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: CleanSpark, Inc. (NASDAQ: CLSK)
Today’s penny stock pick is the developer of infrastructure for Bitcoin, CleanSpark, Inc. (NASDAQ: CLSK).
CleanSpark, Inc. engages in the mining of Bitcoin operations. It also provides data center services, including rack space, power, and equipment; and various cloud services, such as virtual, virtual storage, and data backup services.
Website: https://www.cleanspark.com
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for CLSK in the last 3 months, the stock has an average price target of $8.74, which is nearly 80% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The overall optimism with cryptocurrency stocks, on news that Coinbase Global is partnering with securities exchange operator Cboe Global Markets on a spot Bitcoin exchange-traded fund (ETF) that would be managed by Fidelity.
- CLSK published its latest monthly business update. The company said that it mined 491 bitcoins in June and sold 413 for proceeds of roughly $11.2 million to fund its operations. In May, the company’s tally was 609 bitcoins.
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.
CLSK – 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.
CLSK – 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 CLSK is above the price of $5.05.
Target Prices: Our first target is $6.50. If it closes above that level, the second target price is $7.60.
Stop Loss: To limit risk, place a stop loss at $4.20. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 51%.
For a risk of $0.85, our first target reward is $1.45, and the second target reward is $2.55. 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:
- From the Company’s inception through September 30, 2022, CLSK sustained $196,053,911 in cumulative net losses and had a net loss of $40,089,393 for the fiscal year ending September 30, 2022.
CLSK-Consolidated Statements of Operations and Comprehensive Loss
- The company was formerly known as Stratean Inc. and changed its name to CleanSpark, Inc. in November 2016.
- Despite being a loss-making company, the executives are being paid millions as compensation.
CLSK – Executive Compensation
- The company is currently the subject of a shareholder class action. The Class Complaint on January 20, 2021, alleges that, between December 31, 2020, and January 14, 2021, CLSK and certain members of its executive management team failed to disclose certain material information to investors and that, as a result of the foregoing, the positive statements about the company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
- Hedge Funds Decreased Holdings by 31.0K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
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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