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.
Note: For today’s recommendation, we have picked a stock that used to be a penny stock, but is technically not considered a penny stock now, as its current price is $5.90. However, the chart of the stock appears strong, and there are multiple catalysts for this stock. Therefore, we are making an exception for today.
Penny Stock of the Day: Nokia Corporation (NYSE: NOK)
Today’s penny stock pick is the Finnish multinational telecommunications giant, Nokia Corporation (NYSE: NOK).
Nokia Corporation provides mobile and fixed network solutions worldwide. The company operates through four segments: Mobile Networks, Network Infrastructure, Cloud and Network Services, and Nokia Technologies. It focuses on mobile radio including macro radio, small cells, and cloud native radio solutions for communications service providers and enterprises; and provides network planning and optimization, network implementation, and systems integration, as well as company-wide managed services.
The company also offers fixed networking solutions, such as copper and fiber access products, solutions, and services. In addition, it provides network infrastructure and professional services for mobile networks; and managed services for the fixed, mobile, Internet protocol (IP), and optical domains. Further, the company offers network planning, implementation, operation, and maintenance services.
Additionally, it provides IP/optical networking solutions, including IP routing and optical transport systems, software, and services; software solutions, such as customer experience management, network operations and management, communications and collaborations, and policy and charging, as well as cloud, IoT, security, and analytics platforms; and submarine networks and radiofrequency systems.
Website: www.nokia.com
Latest 10-k report (2019): https://sec.report/Document/0001558370-20-002053/
Analyst Consensus: Based on 3 Wall Street analysts offering 12-month price targets for NOK in the last 3 months, the stock has an average price target of $7.13 and an average rating of ‘Moderate Buy’.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Analyst Tim Savageaux from Northland Securities gives a buy rating on Nokia and a Price Target of $7.50.
Recent Analyst Ratings | Source: TipRanks.com
- Rumors that NOK has inked a big deal.
- The news of Nokia deploying 5G private wireless network for Volkswagen’s pilot project in Germany.
- Nokia was selected by Ooredoo Group to bring multiple technologies and services, including 5G, to customers in the Middle East, North Africa, and South-east Asia as part of a multi-country, five-year deal.
- The company recently won 5G radio contract in China, securing a share in one of China Mobile’s (0941.HK) three new 5G contracts.
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 purple color lines. Once a stock breaks out from a symmetrical triangle pattern, it usually moves higher.
NOK – Daily Chart
#2 Price Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA. This is a possible bullish indication.
#3 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.
#4 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.
#5 Bullish RSI: The RSI is currently above 50 and moving higher. This indicates bullishness.
#6 Uptrend Channel: The weekly chart shows that the stock is currently trading within an uptrend channel, marked in orange color. This is a possible bullish indication.
NOK – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, and is also moving higher from oversold levels. All these indicate possible bullishness.
#8 Bullish RSI: The weekly chart shows that the RSI is currently above 50 and moving higher. This indicates 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 NOK is above the price of $6.15.
Target Prices: Our first target is $7.60. If it closes above that level, the second target price is $8.70.
Stop Loss: To limit risk, place a stop loss below $5.30. Note that the stop loss is on a closing basis.
Our target potential upside is 24% to 41%.
For a risk of $0.85, our first target reward is $1.45, and the second target reward is $2.55. 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 not yet filed its 2021 annual report.
- Hedge Funds had decreased Holdings by 107.2K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company’s previous upmove in early 2021 was caused by a Reddit-fueled boost. The speculative interest of meme-stock traders has historically been short-lived. This could happen in the case of NOK as well.
- Most of the company’s growth is coming from its network infrastructure business. Recently, researchers from Gartner reported that several network operators had found Nokia’s equipment underperformed that of its peers. Ryan Koontz of Rosenblatt Securities said in an interview that Ericsson holds a technical lead of six to 12 months over Nokia in hardware development. This, in turn, affected NOK’s crucial client relationships, with Verizon awarding an equipment contract worth $6.9 billion to Samsung last year.
- Nokia has about 5.6 billion shares outstanding. This means that gains become more difficult as it takes large purchases to move the stock price.
- The company executives and board are being paid significant compensation. In 2019, the aggregate amount of compensation paid to the members of the Board for their services on the Board and its committees equaled EUR 2,219,000.
NOK – Compensation – President and CEO
NOK – 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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