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: Trivago NV (NASDAQ: TRVG)
Today’s penny stock pick is the internet-related services and products company, Trivago NV (NASDAQ: TRVG).
Trivago NV operates a hotel and accommodation search platform in the United States, Germany, the United Kingdom, Brazil, and internationally. It offers an online meta-search for hotels and accommodation through online travel agencies, hotel chains, and independent hotels. The company provides access to its platform through 54 localized websites and apps in 32 languages. As of December 31, 2020, its hotel search platform offered access to approximately 5.0 million hotels and other types of accommodation worldwide. It has a strategic partnership with Huawei Technologies Co., Ltd. for the development of travel products for use on the HUAWEI Mobile Services platform. The company operates as a subsidiary of Expedia Lodging Partner Services Sarl.
Website: www.trivago.com
Latest 10-k report: https://sec.report/Document/0001683825-21-000008/
Analyst Consensus: As per TipRanks Analytics, based on 7 Wall Street analysts offering 12-month price targets for TRVG in the last 3 months, the stock has an average price target of $3.15, which is nearly 21% upside from current levels.
Source: TipRanks.com
Analysts| Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reported better than expected earnings estimates. The company did 176% more in revenue year-over-year.
- Hedge Funds Increased Holdings by 1.8 Million 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 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.
TRVG – 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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates 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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend. It has also broken out of a double bottom pattern, which is marked in pink color. All these are possible bullish indications.
TRVG – Weeky Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 TRVG is above the price of $2.80.
Target Prices: Our first target is $3.60. If it closes above that level, the second target price is $4.20.
Stop Loss: To limit risk, place a stop loss below $2.30. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 50%.
For a risk of $0.50, our first target reward is $0.80, and the second target reward is $1.40. 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:
- The company has a history of net losses. The company’s net loss for the year ended December 31, 2020, was €245.4 million.
TRVG – Results of Operations
- The company has ongoing legal proceedings.
- On August 23, 2018, the Australian Competition and Consumer Commission instituted proceedings in the Australian Federal Court against TRVG alleging a number of breaches of the Australian Consumer Law.
- The U.K. Competition & Markets Authority had launched a consumer law investigation into online hotel booking sites in the United Kingdom in October 2017. On July 26, 2018, the CMA opened an investigation into certain of TRVG’s display practices in the United Kingdom that the CMA considered may violate U.K. consumer law.
- Despite being a loss-making company, the executives are being paid significant compensation.
TRVG – Executive Compensation
- The COVID-19 pandemic has had and is expected to continue to have, a material adverse impact on the travel industry and the company’s business, financial performance, and liquidity position.
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.