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: Archer Aviation Inc. (NYSE: ACHR)
Today’s penny stock pick is the urban air mobility company, Archer Aviation Inc. (NYSE: ACHR).
Archer Aviation Inc. engages in designs, develops, manufactures, and operates electric vertical takeoff and landing aircrafts to carry passengers.
Website: https://www.archer.com
Latest 10-k report: https://sec.report/Document/0001628280-22-006078
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for ACHR in the last 3 months, the stock has an average price target of $10.50, which is nearly 127% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- P. Morgan initiated coverage of the stock with an overweight recommendation and a 2022 year-end price target of $7.
Analysts | Source: TipRanks.com
- Corporate Insiders Bought Shares Worth $3.5M in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company is creating a joint electric vertical take-off and landing advisory committee with United Airlines.
- Hedge Funds Increased Holdings by 5.6M 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 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out a symmetrical triangle pattern, which is marked as purple 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.
ACHR – 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 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#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, which is marked as a pink color line. This is a possible bullish indication.
ACHR – 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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ACHR is above the price of $4.70.
Target Prices: Our first target is $5.60. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $4.10. Note that the stop loss is on a closing basis.
Our target potential upside is 19% to 49%.
For a risk of $0.60, our first target reward is $0.90, and the second target reward is $2.30. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses. As of December 31, 2021, ACHR has incurred a year-to-date net loss of $347.8 million, and a net loss of approximately $373.6 million since inception.
ACHR – Consolidated Statements of Operations and Comprehensive Loss
- The company has ongoing legal proceedings. On April 6, 2021, Wisk Aero LLC brought a lawsuit against ACHR in the United States District Court for the Northern District of California alleging misappropriation of trade secrets and patent infringement.
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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