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: Genius Brands International Inc. (NASDAQ: GNUS)
Today’s penny stock pick is the entertainment company, Genius Brands International Inc. (NASDAQ: GNUS).
Genius Brands International Inc. is a content and brand management company that creates and licenses multimedia content for toddlers to tweens worldwide.
The company offers Rainbow Rangers, an animated series about the adventures of seven magical girls; Llama Llama, an animated series; SpacePop is a music and fashion driven animated property; Thomas Edison’s Secret Lab, a STEM-based comedy adventure series; and Warren Buffet’s Secret Millionaire’s Club, an animated series for kids.
It also develops animated series, such as Superhero Kindergarten and Baby Genius. In addition, the company acts as a licensing agent for Llama Llama. It serves various customers and partners, including broadcasters, consumer products licensees, manufacturers, wholesalers, and retailers.
Website: www.gnusbrands.com
Latest 10-k report: https://sec.report/Document/0001683168-21-001169
Analyst Consensus: Not covered by analysts
Potential Catalysts / Reasons for the Hype:
- The company officially announced an investment conference and specifically reported that a piece of positive news will be shared on Thursday. The rumors surrounding this news is ranging from deals with Disney or Netflix, to a sale of the company. This had resulted in the current surge in prices.
- A recent deal between GNUS and VIACOM, in which GNUS products will be featured on VIACOM’S streaming platform “Pluto TV”.
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 pink 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.
GNUS – 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 has started to move 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. This indicates bullishness.
#5 Consolidation Area: The weekly chart shows that the stock is currently forming a consolidation area, which is marked as a pink color rectangle. Once the stock breaks out of this consolidation area, it could surge higher.
GNUS – Weekly Chart
#6 Bullish Stoch: In the weekly chart, the %K line of the stochastic is above the %D line and is currently moving up from oversold levels. 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 GNUS is above the price of around $2.30.
Target Prices: Our target prices are $4.00 and $5.00.
Stop Loss: To limit risk, place a stop loss at $1.50. Note that the stop loss is on a closing basis.
Our target potential upside is 74% to 117%.
For a risk of $0.80, our first target reward is $1.70, and the second target reward is $2.70. 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 a history of operating losses and had incurred net losses in each fiscal quarter since its inception. For the year ended December 31, 2020, the company incurred a net loss of $401,669,805, while for the previous year, the company had incurred a net loss of $11,481,245.
GNUS – Consolidated Statements of Operations
- The company was formerly known as Pacific Entertainment Corporation and changed its name to Genius Brands International, Inc. in October 2011.
- The company had received notice from the Listing Qualifications Department of The NASDAQ Stock Market for lack of compliance with the NASDAQ Listing Rule 5550(a)(2) on September 4, 2019, and faced the risk of delisting.
- The company’s highly recognizable show is Llama Llama. However, it is rumored that the company doesn’t own it, but licenses from the author of the popular books.
- Despite making significant losses year-over-year, the compensation of company executives increased significantly. For instance, the CEO’s compensation had an increase of more than 4000%.
GNUS – Executive Compensation
- GNUS had heavy shareholder dilution over the past 10 years.
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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