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: Crescent Point Energy Corp (NYSE: CPG)
Today’s penny stock pick is the independent exploration and production company, Crescent Point Energy Corp (NYSE: CPG).
Crescent Point Energy Corp explores, develops, and produces light and medium crude oil and natural gas reserves in Western Canada and the United States. The company focuses primarily on light oil production in southern Saskatchewan.
Website: www.crescentpointenergy.com
Latest 10-k report: https://sec.report/Document/0001628280-21-002948/
Analyst Consensus: According to TipRanks Analytics, based on 7 Wall Street analysts offering 12-month price targets for CPG in the last 3 months, the stock has an average price target of $6.21.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Crescent Point Energy Corp. raised its quarterly dividend as it increased its production guidance for next year.
- The company said it expects production next year to be between 133,000 and 137,000 barrels of oil equivalent per day, up from its preliminary estimate for the year of 131,000 to 135,000 boepd. According to JPM, OIL is expected to reach $125 in 2022, translating to higher prices and better dividends.
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 with high volume. 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 pink color lines. Once a stock breaks out from a symmetrical triangle pattern, it usually moves higher.
CPG – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line has started to move higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above both 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#5 IH&S Pattern: The stock’s weekly chart shows that the stock has been forming an Inverted Head and Shoulders pattern. This is marked in the chart in purple color. An IH&S pattern is a bullish pattern and a breakout from it is usually the sign of an upcoming bullish move. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are currently in control.
CPG – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#7 Bullish RSI: The RSI is above 50 and moving higher in the weekly chart, indicating the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CPG is above the price of $5.30.
Target Prices: Our first target is $6.50. If it closes above that level, the second target price is $9.00.
Stop Loss: To limit risk, place a stop loss at $4.50. Note that the stop loss is on a closing basis.
Our target potential upside is 25% to 70%.
For a risk of $0.80, our first target reward is $1.30, and the second target reward is $3.70. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Potential Risks / Red Flags:
- The company has been a loss-making company.
CPG – Net Loss (Annual)
CPG – Net Loss (Quarter)
- CPG had recorded a depletion expense of $611.6 million and an impairment expense of $3,557.8 million for the year ended December 31, 2020.
- Corporate Insiders had sold Shares Worth $58.8K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company executives are being paid significant compensation, despite being a loss-making company. In 2020, the Company recorded $5.5 million relating to the compensation of key management personnel. In 2020, share-based compensation costs relating to the compensation of key management personnel were $4.9 million.
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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