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: Banco Santander SA (NYSE: SAN)
Today’s penny stock pick is the financial services company, Banco Santander SA (NYSE: SAN).
Banco Santander SA, together with its subsidiaries, provides various retail and commercial banking products and services to individuals, small and medium-sized enterprises, and large companies worldwide. It offers demand and time deposits, and current and savings accounts; mortgages, consumer finance, syndicated corporate loans, structured financing, cash management, export and agency finance, trade and working capital solutions, and corporate finance; and insurance products.
The company also provides cash, asset, and wealth management; and private banking services. In addition, it is involved in corporate banking; treasury, risk hedging, foreign trade, confirming, custody, and investment banking activities.
Website: www.santander.com
Latest 10-k report: https://sec.report/Document/0000891478-21-000041/Interactive-1
Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for SAN in the last 3 months, the stock has an average price target of $4.56, which is nearly 27% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently overhauled its shareholder reward policy. 40% of the underlying net profit will be spent on shareholder rewards, split between dividends and share buybacks.
- Hedge Funds Increased Holdings by 5.7M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel: The daily chart shows that the stock has been forming a downtrend channel, which is shown as purple color lines. Once the stock breaks out of the trend channel, it could move higher.
SAN – 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 moving higher from below the +DI and -DI lines.
#3 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#4 Bullish MACD: 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 Aroon: The value of Aroon Up is above 70 while Aroon Down is below 30 in the daily chart indicating bullishness.
#6 Flag Pattern: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic flag pattern and is marked in the chart in pink color. A flag is a continuation pattern. Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case).
SAN – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#8 Bullish RSI: The RSI is above 50 and moving higher, 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 SAN is above the price of $3.70.
Target Prices: Our first target is $4.70. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $3.10. Note that the stop loss is on a closing basis.
Our target potential upside is 27% to 62%.
For a risk of $0.60, our first target reward is $1.00, and the second target reward is $2.30. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company had reported losses during the recent year.
SAN – Cash Flow Statements
- The company was formerly known as Banco Santander Central Hispano S.A. and changed its name to Banco Santander, S.A. in June 2007.
- Multiple analysts had downgraded the stock or lowered the price target during the past few weeks.
Analyst Forecasts | Source: TipRanks.com
- Despite making losses, the company executives are being paid millions in compensation.
SAN – Executive Compensation
- A Spanish judge recently ruled that Banco Santander SA must pay Andrea Orcel more than $75 million for reneging on a promise to name him chief executive.
- SAN has a history of money laundering cases. In August 2021, The Supreme Court had fined Santander with 5.6 million for breaching the money-laundering rule. In July 2021, Norway FSA had fined Santander bank $1 million for an anti-money laundering breach.
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.