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: Bit Digital Inc. (NASDAQ: BTBT)
Today’s penny stock pick is the bitcoin mining company, Bit Digital Inc. (NASDAQ: BTBT).
Bit Digital Inc., together with its subsidiaries, engages in the bitcoin mining business. It is also involved in the treasury management activities. The company’s mining platform operates with the primary intent of accumulating bitcoin which may sell for fiat currency from time to time depending on market conditions.
Website: https://bit-digital.com
Latest 10-k report: https://sec.report/Document/0001213900-22-020007/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for BTBT in the last 3 months, the stock has an average price target of $4.00, which is nearly 131% upside from current levels.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The overall increase in the price of Bitcoin and Ethereum.
- BTBT recently announced its unaudited bitcoin and Ethereum production and corporate updates for the month of June 2022.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
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.
BTBT – 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 Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#5 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.
#6 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.
BTBT – 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.
#8 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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for BTBT is above the price of $1.80.
Target Prices: Our first target is $3.40. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss at $0.90. Note that the stop loss is on a closing basis.
Our target potential upside is 89% to 178%.
For a risk of $0.90, our first target reward is $1.60, and the second target reward is $3.20. 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. BTBT had incurred net losses of approximately $1.9 million and $9.7 million for the years ended December 31, 2020, and 2019, respectively.
BTBT – Consolidated Statement of Operations and Comprehensive Income (Loss)
- The company was formerly known as Golden Bull Limited and changed its name to Bit Digital, Inc. in September 2020.
- Despite having a history of net losses, the executives are being paid significant compensation.
BTBT – Executive Compensation | Source: Morningstar.com
- The company has ongoing legal proceedings.
- On January 20, 2021, a securities class action lawsuit was filed against the Company and its Chief Executive Officer and Chief Financial Officer titled Anthony Pauwels v. Bit Digital, Inc., Min Hu and Erke Huang.
- On October 24, 2019, the Pudong Branch of the Shanghai Public Security Bureau announced that it was conducting an investigation of Shanghai Dianniu Internet Finance Information Service Co. Ltd, which was a variable interest entity (VIE) of the Company, for suspected illegal collection of public deposits.
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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