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: TransGlobe Energy Corporation (NASDAQ: TGA)
Today’s penny stock pick is the oil and natural gas exploration company, TransGlobe Energy Corporation (NASDAQ: TGA).
TransGlobe Energy Corporation engages in the acquisition, exploration, development, and production of crude oil and natural gas in Egypt and Canada. The company holds interests in four production sharing concessions, which include West Gharib, West Bakr, NW Gharib, and South Ghazalat, Egypt; and owns production and working interests in facilities in the Cardium light oil and Mannville liquid-rich gas assets in the Harmattan area of west central Alberta, Canada.
Website: www.trans-globe.com
Latest 10-k report: https://sec.report/Document/0001564590-21-012821/
Analyst Consensus: According to TipRanks Analytics, 1 Wall Street analyst is offering 12-month price targets for TGA in the last 3 months. The company’s average price target is $254.94, which represents a whopping 7555.86% change from the last price.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Overall positive sentiment of insiders.
TGA – Insider Sentiment | Source: TipRanks.com
- The rumors that ratification of a new deal is on the Agenda of Egypt’s Parliament during this week.
- Rumors of potential dividend payouts.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 IH&S Pattern Breakout: The daily chart shows that the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in purple color. An IH&S pattern is a strong bullish pattern. Once the stock breaks out of this pattern, it could move higher in the short term.
TGA – 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 is currently moving higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls are now in control.
#4 Bullish MACD: The MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#5 Downtrend Broken: The weekly chart shows that the stock has broken out of the prevailing downtrend and started a new uptrend. This is a possible bullish indication.
TGA – Weekly Chart
#7 Bullish MACD: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). 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 TGA is above the price of $3.50.
Target Prices: Our target prices are $4.50 and $6.00
Stop Loss: To limit risk, place a stop loss below $2.85. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 71%.
For a risk of $0.65, our first target reward is $1.00, and the second target reward is $2.50. 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 has a history of increasing net losses.
TGA -Consolidated Statements of Loss and Comprehensive Loss
- The company was notified on April 20, 2020 by the Listing Qualifications Department of The Nasdaq Stock Market regarding non-compliance with the minimum bid price requirement.
- There are clear warning signs of an energy crisis, which could negatively impact oil stocks soon.
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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