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: WISeKey International Holding AG (NASDAQ: WKEY)
Today’s penny stock pick is the cybersecurity company, WISeKey International Holding AG (NASDAQ: WKEY).
WISeKey International Holding AG provides integrated security solutions in Switzerland, rest of Europe, the Middle East, Africa, North America, the Asia Pacific, and Latin America. The company operates in two segments, IoT and Managed Public Key Infrastructure (mPKI).
It offers microcontrollers that provide identity to various connected devices; and mPKI, which includes digital identity, certificate management and signing solutions, and trust services, as well as offers digital certificates; software as a service, including cloud-based certificate life-cycle-management and signing and authentication solutions; software licenses; post-contract customer support for cybersecurity applications; and infrastructure hosting and monitoring services.
The company also develops, markets, hosts, and supports a range of solutions that enable secure digital identification of people, content, and objects by generating digital identities through its products and services in cybersecurity services, IoT, digital brand management, and mobile security, which enable clients to monetize their existing user bases, as well as expand its eco-system. In addition, it engages in financing, sales, and distribution activities; and sells semiconductors secure chips.
Website: https://www.wisekey.com
Latest 10-k report: https://docs.wisekey.com/site/justdownload.html?id=135
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for WKEY in the last 3 months, the stock has an average price target of $4.00, which is nearly 52% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The recent tweet about a discussion between WKEY’s CEO and Elon Musk. The topic of the conversation was centered around launching more low-orbit Picco satellites using SpaceX and augmenting the 13 wise.sat fossa satellites that are already in orbit.
- The company recently announced that it would invest up to $10 million over the next two years, to mine Bitcoin from its Geneva data center.
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.
WKEY – 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 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 looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
WKEY – 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 WKEY is above the price of $2.77.
Target Prices: Our first target is $3.40. If it closes above that level, the second target price is $4.00.
Stop Loss: To limit risk, place a stop loss at $2.40. Note that the stop loss is on a closing basis.
Our target potential upside is 23% to 44%.
For a risk of $0.37, our first target reward is $0.63, and the second target reward is $1.23. 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.
WKEY – Consolidated Statements of Comprehensive Loss
- The company has a negative operating cashflow. Historically, the Group has been dependent on equity financing to augment the operating cash flow to cover its cash requirements. Any additional equity financing may be dilutive to shareholders.
- Despite being a loss-making company, the executives are being paid significant compensation.
WKEY – 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.