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: Comstock Mining Inc. (NYSE: LODE)
Today’s penny stock pick is the gold ore mining company, Comstock Mining Inc. (NYSE: LODE).
Comstock Mining Inc. engages in the exploration, development, and production of mineral properties in Nevada. The company explores for gold, silver, lithium, nickel, cobalt, and mercury ores. It operates in two segments, Mining and Real Estate.
The Mining segment owns and controls approximately 9,358 acres of mining claims and parcels, including approximately 2,396 acres of patented claims and surface parcels; and approximately 6,962 acres of unpatented mining claims in the Comstock and Silver City districts.
It primarily focuses on exploring and developing properties in the Dayton resource areas; and Occidental and Gold Hill gold and silver mineral properties. The Real Estate segment comprises land and real estate rental properties, as well as the Gold Hill Hotel and Daney Ranch properties.
Comstock Mining Inc. has collaboration agreements with Oro Industries Inc. and Mercury Clean Up, LLC for the manufacture and deployment of mercury remediation systems with proprietary mechanical, hydro, electro-chemical, and oxidation processes to reclaim and remediate mercury from soils, waste, and tailings.
Website: www.comstockmining.com
Latest 10-k report: https://sec.report/Document/0001120970-21-000046/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for LODE in the last 3 months, the stock has an average price target of $7.25, which is nearly 393% upside from current levels.
Source: TipRanks.com
Analyst Forecasts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The options based short squeeze.
- The company’s acquisition of an additional 3,129,081 common shares in LINICO Corporation, thereby increasing Comstock’s overall ownership to approximately 90%.
- Corporate Insiders Bought Shares Worth $60.7K in the Last 3 Months.
Insiders | 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 has been forming a falling wedge pattern for the past several months. 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 from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
LODE – 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 is currently above the +DI and -DI lines.
#3 Bullish MACD: The MACD line is above the MACD Signal line, indicating bullishness.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
LODE – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is also moving higher from oversold levels, indicating possible bullishness.
#7 Oversold RSI: The RSI is currently moving higher from oversold levels, indicating that a reversal may be imminent.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for LODE is above the price of $1.50.
Target Prices: Our first target is $2.40. If it closes above that level, the second target price is $3.00.
Stop Loss: To limit risk, place a stop loss at $1.00. Note that the stop loss is on a closing basis.
Our target potential upside is 60% to 100%.
For a risk of $0.50, our first target reward is $0.90, and the second target reward is $1.50. 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 net losses. LODE’s net loss was $7.6 million for the nine months ended September 30, 2021, compared to a net income of $18.3 million for the comparable 2020 period.
LODE – Quarterly report – Net Losses
- The company has been subject to legal proceedings.
- On July 12, 2018, Precious Royalties LLC filed a complaint against the Company in the First Judicial District Court of the State of Nevada, in Storey County, alleging that the Company failed to properly pay Precious a net smelter return royalty in accordance with a settlement agreement dated September 24, 2012. The Company negotiated a definitive and final settlement of all claims and counterclaims between the parties, for a one-time payment of $60,000.
- On February 27, 2020, the Company received notice that three former employees had filed a complaint with the U.S. Department of Labor – Occupational Safety and Health Administration (OSHA) regarding alleged wrongful termination of employment in 2019, seeking backpay, frontpay, and other compensatory damages, as well as interest and legal fees and cost.
- Despite having an accumulated deficit of $221.0 million as of December 31, 2020, the company executives are being paid significant compensation.
LODE – Executive Compensation
- On June 24, 2019, the Company had received notice from the NYSE American LLC that it was not compliant with the NYSE American’s low selling price rule 1003(f)(v).
- The Operating Agreement of Northern Comstock LLC requires that the Company make monthly cash capital contributions of $30,000 to Northern Comstock LLC and annual capital contributions in the amount of $482,500 payable in common stock or cash. This could significantly dilute the ownership interests of the common stock.
- The company was formerly known as GoldSpring, Inc. and changed its name to Comstock Mining Inc. in July 2010.
- The company has not given any update on gold mercury production.
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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