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: TOMI Environmental Solutions Inc. (NASDAQ: TOMZ)
Today’s penny stock pick is the bacteria decontamination and infectious disease control company, TOMI Environmental Solutions Inc. (NASDAQ: TOMZ)
TOMI Environmental Solutions, Inc. provides environmental solutions for indoor surface decontamination in the United States and internationally.
Its products and services include SteraMist Surface Unit, a fully portable, handheld, point and spray disinfection/decontamination system intended to provide quick turnover of any affected space; SteraMist Environment System, a transportable, remotely controlled system that provides complete room disinfection/decontamination of a sealed space up to 103.8 m3; and The SteraMist Hospital Disinfection Cart, a solution to aid its hospital-healthcare customers in providing the quality of care and safety to their patients by disinfecting patient and operating rooms, pharmacies, ambulances, and emergency environments in a hospital or healthcare facility.
The company also offers SteraMist Select Surface Unit; Stainless Steel 90-Degree Applicator; iHP Plasma Decontamination Chamber; SteraMist Custom Engineered System; and iHP Corporate Service Decontamination. In addition, it provides full room, equipment, facility, and emergency disinfection and decontamination services. The company manufactures, sells, services, and licenses SteraMist Binary Ionization Technology, a hydrogen peroxide-based mist, and fog.
Website: https://tomimist.com/
Latest 10-k report: https://sec.report/Document/0001654954-21-003525/
Analyst Consensus: Not covered by Analysts
Potential Catalysts / Reasons for the Hype:
- Surge is rumored to be a covid play, triggered by news of the new Omicron variant.
- Corporate Insiders buying shares worth $87.0K in the Last 3 months.
Insiders | Source: TipRanks.com
- The launch of new Amazon storefront for TOMI’s new SteraPak and BIT solution.
- The company received a purchase order from a multinational top five pharmaceutical company. The order is comprised of TOMI’s SteraMist Environment system and validation service, for use at several of the Company’s locations.
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 historic high volume, indicating possible bullishness. The stock is also trading above its 50-day SMA, indicating that the bulls have currently gained control.
TOMZ – 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 is currently moving 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 Above Support Area: The weekly chart shows that the stock is trading above a support area, which is marked as a purple color dotted line. This is a possible bullish indication.
TOMZ – Weekly Chart
#5 Bullish Stoch: In the weekly chart, the %K line of the stochastic is above the %D line, 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 TOMZ is above yesterday’s high, which translates to a price of $2.10.
Target Prices: Our target prices are $3.00 and $4.00.
Stop Loss: To limit risk, place a stop loss at $1.50. Note that the stop loss is on a closing basis.
Our target potential upside is 43% to 90%.
For a risk of $0.60, our first target reward is $0.90, and the second target reward is $1.90. 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:
- The company has a history of losses.
TOMZ – Consolidated Statement of Operations – 2019,2020
TOMZ – Consolidated Statement of Operations – 2018,2017
- The company executives are being paid significant compensation even though the company has just turned profitable. This year’s compensation is almost equal to the same amount as the company’s net profit this year.
TOMZ – Executive Compensation
- The company has significant competition from the likes of International Flavors & Fragrances (IFF), LyondellBasell Industries (LYB), Westlake Chemical (WLK), Braskem (BAK), Sensient Technologies (SXT), NewMarket (NEU), Methanex (MEOH), Renewable Energy Group (REGI), Codexis (CDXS), and Green Plains (GPRE).
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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