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: Helix Energy Solutions Group Inc. (NYSE: HLX)
Today’s penny stock pick is the American oil and gas services company, Helix Energy Solutions Group Inc. (NYSE: HLX).
Helix Energy Solutions Group Inc. provides specialty services to the offshore energy industry primarily in Brazil, the Gulf of Mexico, North Sea, the Asia Pacific, and West Africa regions. The company operates through three segments: Well Intervention, Robotics, and Production Facilities. The company engineers, manages, and conducts well intervention operations that include production enhancement and abandonment, and construction in water depths ranging from 200 to 10,000 feet; and offers remotely operated vehicles (ROVs), trenchers, and ROVDrills for offshore construction and well intervention services.
It also provides intervention engineering; inspection, repair, and maintenance of production structures, trees, jumpers, risers, pipelines, subsea equipment, and related support services. In addition, the company offers reclamation and remediation services; well plug and abandonment services; pipeline abandonment services; and site inspections.
Further, it engages in the installation of flowlines, control umbilicals, and manifold assemblies and risers; trenching and burial of pipelines; installation and tie-in of riser and manifold assembly; commissioning, testing, and inspection activities; and provision of cable and umbilical lay, and connection services.
Additionally, the company offers oil and natural gas processing facilities and services to oil and gas companies; and a fast response system. It serves independent oil and gas producers and suppliers, pipeline transmission companies, renewable energy companies, and offshore engineering and construction firms.
Website: www.helixesg.com
Latest 10-k report: https://sec.report/Document/0000866829-21-000007/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for HLX in the last 3 months, the stock has an average price target of $5.60, which is nearly 45% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Piper Sandler analyst Ian Macpherson upgraded the price target of HLX to $5.60.
Analyst Forecasts | Source: TipRanks.com
- The overall increase in demand for offshore drilling, resulting in less competition from pure drilling contractors.
- Rumors of acquisition.
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 pink 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.
HLX – 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 Unbroken Uptrend: The weekly chart shows that the stock is currently on an uptrend as it has been forming higher highs and higher lows.
HLX – 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 MACD above Signal Line: In the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#9 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 HLX is above the price of $4.40.
Target Prices: Our first target is $5.80. If it closes above that level, the second target price is $6.80.
Stop Loss: To limit risk, place a stop loss at $3.50. Note that the stop loss is on a closing basis.
Our target potential upside is 32% to 55%.
For a risk of $0.90, our first target reward is $1.40, and the second target reward is $2.40. 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:
- Hedge Funds Decreased Holdings by 12.7K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company was formerly known as Cal Dive International, Inc. and changed its name to Helix Energy Solutions Group, Inc. in March 2006.
- The company executives are being paid millions in compensation.
HLX – Executive Compensation
- The company is involved in various legal proceedings, some involving claims for personal injury under the General Maritime Laws of the United States and the Jones Act.
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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