We recently started a series called “Penny Stock of the Day”. These ideas are geared towards 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: Sphere 3D Corp (NASDAQ: ANY)
Today’s penny stock pick is the containerization, virtualization, and data management solutions company, Sphere 3D Corp (NASDAQ: ANY).
Sphere 3D Corp focuses on operating as a carbon neutral bitcoin mining company. It also provides data management solutions through hybrid cloud, cloud, and on-premises implementations directly and through its reseller network and professional services organization.
Its products portfolio includes HVE-STACK high density server, which provides computer and storage appliance for the data centers; HVE-VELOCITY, a high availability dual enclosure storage area network that offers reliability and integrity for optimal data storage, protection, and recovery; HVE 3DGFX, a virtual desktop infrastructure solution; HVE STAGE, a server virtualization platform; and HVE VAULT, an appliance designed to handle requirements for backup and replication storage. In addition, it offers self-service and support services.
Website: www.sphere3d.com
Latest 10-k report: https://sec.report/Document/0001591956-22-000004/
Analyst Consensus: Not Covered By Analysts.
Potential Catalysts / Reasons for the Hype:
- The company called off its planned merger with privately held Gryphon Digital Mining.
- The company announced a change in leadership. Patricia Trompeter will now assume the CEO role from Duncan McEwan.
- Sphere 3D also says that its mining fleet continues to grow.
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.
ANY – Daily Chart
#2 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#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 Bullish ADX and DI: The daily chart shows that the +DI line is above the -DI line, and the ADX line is moving higher from below the +DI and -DI lines. This is a possible bullish sign.
#6 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a blue color dotted line. This is a possible bullish indication.
ANY – Weekly Chart
#7 Downtrend Broken: The stock has currently broken out of a short-term downtrend, which is marked as a pink color line. This signifies bullishness.
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 Bullish RSI: The weekly chart shows that RSI is moving higher from oversold levels and is currently nearing 50, 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 ANY is above the price of $2.60.
Target Prices: Our first target is $3.50. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss at $2.10. Note that the stop loss is on a closing basis.
Our target potential upside is 35% to 92%.
For a risk of $0.50, our first target reward is $0.90, and the second target reward is $2.40. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of increasing net losses.
ANY – Consolidated Statements of Operations
- Hedge Funds Decreased Holdings by 145.3K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company executives are being paid significant compensation, even though the company has been reporting losses year-over-year.
ANY – Executive Compensation
- The company had ongoing litigation with US Trust and entered a definitive Settlement Agreement and Mutual Release effective December 20, 2021. Under this agreement, the Company agreed to pay UD Trust $2.85 million in exchange for a release of all claims. The Settlement Agreement and Mutual Release were approved by the Utah Bankruptcy Court.
- On March 14, 2022, the company was issued a deficiency notice by the Nasdaq Listing Qualifications Staff of Nasdaq for failure to comply with the Listing Rule 5605(c)(2)(A) which requires that each company have an audit committee of at least three members, each of whom must meet the criteria for independence set forth in Rule 10A-3(b)(1). Nasdaq has determined that during the period of June 30, 2021 through March 7, 2022 the company did not comply with the Audit Committee Rule because ANY paid Patricia Trompeter, an audit committee member, an unsolicited discretionary bonus of $100,000 on June 30, 2021 for work in assessing the company’s long-term strategic plan which was not considered board service under the Independence Rule. Patricia Trompeter is now set to be the CEO of the company.
- On February 17, 2021, the Nasdaq Listing Qualifications Staff issued a public letter of reprimand to the company based upon its failure to comply with the Listing Rule 5620(c) during the period of time that it was no longer a foreign private issuer and could not rely on home country practice in the alternative to the Quorum Rule.
- On January 4, 2021, ANY received a written notice from the Listing Qualifications Department of Nasdaq indicating that it was not in compliance with Listing Rule 5620(a) due to its failure to hold an annual meeting of shareholders within twelve months of the end of fiscal year-end.
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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