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: Gevo Inc. (NASDAQ: GEVO)
Today’s penny stock pick is the renewable fuels company, Gevo Inc. (NASDAQ: GEVO).
Gevo Inc. is a renewable chemicals and advanced biofuels company headquartered in unincorporated Douglas County, Colorado. It operates through four segments: Gevo, Agri-Energy, Renewable Natural Gas, and Net-Zero. The company commercializes gasoline, jet fuel, and diesel fuel to achieve zero carbon emissions, and reduce greenhouse gas emissions with sustainable alternatives.
Its products also include renewable gasoline and diesel, isooctane, isobutanol, sustainable aviation fuel, renewable natural gas, isobutylene, ethanol, and animal feed and protein. Gevo, Inc. has a strategic alliance with Axens North America, Inc. for ethanol-to-jet technology and sustainable aviation fuel commercial project development.
Website: https://gevo.com/
Latest 10-k report: https://sec.report/Document/0001437749-22-004346
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for GEVO in the last 3 months, the stock has an average price target of $13.00, which is nearly 240% upside from current levels.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company inked a “take-or-pay” agreement with Delta Air Lines to supply 75 million gallons of sustainable aviation fuel (SAF) per year for seven years.
- GEVO’s earnings report is expected to be released on May 9, 2022.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has been forming 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.
GEVO – Daily Chart
#2 Bullish RSI: The RSI is currently moving higher from oversold levels, indicating possible bullishness.
#3 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
GEVO – Weekly Chart
#4 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.
#5 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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GEVO is above the price of $4.35.
Target Prices: Our first target is $5.70. If it closes above that level, the second target price is $7.20.
Stop Loss: To limit risk, place a stop loss at $3.60. Note that the stop loss is on a closing basis.
Our target potential upside is 31% to 66%.
For a risk of $0.75, our first target reward is $1.35, and the second target reward is $2.85. 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. GEOV incurred net losses of $59.2 million, $40.2 million, and $28.7 million during the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, the company had an accumulated deficit of $557.4 million.
GEVO – Consolidated Statements of Comprehensive Losses
- The company was formerly known as Methanotech, Inc. and changed its name to Gevo, Inc. in March 2006.
- Corporate Insiders Sold Shares Worth $690.7K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Decreased Holdings by 55.9K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company’s approach to the renewable fuels and chemicals markets is dependent on the price of corn and other feedstocks used to produce its products. A decrease in the availability of plant feedstocks or an increase in the price may have a material adverse effect on the company’s financial condition and operating results.
- Despite being a loss-making company, the executives are being paid significant compensation.
GEVO – Executive Compensation
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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