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: Pintec Technology Holdings Limited (NASDAQ: PT)
Today’s penny stock pick is the Chinese online technology platform, Pintec Technology Holdings Limited (NASDAQ: PT).
Pintec Technology Holdings Limited, together with its subsidiaries, operates an online technology platform that enables financial services in the People’s Republic of China. The company connects business partners and financial partners on its platform and enables them to provide financial services to end users.
Its technology platform’s financial services include assistance for borrowers to obtain loans from third party investors and various financial partners; a lending solution for borrowers who want to finance online purchases or who have personal or business installment loan requests; and a wealth management and insurance product distribution solution for asset management and insurance companies to facilitate the sales of products.
Website: www.pintec.com
Latest 10-k report: https://sec.report/Document/0001193125-21-145037/
Analyst Consensus: Not Covered By Analysts
Potential Catalysts / Reasons for the Hype:
- The news of the company expanding its technical services to focus on better empowering the small and medium enterprise (SME) ecosystem, by leveraging the Company’s advanced technology in big data, artificial intelligence, and cloud-based infrastructure.
- The company receives consistent income from almost every cellphone/ cellphone plan purchase requiring a loan in China. This not just makes money for the company, but also feeds their algorithm information.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Breakout From Consolidation Area: The daily chart shows that the stock has broken out of a consolidation area, which is shown as a pink color rectangle. This is a possible bullish indication.
PT – Daily Chart
#2 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#6 Above Support Area: The weekly chart shows that the stock is currently trading above a strong support area, which is marked as a purple color dotted line. This is a possible bullish indication.
PT – 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 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.
#9 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 has currently started to move higher from below the +DI and -DI lines.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for PT is above the price of $1.30.
Target Prices: Our first target is $2.00. If it closes above that level, the second target price is $3.00.
Stop Loss: To limit risk, place a stop loss at $0.85. Note that the stop loss is on a closing basis.
Our target potential upside is 54% to 131%.
For a risk of $0.45, our first target reward is $0.70, and the second target reward is $1.70. 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:
- The company had posted a net loss of RMB296.1 million (US$45.4 million) in the year ended December 31, 2020, and a net loss of RMB906.5 million in the year ended December 31, 2019.
PT – Net Loss
- The company has a history of delayed or missing filings and information. There are also rumors that the reporting had been off as it is a Chinese Company.
- PT has received notice from NASDAQ on May 14, 2019, stating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) due to its failure to timely file its Annual Report on Form 20-F for the year ended December 31, 2018.
- Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on the company’s business, financial conditions, and results of operations.
- The company has a limited operating history. Dumiao, the lending solutions platform, was launched in June 2015, while Hongdian and Polaris wealth management platforms were launched in September 2015 and June 2016, respectively.
- On September 29, 2020, the company and some of its current and former directors and officers, and the underwriters in its initial public offering were named as defendants in a securities class action filed in the U.S. District Court for the Southern District of New York. The action alleges that the company’s registration statement on Form F-1 in connection with our initial public offering contained material misstatements and omissions in violation of the U.S. federal securities laws, including those relating to the company’s revenue recognition, internal control over financial reporting, and historical financial results.
- Despite reporting significant losses, for the year ended December 31, 2020, the company had paid an aggregate of approximately RMB3.5 million (US$0.5 million) in cash and benefits to its executive officers and an aggregate of RMB0.8 million (US$0.1 million) to its non-executive directors.
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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