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: Uranium Royalty Corp (NASDAQ: UROY)
Today’s penny stock pick is the pure-play uranium royalty company, Uranium Royalty Corp (NASDAQ: UROY).
Uranium Royalty Corp acquires, accumulates, and manages a portfolio of geographically diversified uranium interests. The company has royalty interests in the McArthur River, Cigar Lake / Waterbury Lake, Roughrider, Russell Lake, Russell Lake south, and Dawn Lake projects in Saskatchewan, Canada; Anderson and Workman Creek projects in Arizona; Lance and Reno Creek projects in Wyoming; Church Rock and Roca Honda projects in New Mexico; Dewey-Burdock project in South Dakota; Slick Rock project in Colorado; Langer Heinrich project in Namibia; and Michelin project in Newfoundland and Labrador, Canada.
Website: https://www.uraniumroyalty.com
Latest 10-k report: https://www.uraniumroyalty.com/_resources/financials/347717-Uranium-40-F.pdf?v=0.200
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for UROY in the last 3 months, the stock has an average price target of $5.90, which is nearly 109% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- An overall bullish outlook on nuclear energy. EU had stated that nuclear power would qualify as a green investment beginning in 2023. All these translate to a growing need for uranium as fuel for carbon-free nuclear energy.
- The company elected to receive royalty proceeds from the recently re-started world-class McArthur River mine through the delivery of physical uranium. The project plans to produce 15M lbs/year of U3O8 from the operations starting in 2024.
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 a stock breaks out of the falling wedge pattern, it could move higher.
UROY – 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 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 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.
UROY – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 MACD above Signal Line: In the weekly chart as well, 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 UROY is above the price of $3.00.
Target Prices: Our first target is $3.80. If it closes above that level, the second target price is $4.70.
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 27% to 57%.
For a risk of $0.50, our first target reward is $0.80, and the second target reward is $1.70. 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. For the year ended April 30, 2022, the Company incurred a net loss of $4.3 million compared to a net loss of $1.4 million for the previous fiscal year.
UROY – Consolidated Statements of Losses
- Risks related to political unrest in Kazakhstan could negatively impact the Company’s investment in Yellow Cake plc and its option to purchase uranium from Yellow Cake.
- Despite being a loss-making company, the executives are being paid significant compensation. It may be noted that as of April 30, 2022, the Company only had eight employees in Canada and two employees in the United States.
UROY – 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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