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: W&T Offshore, Inc. (NYSE: WTI)
Today’s penny stock pick is the independent oil and natural gas producer, W&T Offshore, Inc. (NYSE: WTI).
W&T Offshore, Inc. engages in the acquisition, exploration, and development of oil and natural gas properties in the Gulf of Mexico. The company sells crude oil, natural gas liquids, and natural gas. It holds working interest in approximately 41 offshore fields in federal and state waters. It has interests in offshore leases covering approximately 669,000 net acres spanning across the Outer Continental Shelf off the coasts of Louisiana, Texas, Mississippi, and Alabama.
Website: www.wtoffshore.com
Latest 10-k report: https://sec.report/Document/0001558370-22-003156
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for WTI in the last 3 months, the stock has an average price target of $7.85, which is nearly 87% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The analyst from Stifel Nicolaus reiterated a buy rating and set a target price of $9.20 for the stock.
Analysts | Source: TipRanks.com
- Hedge Funds Increased Holdings by 499.2K Shares Last Quarter.
Hedge Funds| Source: TipRanks.com
- Crude prices surging above $100. Goldman Sachs has forecast $125 for crude oil in the second half of this year.
- Rumors of a potential buyout.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock had broken out a symmetrical triangle pattern, which is marked as orange color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend. The stock is currently moving higher after taking support near the breakout level of the symmetrical triangle pattern.
WTI – Daily Chart
#2 Price above MA: The stock is currently above its 200-day SMA, indicating that the bulls have still retained control.
#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 Trend Channel: The weekly chart shows that the stock is trading within a trend channel. It is marked as purple color lines. This is a possible bullish indication.
WTI – Weekly Chart
#6 Price Above MAs: The weekly chart shows that the stock is currently trading above its 50-week and 200-week SMA, indicating bullishness.
#7 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI and ADX lines are above the -DI line, and the ADX line is moving higher from below the +DI and -DI lines.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for WTI is above the price of $4.50.
Target Prices: Our first target is $5.50. If it closes above that level, the second target price is $6.50.
Stop Loss: To limit risk, place a stop loss at $3.90. Note that the stop loss is on a closing basis.
Our target potential upside is 22% to 44%.
For a risk of $0.60, our first target reward is $1.00, and the second target reward is $2.00. 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 decreasing net income. For the year ended December 31, 2021, the company had a net loss of $41.5 million.
WTI – Consolidated Statements of Operations
- Corporate Insiders Sold Shares Worth $523.8K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
WTI – Executive Compensation
- The company had to pay Apache Corp. $43.2 million, plus $4.4 million in prejudgment interest, attorney’s fees, and costs assessed in the judgment, for a lawsuit that Apache filed in December 2014 regarding a dispute about Apache’s use of drilling rigs instead of a previously contracted intervention vessel for the plugging and abandonment of three deepwater wells in the Mississippi Canyon area of the Gulf of Mexico.
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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