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: Orbital Energy Group Inc. (NASDAQ: OEG)
Today’s penny stock pick is the diversified energy infrastructure services company, Orbital Energy Group Inc. (NASDAQ: OEG).
Orbital Energy Group Inc. provides electric power and solar infrastructure, and integrated energy infrastructure solutions and services in the United States, the United Kingdom, and internationally. The company provides engineering, procurement, and construction services that support the development of renewable energy generation focused on utility-scale solar construction; and designs, installs, upgrades, repairs, and maintains electric power transmission and distribution infrastructure and substation facilities, as well as offers emergency restoration services, including the repair of infrastructure damaged by inclement weather.
It also provides services to the electric transmission and substation, industrial, communication towers, and disaster restoration market sectors. In addition, the company offers natural gas infrastructure and advanced technology, including metering, odorization, and remote telemetry units; and personalized gas engineering solutions to the gas utilities, power generation, emissions, manufacturing, and automotive industries under the GasPT and VE Technology names.
Website: www.orbitalenergygroup.com
Latest 10-k report: https://sec.report/Document/0001437749-21-007559/
Analyst Consensus: Not Covered By Analysts
Potential Catalysts / Reasons for the Hype:
- The company signed a contract with Lightsource bp, the third-largest Solar producing company in the World.
- Corporate Insiders Bought Shares Worth $880.4K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Increased Holdings by 697.9K 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.
OEG – 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 Bullish RSI: The RSI is above 50 and moving higher, 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.
OEG – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 OEG is above the price of $1.80.
Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $4.00.
Stop Loss: To limit risk, place a stop loss at $1.10. Note that the stop loss is on a closing basis.
Our target potential upside is 67% to 122%.
For a risk of $0.70, our first target reward is $1.20, and the second target reward is $2.20. 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. For the year ended December 31, 2020, OEG had a net loss of $27.4 million.
OEG – Net Loss
- The company may most likely try to sell shares to increase its level of cash in the balance sheet. In that case scenario, investors may suffer stock dilution, which may diminish the fair value of the stock. If the company decides to receive debt financing, bankers may impose restrictive covenants on the company’s assets.
- Despite being a loss-making company, the executives are being paid significant compensation.
OEG – Executive Compensation
- The company has notes payable worth $25 million and financing lease obligations worth $7 million.
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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