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: Oppfi Inc. (NYSE: OPFI)
Today’s penny stock pick is the financial services company, Oppfi Inc. (NYSE: OPFI).
Oppfi Inc. operates a financial technology platform that allows banks to offer lending products. Its platform facilitates the installment loan products, OppLoans and SalaryTap; and the credit card product, OppFi Card.
In July 2021, the company had completed its previously announced business combination with FG New America Acquisition Corp., a special purpose acquisition corporation.
Website: https://www.oppfi.com
Latest 10-k report: https://sec.report/Document/0001104659-21-030874/
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for OPFI in the last 3 months, the stock has an average price target of $10.00, which is nearly 114% upside from current levels.
Source: TipRanks.com
Analyst Forecasts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company announced a $20M Share Repurchase Program.
- Corporate Insiders Bought Shares Worth $323.2K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company recently brought in a new, highly experienced CEO, Neville Crawley.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: 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 currently looks poised for a breakout from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
OPFI – Daily Chart
#2 Bullish RSI: The RSI is currently near 50 and moving higher, indicating possible bullishness.
#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 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.
OPFI – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is currently moving higher from oversold levels. This is a possible bullish indication.
#7 Oversold RSI: In the weekly chart, the RSI is currently near oversold levels. This indicates 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 OPFI is above the price of $5.15.
Target Prices: Our first target is $6.30. If it closes above that level, the second target price is $7.40.
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 22% to 44%.
For a risk of $0.65, our first target reward is $1.15, and the second target reward is $2.25. 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:
- For the year ended December 31, 2020, OPFI incurred a net loss of $185,637.
OPFI – Statement of Operations – Net Loss
- The company has a high risk of charge offs, which increased to 36% over the past quarter.
- There is a multitude of lawsuits against OPFI for its predatory pricing schemes. The Office of the Attorney General (OAG) in Washington D.C had sued OPFI alleging that OppFi violated District law by misrepresenting its high-interest loans as fast and easy cash and falsely claiming that its loans would help struggling consumers build credit. Instead, OppFi charged over 4,000 District residents exorbitant interest rates of up to 198%—more than eight times the District’s 24% rate cap.
- Members of the company management team have been involved in civil disputes and litigation and governmental investigations relating to their business affairs. Although this is technically unrelated to OPFI, it does raise questions on the ethical aspect of the company management.
- The report by Edwin Dorsey alleges that OPFI has paid for positive online reviews and has delayed the processing of loan repayments.
- The company notes in its annual report that the stockholders may be held liable for claims by third parties against OPFI to the extent of distributions received by them upon redemption of their shares.
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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