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: Carlotz Inc. (NASDAQ: LOTZ)
Today’s penny stock pick is the consignment-to-retail used vehicle marketplace, Carlotz Inc. (NASDAQ: LOTZ).
CarLotz, Inc. provides its corporate vehicle sourcing partners and retail sellers of used vehicles. The company serves corporate vehicle sourcing partners, which include fleet leasing companies, rental car companies, banks, captive finance companies, third-party remarketers, wholesalers, companies that manage their own fleets, and original equipment manufacturers; retail sellers of used vehicles to individuals; and retail customers.
Website: https://www.carlotz.com/
Latest 10-k report: https://sec.report/Document/0001104659-21-036389/
Analyst Consensus: Based on 2 Wall Street analysts offering 12-month price targets for LOTZ in the last 3 months, the stock has an average price target of $8.00. This is a nearly 91.85% Upside from the last close of $4.17.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s better-than-expected third-quarter 2021 financial results.
- Barrington reiterated research coverage with a buy stance and a $9 target price.
Recent Analyst Ratings | Source: TipRanks.com
- The news of Carmax and Autonation recording record gross profits in used cars.
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, indicating possible bullishness.
LOTZ – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line has started to move higher from below the +DI and -DI lines.
#3 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line and moving higher, indicating possible bullishness.
#5 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.
#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out of the prevailing downtrend. The downtrend line has been marked in pink color. This is a possible bullish sign.
LOTZ – Weekly Chart
#7 Above Support Area: The stock is currently above a support area, which is marked as an orange color dotted line. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for LOTZ is above the price of $4.40.
Target Prices: Our target prices are $6.00 and $7.00.
Stop Loss: To limit risk, place a stop loss at $3.50. Note that the stop loss is on a closing basis.
Our target potential upside is 36% to 59%.
For a risk of $0.90, our first target reward is $1.60, and the second target reward is $2.60. 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:
- For the year ended December 31, 2020, the company had reported a net loss of $3,542,687.
LOTZ – Net Loss
- The executive compensation increased year over year despite the company reporting losses.
LOTZ – Executive Compensation
- On January 6, 2021, Acamar Partners Acquisition Corp., a Delaware corporation, received a written notice from the Listing Qualifications Department of The Nasdaq Stock Market indicating that the Company is not in compliance with Nasdaq Listing Rule 5620(a) (the “Annual Meeting Rule”) as a result of not having held an annual meeting of stockholders within 12 months of the end of the Company’s fiscal year on December 31, 2019. On January 21, 2021, Acamar Partners acquired CarLotz pursuant to the Merger and changed its name to CarLotz, Inc. in connection with the Merger.
- The company was sued at least three times in the last three months by stockholders claiming the company violated federal securities laws in the months leading up to and since its listing on Nasdaq. The three suits, all of which were filed in federal court in New York, make similar claims that CarLotz knowingly misstated or omitted important information in documents and public statements related to its financial state. That includes information related to sales and inventory constraints that have since coincided with a steady decline in its share price. The three suits have since been consolidated into one.
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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