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: TMC the metals company Inc. (NASDAQ: TMC)
Today’s penny stock pick is the deep sea mining company, TMC the metals company Inc. (NASDAQ: TMC).
TMC the metals company Inc. engages in the exploration of battery-grade metals. It primarily explores nickel sulfate, cobalt sulfate, copper, and manganese products. The company, through its subsidiaries, holds exploration rights in three polymetallic nodule contract areas in the Clarion Clipperton Zone of the Pacific Ocean.
Website: https://metals.co/
Latest 10-k report: https://sec.report/Document/0001213900-21-018753/ , https://sec.report/Document/0001213900-21-028751 (Amended)
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for TMC in the last 3 months, the stock has an average price target of $2.50.
Source: TipRanks.com
Analyst Forecast | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The rise in nickel prices. There is also a shortage of Nickel caused due to international boycott of Russia, and Russia’s possible ban of nickel and other commodity sales to western countries. Russia is a chief exporter of Nickel.
- Corporate Insiders Bought Shares Worth $3.7M in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Increased Holdings by 860.0 Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company’s deep sea mining vessel, ‘Hidden Gem has completed a six-week expedition and is on a path to tap planet’s largest known source of EV battery metals.
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.
TMC – 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 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 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend and is moving higher. This is a possible bullish indication.
TMC – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#8 MACD above Signal Line: In the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for TMC is above the price of $3.95. However, you can purchase half the intended quantity of shares of TMC above the price of $3.45.
Target Prices: Our first target is $5.50. If it closes above that level, the second target price is $9.00.
Stop Loss: To limit risk, place a stop loss at $3.10. Note that the stop loss is on a closing basis.
Our target potential upside is 39% to 128%.
For a risk of $0.85, our first target reward is $1.55, and the second target reward is $5.05. This is a nearly 1:2 and 1:6 risk-reward trade.
In other words, this trade offers 2x to 6x more potential upside than downside.
Potential Risks / Red Flags:
- The company has been a loss-making company since its inception. For the year ended December 31, 2020, TMC had a net loss of approximately $2.9 million.
TMC – Statements of Operations
- The company has a history of name changes. It was formerly known as DeepGreen Metals. The Metals Company was founded in 2021 through the merger of DeepGreen and the Sustainable Opportunities Acquisition Corporation.
- The company has no operating history and no revenues and provides no basis on which to evaluate its ability to achieve its business objective.
- As of December 31, 2020, the company had approximately $1.3 million in cash and a working capital deficiency of approximately $366,000.
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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