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: Rekor Systems, Inc. (NASDAQ: REKR)
Today’s penny stock pick is the leading AI roadway intelligence company, Rekor Systems, Inc. (NASDAQ: REKR).
Rekor Systems, Inc. provides intelligent infrastructure solutions and services for transportation management, public safety, and commercial markets. It offers Rekor Command Roadway Monitoring Core Application and Events Management application for cross-agency incident detection and management; Community Connect application to notify public in real-time of events that are impacting the roadway; Advanced Analytics application for archive incident and event information; Road Conditions application for real-time conditions happening on roadways; and Asset View application allows agencies to integrate with its existing assets on the roadway and showcase these assets in real-time.
The company also provides Rekor Discover Count, Class and Speed application that delivers per vehicle record data and analytics; and Sustainability Planning application that offers cloud-based dashboards and reports the count of EVs and heatmaps for EVs, as well as a breakdown of EV models, greenhouse gas emissions and smog, and other metrics.
In addition, it offers Rekor Scout for public safety that provides accurate license plate and vehicle recognition on any IP, traffic, or security camera.
Further, the company provides Rekor CarCheck, an AI-based vehicle and license plate recognition technology to respond with accurate license plate data, vehicle make, model, body type, and color for commercial applications; and AutoNotice application for contactless compliance that delivers a turnkey information and citation management solution for cities, states, and municipalities for both primary and secondary offenses.
Additionally, it offers Rekor Edge Max System, a fixed traffic data collection system; Rekor Edge Pro, a vehicle recognition solution; and Rekor Edge Flex, a portable data collection system.
Website: https://www.rekor.ai
Analyst Consensus: Not Covered By Wall Street Analysts.
Potential Catalysts / Reasons for the Hype:
- Corporate Insiders Bought Shares Worth $95.5K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company is a first mover in transportation management systems, a sector that is expected to grow to $31.8 billion by 2030.
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.
REKR – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#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.
REKR – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for REKR is above the price of $1.70.
Target Prices: Our first target is $2.60. If it closes above that level, the second target price is $3.20.
Stop Loss: To limit risk, place a stop loss at $1.20. Note that the stop loss is on a closing basis.
Our target potential upside is 53% to 88%.
For a risk of $0.50, our first target reward is $0.90, and the second target reward is $1.50. 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. As of and for the year ended December 31, 2022, the Company had a net loss from continuing operations of $83,454,000 and a working capital deficit of $6,010,000.
REKR – Consolidated Statements of Operations
- Based on REKR’s current business plan assumptions and the expected cash burn rate, the Company believes that the existing cash is insufficient to fund operations for the next twelve months following the issuance of the audited financial statements. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
- Hedge Funds Decreased Holdings by 758.9K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- On September 18, 2020, Fordham Financial Management, Inc. commenced a lawsuit against REKR in the Supreme Court for the State of New York, New York County. Fordham alleged that the company breached an underwriting agreement and brought claims for breach of contract, a declaratory judgment, and attorneys’ fees and expenses, seeking damages. REKR had to make a payment of $1,320,000.
- Despite being a loss-making company, the executives are being paid significant compensation.
REKR – 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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