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: VEON Ltd (NASDAQ: VEON)
Today’s penny stock is an extremely high-risk-high-reward recommendation – Ukraine’s biggest mobile operator, VEON Ltd (NASDAQ: VEON).
VEON Ltd through its subsidiaries, provides mobile and fixed-line telecommunications services. It offers voice, data, and other telecommunication services through a range of wireless, fixed, and broadband internet services.
The company provides value-added services, including short messages, multimedia messages, caller number identification, call waiting, data transmission, mobile internet, downloadable content, mobile finance services, machine-to-machine, and other services; national and international roaming services; wireless internet access and mobile financial services; and mobile bundles and call completion services.
It also offers fixed-line telecommunication services, such as voice, data, internet, and value-added services for corporations, operators, and consumers, as well as sells equipment and accessories. The company provides its services under the Beeline, Kyivstar, Jazz, Djezzy, and banglalink brands in Russia, Pakistan, Algeria, Uzbekistan, Ukraine, Bangladesh, Kazakhstan, Kyrgyzstan, and Georgia. It serves approximately 210 million customers.
Website: www.veon.com
Latest 10-k report: https://sec.report/Document/0001468091-21-000019/
Analyst Consensus: Not Covered By Analysts.
Potential Catalysts / Reasons for the Hype:
- The stock’s recent sell-off was triggered due to a mix of Russia’s Ukraine invasion paired with a recent loan. Veon had announced a RUB 30 billion seven-year term loan with VTB Bank (a Russian Bank), valued at roughly $400 million. Post the Ukraine conflict, the Russian monetary system took a big hit after its removal from SWIFT resulting in the value of the RUB deteriorating. However, Veon management has now announced that it has access to plenty of cash holdings that aren’t denominated in rubles.
- VEON announced that it isn’t subject to European Union sanctions through its association with two Russian billionaire investors, Mikhail Fridman and Petr Aven. The company said that L1T VIP Holdings S.à r.l. holds a roughly 48% stake in the company, with Messrs. Fridman and Aven holding less than 50% interest in the group.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Bullish Reversal Candlestick Pattern: The daily chart shows that the stock has formed a bullish harami candlestick pattern, which points to reversals in a bear trend. It consists of a bearish candle with a large body, followed by a bullish candle with a small body enclosed within the body of the prior candle. As a sign of changing momentum, the small bullish candle ‘gaps’ up to open near the mid-range of the previous candle. Importantly, the bullish (green) candle was formed with a historic high volume.
VEON – Daily Chart
#2 Oversold 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 started to move higher from oversold levels, indicating possible bullishness.
#4 Above Price Bottom: The weekly chart shows that the stock is currently trading above a possible price bottom, which is marked as a purple color dotted line. This is a possible bullish indication.
VEON – Weekly Chart
#5 Bullish Stoch: The %K line has crossed above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#6 Oversold RSI: The RSI is currently near oversold levels in the weekly chart, indicating that a reversal may be imminent.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for VEON is above the price of $0.45.
Target Prices: Our first target is $0.80. If it closes above that level, the second target price is $1.20.
Stop Loss: To limit risk, place a stop loss at $0.22. Note that the stop loss is on a closing basis.
Our target potential upside is 78% to 167%.
For a risk of $0.23, our first target reward is $0.35, and the second target reward is $0.75. 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 reported losses for the recent year.
VEON – Consolidated Income Statement
- The company has multiple headwinds like the increasing level of sanctions being applied to Russia and changes in the value of the ruble.
- The current geopolitical situation and conflict surrounding Russia and Ukraine have the potential to adversely affect the company’s operations.
- Hedge Funds Decreased Holdings by 353.3K Shares Last Quarter.
VEON – Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives and Key Senior Managers are being paid significant compensation.
VEON – Compensation for Board of Directors
VEON – Compensation for Key Senior Managers
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.