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: Cipher Mining Inc. (NASDAQ: CIFR)
Today’s penny stock pick is the technology company, Cipher Mining Inc. (NASDAQ: CIFR).
Cipher Mining Inc., through itself and its consolidated subsidiaries, including CMTI, develops and operates industrial scale bitcoin mining data centers in the United States. It operates four bitcoin mining data centers in Texas.
Its Odessa data center (the Odessa Facility) is its wholly owned 207 megawatts (MW) facility located in Odessa, Texas. The Odessa Facility is capable of producing approximately 4.2 exahash per second (EH/s). Its Alborz data center (the Alborz Facility) is located near Happy, Texas.
Its Bear data center (the Bear Facility) is located near Andrews, Texas. Its Chief data center (the Chief Facility) is also located near Andrews, Texas. The Chief Facility is a 10 MW data center that is connected to the local electrical grid.
Website: https://www.ciphermining.com
Latest 10-k report: https://investors.ciphermining.com/sec-filings/sec-filing/10-k/0000950170-23-007793
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for CIFR in the last 3 months, the stock has an average price target of $3.75, which is nearly 23% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently announced results for its first quarter 2023, with an update on its operations and deployment strategy. CIFR completed the first phase of growth at its Odessa facility and achieved a self-mining capacity of over 6.0 EH/s across its portfolio.
- The company achieved record production during the month of May.
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.
CIFR – 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.
CIFR – 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 CIFR is above the price of $3.20.
Target Prices: Our first target is $4.40. If it closes above that level, the second target price is $5.30.
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 38% to 66%.
For a risk of $0.70, our first target reward is $1.20, and the second target reward is $2.10. 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. CIFR incurred a net loss of $39.1 million and negative cash flows from operations of $20.9 million for the year ended December 31, 2022.
CIFR – Consolidated Statements of Operations
- The company has ongoing legal proceedings. On November 18, 2022, Luminant filed suit against CMTI in the 95th District Court of Dallas County, Texas, asserting Texas state law claims for declaratory judgment and “money had and received”, seeking recoupment and return of money previously paid by Luminant to CMTI in connection with Luminant’s construction and energization of Cipher’s bitcoin mining data center in Odessa, Texas.
- CIFR operates in a highly competitive industry and competes against companies that operate in less regulated environments as well as companies with greater financial and other resources. The company’s business, operating results, and financial condition may be adversely affected if it is unable to respond to its competitors effectively.
- Despite being a loss-making company, the executives are being paid significant compensation.
CIFR – 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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