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: Grab Holdings Ltd (NASDAQ: GRAB)
Today’s penny stock pick is the software application provider for ride-hailing transport, food delivery, and payment solutions, Grab Holdings Ltd (NASDAQ: GRAB).
Grab Holdings Ltd provides superapps that allow access to mobility, delivery, financial services, and enterprise offerings through its mobile application in Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
Latest 10-k report: https://sec.report/Document/0001193125-21-348276/
Analyst Consensus: As per TipRanks Analytics, based on 9 Wall Street analysts offering 12-month price targets for GRAB in the last 3 months, the stock has an average price target of $5.42, which is nearly 73% upside from current levels.
Potential Catalysts / Reasons for the Hype:
- The company reported revenue for the first quarter that beat Wall Street estimates.
- Altimeter Capital promised to hold onto their Grab stake for three years, signaling their commitment to the SPAC deal.
- Evercore ISI analyst reiterated ‘Buy’ rating and set an $8 price target for the stock.
On analyzing the company’s stock charts, there seem to be multiple 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.
#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 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, 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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of the downtrend and moving higher. This is a possible bullish indication.
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is also moving higher from oversold levels, indicating possible bullishness.
#7 Oversold RSI: The RSI is moving higher from oversold levels, indicating that a reversal may be imminent.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GRAB is above the price of $3.40.
Target Prices: Our first target is $5.00. If it closes above that level, the second target price is $6.50.
Stop Loss: To limit risk, place a stop loss at $2.50. Note that the stop loss is on a closing basis.
Our target potential upside is 47% to 91%.
For a risk of $0.90, our first target reward is $1.60, and the second target reward is $3.10. 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. Grab incurred net losses of $2.7 billion and $4.0 billion, and had net cash outflows from operating activities of $643 million and $2.1 billion, in 2020 and 2019, respectively.
- Hedge Funds Decreased Holdings by 1.2M Shares Last Quarter.
- Shareholder rights law firm Robbins LLP is investigating Grab Holdings Limited and its officers and directors to determine whether they breached their fiduciary duties and violated securities laws in relation to the Company’s decline in revenue in Q4 2021. At least eight law firms have announced their intention to investigate Grab for matters such as false and misleading statements, possible fraud, and other violations of US federal securities laws.
- Grab faces intense competition across the segments and markets it serves.
- Grab’s liabilities exceeded its assets by $6.3 billion and $4.2 billion as of December 31, 2020, and 2019, respectively.
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!
— 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.Wall Street legend warns "A strange day is coming" [sponsor]
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