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: Uranium Energy Corp. (NYSE: UEC)
Today’s penny stock pick is the independent U.S. uranium mining company, Uranium Energy Corp. (NYSE: UEC).
Uranium Energy Corp. engages in exploration, pre-extraction, extraction, and processing of uranium and titanium concentrates in the United States, Canada, and Paraguay. It owns interests in the Palangana mine, Goliad, Burke Hollow, Longhorn, and Salvo projects located in Texas; Anderson, Workman Creek, and Los Cuatros projects situated in Arizona; Slick Rock project in Colorado; Reno Creek project in Wyoming; Diabase project located in Canada; and Yuty, Oviedo, and Alto Paraná titanium projects in Paraguay.
Website: www.uraniumenergy.com
Latest 10-k report: https://sec.report/Document/0001437749-20-021877
Analyst Consensus: According to TipRanks Analytics, 1 Wall Street analyst is offering 12-month price targets for UEC in the last 3 months. The company’s average price target is $5.60, which represents a 57.30% change from the last price.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently receiving a buy rating from an analyst.
Recent Analyst Ratings | Source: TipRanks.com
- Increase in Uranium spot prices, making short term supply contracts all of a sudden 50% more expensive.
- The slow shift back to embracing nuclear power again, from utilities with no perspective to continue their activity in the future to a situation where utilities have a perspective of prolonged nuclear power activity, translating to increasing demand for uranium.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Cup and Handle Pattern Breakout: The daily chart shows that the stock was forming a cup and handle pattern. This is marked in the chart in purple color. A cup and handle pattern is a consolidation and breakout pattern. Whenever a stock breaks out of the cup and handle pattern, it typically moves higher. Currently, the stock has broken out of the cup and handle pattern, indicating possible bullishness.
UEC – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX line 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 its 50-day as well as 200-day SMA, indicating that the bulls are now in control.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates possible bullishness.
#5 Bullish MACD: The MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#6 IH&S Pattern: The weekly chart shows that the stock has been forming an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern. Once the stock breaks out of this pattern, it could move higher in the short term.
UEC – Weekly Chart
#7 Bullish MACD: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates 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 UEC is above the price of $3.60.
Target Prices: Our target prices are $4.50 and $7.00
Stop Loss: To limit risk, place a stop loss below $3.05. Note that the stop loss is on a closing basis.
Our target potential upside is 25% to 94%.
For a risk of $0.55, our first target reward is $0.90, and the second target reward is $3.40. This is a nearly 1:2 and 1:6 risk-reward trade.
In other words, this trade offers 2x to 6x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of significant losses. For Fiscal 2020, Fiscal 2019, and Fiscal 2018, UEC recorded a net loss of $14,610,516, $17,152,789, and $17,826,634, respectively.
UEC – Net Loss
- The company was formerly known as Carlin Gold Inc. and changed its name to Uranium Energy Corp. in January 2005.
- The company insiders had sold shares worth $2.4 million during the past three months, a possible indication of a lack of confidence in the company’s prospects.
UEC – Insider Transactions
- Despite reporting losses year after year, the company executives are being paid significant compensation.
UEC – Executive Compensation
- In 2015, an investor in shares of Uranium Energy Corp. had filed a lawsuit against certain directors of Uranium Energy over alleged breaches of fiduciary duties.
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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