a sustainable process for enhancing metal recovery from dross targeting primarily metallurgical industry; plasma atomized metal powders; PUREVAP, a process to produce high purity metallurgical grade silicon and solar grade silicon from quartz; PUREVAP Nano Silicon Reactor, is designed to transform silicon into spherical silicon nanopowders and nanowires for use in lithium-ion batteries; and plasma atomization process allows to produce and offer to the additive manufacturing market high purity spherical metal powders, including titanium alloy powders.

The company also provides plasma torches, plasma arc waste destruction systems; steam plasma arc refrigerant cracking systems; plasma arc chemical warfare agent destruction systems; plasma resource recovery systems; and plasma arc gasification and vitrification.

Further, the company provides engineering and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, additive manufacturing (including 3D printing), oil and gas, and environmental industries. It also provides installation, commissioning, and start-up services.

Website:  https://www.pyrogenesis.com/

Latest 10-k report:  https://sec.report/Document/0001104659-21-045136/

Analyst Consensus: Not covered by analysts currently.

Potential Catalysts / Reasons for the Hype:

  • The company’s announcement of $6 Million Torch Order with Another Major Iron Ore Pelletizer. The Client expects the next orders to be for 130 torches.
  • PYR securing additional government funding of $630,000 for a total project value of approximately $5.3MM (including sale of IP of $3.3MM) to develop a new production process for converting quartz to fumed silica.
  • The company reporting a record revenue of $8.3 million in the second quarter.
  • The future potential for waste-to-energy solution [PRRS] of PyroGenesis.
  • Rumors that PYR is now included in the Russell Prime indexes.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as pink color lines. This is a possible bullish indication.

PYR – Daily Chart

#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX lines are above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.

#3 Price above MAs: The stock is currently above both 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.

#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.

#5 Bullish Stoch:  The %K line is above the %D line of the stochastic in the weekly chart, and is also moving higher from oversold levels, indicating possible bullishness.

#6 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as an orange color dotted line. This is a possible bullish indication.

PYR – Weekly Chart

#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.

#8 Bullish RSI: The weekly chart shows that the RSI is currently near 50 and moving higher, indicating the strength of the current upmove.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for PYR is above the price of $4.90.

Target Prices: Our first target is $6.50. If it closes above that level, the second target price is $9.00.

Stop Loss: To limit risk, place a stop loss at $3.90. Note that the stop loss is on a closing basis.

Our target potential upside is 33% to 84%.

For a risk of $1.00, our first target reward is $1.60, and the second target reward is $4.10. This is a nearly 1:2 and 1:4 risk-reward trade.

In other words, this trade offers 2x to 4x more potential upside than downside.

Potential Risks / Red Flags:

  1. The company had a history of losses and negative cash flows prior to December 31, 2020. For the year ended and as of December 31, 2020, the Company has an accumulated deficit of $19,007,273.

    PYR – Consolidated Statements of Comprehensive Income

    PYR – Consolidated Statements of Financial Position

  2. Corporate Insiders had sold shares worth C$8.1 million in the Last 3 Months. The CEO had sold shares worth C$16 million during the past year.

    PYR – Insider Transactions | Source: TipRanks.com

    PYR – Insider Transactions | Source: TipRanks.com

  3. The company is rumored to be paying the property taxes on the property owned by the CEO, which is also being leased to them with interest. It is rumored that PYR also pays depreciation expenses to Peter on the value of the properties.

As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!

Happy Trading!

— Trades of the Day Research Team

READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.

Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.

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