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: Engine Gaming and Media Inc. (NASDAQ: GAME)
Today’s penny stock pick is the company that engages in the development and sale of gaming applications, Engine Gaming and Media Inc. (NASDAQ: GAME).
Engine Gaming and Media Inc. provides e-sport or sporting event or tournament services; offers content management system, video software, mobile applications, and e-sports data platform solutions; sources, creates, and places advertising campaigns that run in company’s network of publisher sites; and provides installation and website design services, as well as data analysis report delivery. The company also offers Esports platform for online tournaments; content publishing, engagement, and monetization; data analytics and intellectual property solutions; UMG Online, an esports website for daily tournaments and ladders; and racing titles.
Website: https://enginegaming.com/
Latest 10-k report (2020): https://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00032457
Analyst Consensus: According to TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for GAME in the last 3 months, the stock has a ‘Moderate Buy’ rating and a $14.00 price target.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s positive earnings report. The company’s revenue in fiscal Q4 came in at $11.8 million, beating estimates.
- Corporate Insiders Bought Shares Worth C$327.7K in the Last 3 Months.
Insider Transactions| Source: TipRanks.com
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 with historic high volume, indicating possible bullishness.
GAME – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and ADX line are above the -DI line, and the ADX line has currently moved 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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend, which is marked as a pink color line. This indicates bullishness.
GAME – Weekly Chart
#5 Above Support Area: The weekly chart shows that the stock is trading above a support area, which is marked as an orange color dotted line. This is a possible bullish indication.
#6 Bullish Stoch: In the weekly chart, the %K line of the stochastic is above the %D line, and is also moving higher from oversold levels, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GAME is above the price of $4.17.
Target Prices: Our target prices are $5.70 and $7.00.
Stop Loss: To limit risk, place a stop loss below $3.40. Note that the stop loss is on a closing basis.
Our target potential upside is 37% to 68%.
For a risk of $0.77, our first target reward is $1.53, and the second target reward is $2.83. 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 name changes. It was formerly Torque Esports Corp and changed its name to Engine Media Holdings, Inc. and later to Engine Gaming and Media, Inc. in October 2021.
- The company has increasing losses year over year.
GAME – Net Loss
- Despite reporting significant losses, the company executives were given hundreds of thousands of dollars as compensation.
GAME – 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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