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: Ardagh Metal Packaging SA (NYSE: AMBP)
Today’s penny stock pick is the packaging and containers company, Ardagh Metal Packaging SA (NYSE: AMBP).
Ardagh Metal Packaging SA supplies metal beverage cans in Europe, the United States, and Brazil. Its products are used in various end-use categories, including beer, carbonated soft drinks, energy drinks, hard seltzers, juices, pre-mixed cocktails, teas, sparkling waters, and wine. The company serves beverage producers. The company is based in Luxembourg, Luxembourg.
Website: https://www.ardaghmetalpackaging.com
Latest 10-k report: https://otp.tools.investis.com/clients/us/ardagh_metal_packaging/SEC/sec-outline.aspx?FilingId=15633134&Cik=0001845097&PaperOnly=0&HasOriginal=1
Analyst Consensus: As per TipRanks Analytics, based on 9 Wall Street analyst offering 12-month price targets for AMBP in the last 3 months, the stock has an average price target of $5.56, which is nearly 15% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The positive mention by Jenny Harrington, CEO of Gilman Hill Asset Management and a CNBC commentator, “It’s got a terrific balance sheet, maturities are far out and it sold off because it came out in a SPAC structure and everybody hated companies that were associated with SPACs”.
- Hedge Funds Increased Holdings by 3.3M 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 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.
AMBP – 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.
AMBP – 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 AMBP is above the price of $4.95.
Target Prices: Our first target is $6.00. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $4.30. Note that the stop loss is on a closing basis.
Our target potential upside is 21% to 41%.
For a risk of $0.65, our first target reward is $1.05, and the second target reward is $2.05. 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 customer concentration risk, as ten customers accounted for approximately 58% of the company’s 2021 consolidated revenues.
- There is significant competition from other metal packaging producers and from manufacturers of alternative forms of packaging.
- As of December 31, 2021, AMBP’s accumulated post-retirement benefit obligation, net of employee benefit assets, was approximately $178 million covering employees in multiple jurisdictions. The costs associated with these and other benefits to employees could have a material adverse effect on the company’s financial condition.
- Brexit could negatively impact the company, as nearly 10% of the company’s total 2021 revenue was derived from revenues generated in the United Kingdom. Three of AMBP’s 24 manufacturing facilities are located in the United Kingdom, as of December 31, 2021.
- The company’s corporate structure and relationship with its parent company appear to be complex. The company had voluntarily delisted its Class A common shares from the NYSE following the completion of the previously announced exchange offer under which AGSA offered to exchange each outstanding AGSA Share for 2.5 shares of Ardagh Metal Packaging S.A.
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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