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: BGC Partners, Inc. (NASDAQ: BGCP)
Today’s penny stock pick is the New York based American global financial services company, BGC Partners, Inc. (NASDAQ: BGCP).
BGC Partners, Inc. offers various brokerage products, such as fixed income, such as government bonds, corporate bonds, and other debt instruments, as well as related interest rate derivatives and credit derivatives; and fixed income, equity derivatives and cash equities, energy and commodities, shipping, insurance, and futures and options.
The company also provides trade execution, brokerage, clearing, trade compression, post-trade, information, consulting, and other back office services to financial and non-financial institutions. In addition, it offers electronic and hybrid brokerage, other financial technology solutions, market data and related information services, and analytics related to financial instrument and markets under the Fenics, FMX, BGC Trader, CreditMatch, Fenics Market Data, Fenics GO, BGC Market Data, kACE2, Capitalab, Swaptioniser, CBID, Lucera, and LumeAlfa brand names.
Further, the company provides screen-based market solutions, which enable its clients to develop a marketplace, trade with their customers, issue debt, trade odd lots, access program trading interfaces, and access its network and intellectual property; option pricing and analysis tools; and software and technology infrastructure for the transactional and technology related elements. It primarily serves banks, broker-dealers, investment banks, trading firms, hedge funds, governments, and corporations, as well as investment firms.
Website: www.bgcpartners.com
Latest 10-k report: https://sec.report/Document/0001564590-21-009638/ (original), https://sec.report/Document/0001193125-21-140704 (amended)
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for BGCP in the last 3 months, the stock has an average price target of $8.00, which is nearly 108% upside from current levels.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- BGC Partners, through its Sunrise brand, recently executed its first block trade of Micro Bitcoin options offered by CME Group.
- Rumors of a share buyback program.
- Hedge Funds Increased Holdings by 13.3K Shares Last Quarter.
Hedge Fund | 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. Once the stock breaks out of the falling wedge pattern, it could move higher.
BGCP – Daily Chart
#2 Bullish RSI: The RSI is currently moving higher from oversold levels, indicating possible bullishness.
#3 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The weekly chart shows that the stock has currently taken support at the 38.2% Fibonacci support level of the upmove. This seems like a good area for the stock to move higher.
BGCP – Weekly Chart
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for BGCP is above the price of $4.00.
Target Prices: Our first target is $4.80. If it closes above that level, the second target price is $5.50.
Stop Loss: To limit risk, place a stop loss at $3.50. Note that the stop loss is on a closing basis.
Our target potential upside is 20% to 38%.
For a risk of $0.50, our first target reward is $0.80, and the second target reward is $1.50. 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 net losses.
BGCP – Consolidated Statements of Operations
- The company executives are being paid millions, even though BGCP has been a loss-making company.
BGCP – Executive Compensation
- The company had commenced legal proceedings against two former associates after discovering what it called the theft of $35.2m from funds the company set aside for UK tax payments. The complaint was filed against members of BGC’s board of directors; BGC’s controlling stockholders, Howard Lutnick, Cantor Fitzgerald, L.P., and CF Group Management, Inc.; and BGC’s CEO Lutnick (in his capacity as an officer), for breaches of fiduciary duty.
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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