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: ATI Physical Therapy Inc. (NYSE: ATIP)
Today’s penny stock pick is the outpatient physical therapy provider, ATI Physical Therapy Inc. (NYSE: ATIP).
ATI Physical Therapy Inc. specializes in outpatient rehabilitation and adjacent healthcare services in the United States. It offers a range of services to its patients, including physical therapy, work conditioning, hand therapy, aquatic therapy, functional capacity assessment, sports medicine, wellness programs, and home health. The company provides outpatient physical therapy services under the ATI Physical Therapy name.
Website: https://www.atipt.com/
Latest 10-k report: https://sec.report/Document/0001815849-21-000004/
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for ATIP in the last 3 months, the stock has an average price target of $4.83, which is nearly 29% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Jefferies announced that it is upgrading shares of ATI Physical Therapy to buy, and assigning a $5 price target to the shares. Citi analyst Jason Cassorla assumed coverage of ATI Physical Therapy with a “Neutral” rating and a $3.50 price target.
Analyst Forecasts | Source: TipRanks.com
- Corporate Insiders Bought Shares Worth $36.3K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Increased Holdings by 4.6M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Rumors of announcement of a new CEO.
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.
ATIP -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 Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#5 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.
#6 Consolidation Area: The weekly chart shows that the stock has been forming a consolidation area during the past several months. Once it breaks out of the consolidation area, it could move higher.
ATIP – Weekly Chart
#7 Bullish RSI: The RSI is currently moving higher from oversold levels. This indicates bullishness.
#8 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, 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 ATIP is above the price of $4.00.
Target Prices: Our first target is $5.60. If it closes above that level, the second target price is $7.60.
Stop Loss: To limit risk, place a stop loss at $3.00. Note that the stop loss is on a closing basis.
Our target potential upside is 40% to 90%.
For a risk of $1.00, our first target reward is $1.60, and the second target reward is $3.60. 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 has a history of net losses. For the period from June 10, 2020 (inception) through December 31, 2020, ATIP had a net loss of $1,588,639.
ATIP – Statement of Operations
- Due to the Covid spread, officials have asked hospitals to limit elective surgeries. This could impact the patient traffic.
- ATI Physical Therapy Inc., in its earnings debut as a public company following a merger with a blank-check firm, Fortress Value Acquisition Corp. II, revised its revenue projections sharply lower and disclosed larger-than-expected staff turnover.
- Mike Petusky. Research Analyst at Barrington Research Associates, wrote in a report – “The release also lacked a share count, a balance sheet, a cash flow statement or, for that matter, a good defense for why the company’s original guidance (which was officially maintained up until yesterday) ever made sense. We are shocked by what has unfolded at ATI.”
- At least five law firms from coast-to-coast had published press releases urging investors who had lost money to contact them for their securities fraud investigations on ATIP.
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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