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: Meiwu Technology Co Ltd (NASDAQ: WNW)
Today’s penny stock pick is the Chinese online retail of foods products company, Meiwu Technology Co Ltd (NASDAQ: WNW).
Meiwu Technology Co Ltd offers green food, organic food, intangible cultural heritage food, agricultural products, and pollution-free products. It also operates a restaurant under the Wunong Food Hall name; and engages in the wholesale of agricultural products.
Website: www.wnw108.com/
Latest 10-k report: https://sec.report/Document/0001493152-21-015744/
Analyst Consensus: Not covered by analysts.
Potential Catalysts / Reasons for the Hype:
- The speculation that a deal is on the horizon, fueled by an SEC filing on a subsidiary that was set up in September.
- Rumors that the Chinese government has selected 50 promising companies to boost up, and Wunong is one of them.
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. The stock is also trading above its 50-day SMA, indicating that the bulls are gaining control.
WNW – 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 Stoch: In the daily 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.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish sign.
WNW – Weekly Chart
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for WNW is above the price of around $4.75.
Target Prices: Our target prices are $6.00 and $7.50.
Stop Loss: To limit risk, place a stop loss at $4.00. Note that the stop loss is on a closing basis.
Our target potential upside is 26% to 58%.
For a risk of $0.75, our first target reward is $1.25, and the second target reward is $2.75. 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 began operations only in mid-2018 and in its first year of operations, WNW posted a net loss of $980,098. For the year ended December 31, 2019, WNW posted a net loss of $1,755,042 and for the year ended December 31, 2020, WNW posted a net loss of $2,218,062.
WNW – Consolidated Statements of Operations and Comprehensive Loss
- The company was formerly known as Advancement International Limited and changed its name to Wunong Net Technology Company Limited in August 2019.
- Very little information exists on the company’s operations.
- The company had an IPO price of $5. In the next two days, WNW stock reached highs of $160.68, a nearly 3,113% move. Since then, the stock was in a steady decline.
- Hedge funds don’t have a meaningful investment in Wunong Net Technology. Also, it is rumored that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company’s decision-making.
- The company mentions in its latest 20-F report that it plans to raise capital in order to fund the company’s growth plans in the future and anticipate doing so through further share issuances. Such share issuances will cause shareholders’ interests in the Company to be diluted.
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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