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: Tellurian Inc. (NYSE: TELL)
Today’s penny stock pick is the Texas-based natural gas company, Tellurian Inc. (NYSE: TELL).
Tellurian Inc. is developing a portfolio of natural gas production, liquefied natural gas (LNG) marketing, and infrastructure assets that includes an approximately 27.6 million tonnes per annum LNG terminal facility and an associated pipeline in southwest Louisiana. It owns interests in 9,373 net acres of natural gas production assets, and 72 producing wells located in the Haynesville Shale trend of northern Louisiana.
Website: www.tellurianinc.com
Latest 10-k report: https://sec.report/Document/0000061398-21-000010/
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for TELL in the last 3 months, the stock has an average price target of $ 4.25, which is nearly 62% upside from current levels.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The upcoming quarterly earnings results. Equities analysts are expecting Tellurian Inc. to announce $41.28 million in sales for the current quarter.
- Hedge Funds Increased Holdings by 4.9M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- It is assumed that LNG had a key role to play to further the use of renewable energy and as a backup in the event of intermittent supply.
- Germany stopping approval of $11 Billion Nord Stream 2 Pipeline With Russia.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: 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 currently looks poised for a breakout from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
TELL – Daily Chart
#2 Bullish Stoch: The %K line of the stochastic is above the %D line, indicating possible bullishness.
#3 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.
#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 Uptrend Channel: The weekly chart shows that the stock is currently trading within an uptrend channel. This is a possible bullish sign.
TELL – 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.
#7 Bullish RSI: In the weekly chart, the RSI is moving higher from oversold levels and is now nearing 50. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for TELL is above the price of $2.80.
Target Prices: Our first target is $3.80. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss at $2.20. Note that the stop loss is on a closing basis.
Our target potential upside is 36% to 79%.
For a risk of $0.60, our first target reward is $1.00, and the second target reward is $2.20. 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. TELL’s consolidated net loss was approximately $210.7 million for the year ended December 31, 2020, compared to a net loss of approximately $151.8 million for the same period of 2019.
Consolidated Statements of Operations
- Corporate Insiders Sold Shares Worth $569.0K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid millions as compensation.
Executive Compensation
- A Tellurian investor has sued co-founder and Executive Chairman Charif Souki, seeking tens of millions of dollars in compensation for alleged breach of contract and fraud.
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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