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: Exela Technologies Inc. (NASDAQ: XELA)
Today’s penny stock pick is the global business process automation company, Exela Technologies Inc. (NASDAQ: XELA).
Exela Technologies Inc. provides transaction processing solutions, enterprise information management, document management, and digital business process services worldwide. The company operates through three segments: Information & Transaction Processing Solutions (ITPS), Healthcare Solutions (HS), and Legal & Loss Prevention Services (LLPS).
The Company’s BPA suite of solutions is deployed in banking, healthcare, insurance, and other industries. The company is focused on work flow automation, attended and un-attended cognitive automation, digital mail rooms, print communications, and payment processing with deployments across the globe.
Website: www.exelatech.com
Latest 10-k report: https://sec.report/Document/0001558370-21-003326/
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for XELA in the last 3 months, the stock has an average price target of $4.00, which is nearly 627% upside from current levels.
Source: TipRanks.com
Analyst Forecasts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company renewed a key services contract with a “leading consulting firm.”
- The company recently expanded a contract with a top global bank.
- Corporate Insiders Bought Shares Worth $590.6K 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.
XELA – Daily Chart
#2 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#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 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.
XELA – 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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for XELA is above the price of $0.70.
Target Prices: Our first target is $1.50. If it closes above that level, the second target price is $2.30.
Stop Loss: To limit risk, place a stop loss below $0.30. Note that the stop loss is on a closing basis.
Our target potential upside is 114% to 229%.
For a risk of $0.40, our first target reward is $0.80, and the second target reward is $1.60. 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.
XELA – Consolidated Statements of Operations
- Despite being a loss-making company, the executives are being paid significant compensation.
XELA – Executive Compensation
- Hedge Funds Decreased Holdings by 650.0K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company had failed to meet certain compliance requirements of Nasdaq Capital Market in 2020. This included the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq Listing Rules and Nasdaq Listing Rule 5550(b)(2) requiring the Market Value of Listed Securities to be at or above $35 million, and Nasdaq Listing Rule 5250(c)(1), which requires timely filing of periodic reports with the SEC.
- The company has significant debt.
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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