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: Camber Energy Inc. (NYSE: CEI)
Today’s penny stock pick is the oil and natural gas company, Camber Energy Inc. (NYSE: CEI).
Camber Energy Inc. engages in the acquisition, development, and sale of crude oil, natural gas, and natural gas liquids (NGL) in the Cline shale and upper Wolfberry shale in Glasscock County, Texas. As of March 31, 2020, its total estimated proved reserves were 133,442 million barrels of oil equivalent comprising 54,850 barrels of crude oil reserves, 43,955 barrels of NGL reserves, and 207,823 million cubic feet of natural gas reserves.
Website: www.camber.energy
Latest 10-k report: https://sec.report/Document/0001580695-20-000260/ (2020)
Analyst Consensus: Not covered by Analysts.
Potential Catalysts / Reasons for the Hype:
- The rumors of an upcoming short squeeze.
- ESG Clean Energy responded to Kerrisdale Capital report on Camber Energy, saying that that the report contains misleading and inaccurate information about ESG.
- The expectation that the 10k form from Camber would be filed Nov 19(Friday).
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as orange color lines. Once a stock breaks out from a symmetrical triangle pattern, it usually moves higher.
CEI – Daily Chart
#2 Price above MA: The stock is currently above the 200-day SMA, demonstrating that the bulls are currently gaining control.
#3 MACD above Signal Line: In the daily chart, the MACD (light blue color) has currently crossed above the MACD signal line (orange color). This indicates a possible bullish setup.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line, showing bullishness.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a long-term support area. This is marked as an orange color dotted line. This is a possible bullish sign.
CEI – Weekly Chart
#7 Bullish ADX and DI: In the weekly chart, 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. All these are possible bullish indications.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CEI is above the price of $1.70.
Target Prices: Our target prices are $2.60 and $4.00.
Stop Loss: To limit risk, place a stop loss below $1.15. Note that the stop loss is on a closing basis.
Our target potential upside is 53% to 135%.
For a risk of $0.55, our first target reward is $0.90, and the second target reward is $2.30. This is 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 reported net losses of $3.8 million for 2020. In comparison, for 2019, the company had reported a net income of $16.6 million.
CEI – Consolidated Statements of Operations
- The company was formerly known as Lucas Energy Inc. and changed its name to Camber Energy, Inc. in January 2017.
- The company is yet to file the latest annual report as well as the quarterly Interestingly, the reason given for the failure of 10-Q filing was “the registrant completed an acquisition of Viking Energy Group, Inc. common stock at the end of 2020. A reasonable estimate of the results of operations could not be made as of the current date as the registrant’s accountants are still preparing the registrant’s results of operations.” The acquisition was completed almost a year ago.
- On February 24, 2020, the company received notice from the NYSE American about non-compliance with certain of the Exchange’s continued listing standards.
- In the report issued by Kerrisdale Capital about Camber Energy in October 2021, the research firm calls CEI “a defunct oil producer that has failed to file financial statements with the SEC since September 2020, is in danger of having its stock delisted next month, and just fired its accounting firm in September.”
- The company has ongoing legal proceedings against Maranatha Oil Matter, PetroGlobe Energy Holdings, LLC and Signal Drilling, LLC, Apache Corporation, and N&B Energy.
- The company executives are being paid hundreds of thousands of dollars in compensation, despite reporting losses.
CEI – Executive Compensation
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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