This High Risk / High Reward Stock Looks to be in a Bullish Setup

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: Broadwind Inc. (NASDAQ: BWEN)

Today’s penny stock pick is the US provider of wind towers and other specialized equipment, Broadwind Inc. (NASDAQ: BWEN).

Broadwind Inc. manufactures and sells structures, equipment, and components for clean tech and other specialized applications primarily in the United States. It operates through three segments: Heavy Fabrications, Gearing, and Industrial Solutions.

The Heavy Fabrications segment provides fabrications to various industrial markets; and steel towers and adapters primarily to wind turbine manufacturers. The Gearing segment offers gearing, and gearboxes and systems for onshore and offshore oil and gas fracking and drilling, surface and underground mining, wind energy, steel, material handling, and other infrastructure markets. The Industrial Solutions segment provides supply chain solutions, inventory management, and kitting and assembly services to natural gas turbine market.

The company sells its products to the energy, mining, and infrastructure sector customers through its direct sales force and independent sales agents.

Website:  www.bwen.com

Latest 10-k report: https://sec.report/Document/0001437749-21-004032

Analyst Consensus: According to TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for BWEN in the last 3 months, the stock has a ‘Moderate Buy’ rating and a price target of $6.00, which is a 73.41% upside from current levels.

Source: TipRanks.com

Recent Analyst Ratings | Source: TipRanks.com

Potential Catalysts / Reasons for the Hype:

  • The news about the US planning to open most of Atlantic territorial waters to wind farms. BWEN appears to be perfectly positioned to exploit the country’s infrastructure investment and the global mega clean energy transfer movement.
  • The company recently received over $12 million in new tower orders from multiple wind turbine customers. Including these new orders, Broadwind sold approximately 25% of its full-year 2022 optimal tower production capacity. Broadwind is also expecting to receive additional orders for 2022 production capacity over the coming months.

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 high volume, indicating possible bullishness. The stock is also trading above its 50-day SMA, indicating that the bulls have currently gained control.

BWEN – Daily Chart

#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and ADX line are above the -DI line, and the ADX line has currently moved 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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates 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.

BWEN – Weekly Chart

#6 Bullish RSI: In the weekly chart the RSI is currently nearing 50 after moving higher from oversold levels, indicating possible bullishness.

#7 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. All this indicates possible bullishness.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for BWEN is above the price of $3.55.

Target Prices: Our target prices are $5.00 and $6.50.

Stop Loss: To limit risk, place a stop loss at $2.65. Note that the stop loss is on a closing basis.

Our target potential upside is 41% to 83%.

For a risk of $0.90, our first target reward is $1.45, and the second target reward is $2.95. 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:

  1. The company has been a loss-making company. BWEN had reported a net loss of $1.48 million in 2020 and $4.52 million in 2019.

    BWEN – Consolidated Statements of Operations

  2. The company was formerly known as Broadwind Energy, Inc. and changed its name to Broadwind, Inc. in May 2020.
  3. Despite being a loss-making company, the company executives are being paid good compensation.

    BWEN – Executive Compensation

  4. Broadwind has a substantial net operating losses (NOLs) of around $14M.
  5. The company had previously received notice regarding non-compliance with the minimum bid price requirement for continued inclusion of its common stock on The NASDAQ Capital Market.

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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