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: Nordic American Tanker Ltd (NYSE: NAT)
Today’s penny stock pick is the tanker company, Nordic American Tanker Ltd (NYSE: NAT).
Nordic American Tanker Ltd acquires and charters double-hull tankers in Bermuda and internationally. It operates a fleet of 25 Suezmax crude oil tankers. It operates vessels in the spot market or on spot market-related charters pursuant to cooperative arrangements with third parties
Website: www.nat.bm
Latest 10-k report: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001000177/000114036121014948/brhc10022989_20f.htm
Analyst Consensus: Based on 2 Wall Street analysts offering 12-month price targets for NAT in the last 3 months, the stock has an average price target of $3.43 and an average rating of ‘Moderate Buy’. The average price target is a 19.10% upside from the last close.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The news that the board member Dough Penick of Dallas bought 50,000 shares at $ 2.565 per share, increasing his holding to 175,000 NAT shares. During September all NAT board members have increased their holdings of NAT shares.
- News about Very large crude carrier (VLCC) spot rates starting to improve.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Double Bottom Pattern Breakout: The daily chart shows that the stock was forming a double bottom pattern, which is shown in purple color. A double bottom pattern is a strong bullish pattern and a breakout from it would indicate that the stock could surge higher. The stock has currently broken out of the double bottom pattern, indicating possible bullishness. The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
NAT – 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 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 %K line of the stochastic is above the %D line, indicating bullishness.
#5 Falling Wedge Pattern: The weekly chart shows that the stock is currently forming a falling wedge pattern, which is shown in orange color. A breakout from it would indicate that the stock could surge higher.
NAT – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is also moving higher from oversold levels, indicating possible bullishness.
#7 Bullish MACD: The weekly chart also shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for NAT is above the price of $3.00.
Target Prices: Our first target is $4.50. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $2.20. Note that the stop loss is on a closing basis.
Our target potential upside is 50% to 100%.
For a risk of $0.80, our first target reward is $1.50, and the second target reward is $3.00. 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:
- NAT has been a loss-making company. It has an outstanding debt of $249.7 million as of April 2021.
NAT – Consolidated Statement of Operations
- The company was formerly known as Nordic American Tanker Shipping Limited and changed its name to Nordic American Tankers Limited in June 2011.
- During the year ended December 31, 2020, the company paid aggregate cash compensation of $6.0 million to its directors and executive officers (six persons).
- NAT has an aging fleet. The Sea Life or Sailing Life for a Tanker is around 20 years, and in the industry, tankers over 15 years are viewed as impractical because they need to be re-regulated every year for millions of dollars.
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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