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: Eos Energy Enterprises Inc. (NASDAQ: EOSE)
Today’s penny stock pick is the storage battery manufacturing company, Eos Energy Enterprises Inc. (NASDAQ: EOSE).
Eos Energy Enterprises Inc. designs, manufactures, and deploys battery storage solutions for utility, commercial and industrial, and renewable energy markets in the United States. It offers stationary battery storage solutions. The company’s flagship product is the Eos Znyth DC battery system designed to meet the requirements of the grid-scale energy storage market.
Website: https://eosenergystorage.com/
Latest 10-k report: https://sec.report/Document/0001628280-22-004017
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Streets analyst offering 12-month price targets for EOSE in the last 3 months, the stock has an average price target of $13.00, which is nearly 333% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The increased focus on renewable sources of energy and battery storage because of the Russia-Ukraine conflict. As clean energy solutions become more important for energy independence, countries may place an increased emphasis on energy storage.
- Corporate Insiders Bought Shares Worth $304.7K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Rumors that the company has landed a big order for their battery systems.
- Evercore ISI and B.Riley Financial Reiterated the buy rating and increased price target for the stock.
Analysts | Source: TipRanks.com
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 break out from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
EOSE – Daily Chart
#2 Bullish RSI: The RSI is currently moving higher from oversold levels, 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.
EOSE – Weekly Chart
#7 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 EOSE is above the price of $3.75.
Target Prices: Our first target is $5.00. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $3.00. Note that the stop loss is on a closing basis.
Our target potential upside is 33% to 87%.
For a risk of $0.75, our first target reward is $1.25, and the second target reward is $3.25. 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. For the years ended December 31, 2021, 2020, and 2019, EOSE had $124.2 million, $70.6 million, and $79.5 million in net losses, respectively.
EOSE – Consolidated Statements of Operations
- As of December 31, 2021, the Company is under investigation by the U.S. Department of Justice for underpayment of certain custom duties from the past years for the imports of supplies from overseas vendors.
- Hedge Funds Decreased Holdings by 21.0K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
EOSE – Summary Compensation Table
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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