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: New Gold Inc. (NYSE: NGD)
Today’s penny stock pick is the Canadian mining company, New Gold Inc. (NYSE: NGD).
New Gold Inc. engages in the development and operation of mineral properties. It primarily explores gold, silver, and copper deposits. The company’s principal operating properties include 100% interest in the Rainy River gold-silver mine located in Ontario, Canada; and New Afton gold-copper mine located in British Columbia, Canada. It also operates the Cerro San Pedro gold-silver mine in San Luis PotosÃ, Mexico.
Website: www.newgold.com
Latest 10-k report: https://sec.report/Document/0000800166-21-000006/
Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for NGD in the last 3 months, the stock has an average price target of $1.81.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- On Jan. 12, 2022, the Company reported fourth quarter and annual operational results for the Company as of December 31, 2021. NGD achieved the updated consolidated gold equivalent guidance range during the quarter. The Company also provided notice that it will release its fourth quarter and full year 2021 financial results and 2022 operational outlook before markets open on Wednesday, February 23, 2022.
- Hedge Funds Increased Holdings by 670.1K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company recently closed the sale of the gold stream held on the Blackwater Project. This deal, worth $300 million, is anticipated to sufficiently capitalize the company to continue on its existing projects and move forward with new ones.
- NGD is advancing the ramp-up of projects at its New Afton mine in British Columbia and continuing working toward an optimized underground-mine plan study at Rainy River.
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 a symmetrical triangle pattern, which is marked as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
NGD – 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 MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#6 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.
NGD – Weekly Chart
#7 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#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 NGD is above the price of $1.78.
Target Prices: Our first target is $2.30. If it closes above that level, the second target price is $3.60.
Stop Loss: To limit risk, place a stop loss at $1.46. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 102%.
For a risk of $0.32, our first target reward is $0.52, and the second target reward is $1.82. This is a nearly 1:2 and 1:6 risk-reward trade.
In other words, this trade offers 2x to 6x more potential upside than downside.
Potential Risks / Red Flags:
- Bank of America analyst Michael Jalonen reiterated his Underperform rating and $1.25 price target for New Gold. “ We rate New Gold shares as Underperform on concerns around liquidity, permitting, execution and valuation, particularly in the short-term.”
Analyst Forecasts | Source: TipRanks.com
- The company executives are being paid millions in compensation.
NGD – Executive 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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