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: Nordic American Tanker Ltd (NYSE: NAT)
Today’s penny stock pick is the tanker company, Nordic American Tanker Ltd (NYSE: NAT).
Nordic American Tanker Ltd owns and operates double hull crude oil tankers. It is an international tanker company that owns double-hull Suezmax tankers. It operates vessels in the spot market or on spot market-related charters pursuant to cooperative arrangements with third parties. The company’s fleet consists of crude oil tankers, and all of its vessels are employed in the spot market. The company has only one type of vessel – Suezmax crude oil tankers.
Website: https://www.nat.bm
Latest 10-k report: https://sec.report/Document/0001140361-22-018634/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for NAT in the last 3 months, the stock has an average price target of $4.25, which is nearly 17% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reported a positive Q3 result, Q3 GAAP EPS of $0.05 beat by $0.01 while revenue of $47.38M (+408.9% Y/Y) beat by $2.78M.
- Jeffries analyst Omar Nokta raised the target to $4.50 from $4.
- The company announced that it will be paying its dividend of $0.05 on the 20th of December, an increased payment from last year’s comparable dividend.
- Hedge Funds Increased Holdings by 7.8K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Uptrend Channel: The daily chart shows that the stock has been trading within an uptrend channel, which is shown in purple color lines. This is a possible bullish indication.
NAT – 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 MAs: The stock is currently above its 50-day as well as 200-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 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.
NAT – Weekly Chart
#6 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.
#7 Bullish RSI: The RSI is above 50 and moving higher, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for NAT is above the price of $3.65.
Target Prices: Our first target is $4.70. If it closes above that level, the second target price is $5.50.
Stop Loss: To limit risk, place a stop loss at $3.00. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 51%.
For a risk of $0.65, our first target reward is $1.05, and the second target reward is $1.85. 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.
NAT – Consolidated Statements of Operations
- NAT issued $80.1m of new shares during 2021, plus a further $34.8m during the first half of 2022. As a result, this lifted their outstanding share count of 151,446,112 at the end of 2020 to 202,672,862 by the end of the second quarter of 2022, thereby representing a one-third increase. The issue of new shares to boost NAT’s cash balance to survive their negative operating cash flow eroded the value of existing shares.
- The company was formerly known as Nordic American Tanker Shipping Limited and changed its name to Nordic American Tankers Limited in June 2011.
- The demand for the company’s vessels and services derives primarily from crude oil. Any decrease in shipments of crude oil may adversely affect NAT’s financial performance. The development, availability, and relative costs of nuclear power, natural gas, coal, and other alternative sources of energy could also adversely impact the company’s performance.
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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