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: Northern Dynasty Minerals Ltd (NYSE: NAK)
Today’s penny stock pick is the mining company, Northern Dynasty Minerals Ltd (NYSE: NAK).
Northern Dynasty Minerals Ltd engages in the exploration of mineral properties in the United States. Its principal mineral property is the Pebble copper-gold-molybdenum project comprising 2,402 mineral claims that cover an area of approximately 417 square miles located in southwest Alaska.
Website: www.northerndynastyminerals.com
Latest 10-k report: https://sec.report/Document/0001654954-21-003677/
Analyst Consensus: According to TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for NAK in the last 3 months, the stock has a ‘Moderate Buy’ rating and a price target of $1.20, which is a 100.53% upside from current levels.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- NAK winning a motion in a lawsuit related to the company’s Alaskan mining project. Pebble Partnership, a subsidiary of the Northern Dynasty, won its motion to intervene in a lawsuit filed by environmental groups against a 2019 EPA decision to withdraw Obama-era protections of the Bristol Bay watershed location of the Pebble Mine project. The decision to allow Pebble Partnership intervention gives Northern Dynasty a say in the legal process. Rumors also point to the probability of USACE overturning its decision versus the protracted legal process and consequences.
- Northern Dynasty Minerals Is Maintained at Buy by HC Wainwright & Co.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock was forming a falling wedge pattern for the past several weeks. These are marked as purple color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out of the falling wedge pattern with very high volume, indicating possible bullishness. The stock is also trading above its 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
NAK – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is currently above the +DI and -DI lines.
#3 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.
#4 Bullish Stoch: The chart shows that the %K line of the stochastic is above the %D line, indicating possible bullishness.
#5 Above Support Area: The weekly chart shows that the stock is trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
NAK – Weekly Chart
#6 Bullish RSI: In the weekly chart the RSI is above 50 and moving higher, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for NAK is above the price of $0.62.
Target Prices: Our target prices are $1.20 and $1.60.
Stop Loss: To limit risk, place a stop loss at $0.26. Note that the stop loss is on a closing basis.
Our target potential upside is 94% to 158%.
For a risk of $0.36, our first target reward is $0.58, and the second target reward is $0.98. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has been a loss-making company. The Company incurred a consolidated net loss of $64 million during the year ended December 31, 2020, and has a consolidated deficit of $620 million.
NAK – Annual Report – Consolidated Statements of Comprehensive Loss
- As per TipRanks, Corporate Insiders Sold Shares Worth $380.2K in the Last 3 Months.
Recent Insider Transactions | Source: TipRanks.com
Recent Insider Transactions | Source: TipRanks.com
- The company was involved in multiple legal proceedings, like Class Action Litigation Relating To Short Seller Investment Report, and Class Action Litigation Relating to the USACE’s Record of Decision.
- The company’s primary asset is the Pebble Project, which is one of the largest copper-gold mines in American history. However, the project is located near Bristol Bay in Alaska, in an environmentally sensitive area, which produces over 50% of the entire world’s supply of wild salmon. Moreover, numerous Alaskan activist groups are against Northern Dynasty Minerals. The governor of Alaska has been said to be against the Pebble Project, as well as the Speaker of the House. Until Northern Dynasty gets permission from the U.S. Environmental Protection Agency (EPA) to drill, it will be quite difficult for the company to turn a profit.
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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