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: Odyssey Marine Exploration, Inc. (NASDAQ: OMEX)
Today’s penny stock pick is the deep-ocean exploration, Odyssey Marine Exploration, Inc. (NASDAQ: OMEX).
Odyssey Marine Exploration, Inc. together with its subsidiaries, discovers, validates, and develops seafloor mineral resources worldwide. The company provides specialized mineral exploration, project development, and marine services to clients.
Odyssey provides marine services for private clients and governments who are interested in exploring their Exclusive Economic Zone (EEZ) to survey, map and identify any potential mineral resources present. The company focuses on the exploration of polymetallic nodules (battery metals to power the future) and subsea phosphate deposits (fertilizer to feed the future).
Website: https://www.odysseymarine.com
Latest 10-k report: https://ir.odysseymarine.com/financials/sec-filings/sec-filings-details/default.aspx?FilingId=16534686
Analyst Consensus: Not Covered By Wall Street Analysts
Potential Catalysts / Reasons for the Hype:
- Price action points to potential accumulation.
- The company recently entered into a purchase agreement to acquire a 13% interest in Ocean Minerals LLC (OML). This also allows Odyssey to acquire a total of up to 40% of OML over the next 18 months at Odyssey’s discretion. This is anticipated to be an important next step for OMEX to become the world’s leading marine mineral development company.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Consolidation Area Breakout: The daily chart shows that the stock has broken out of a long-term consolidation area, which is shown as a purple color rectangle. This is a possible bullish indication.
OMEX – 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 MA: The stock is currently above its 50-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.
OMEX – Weekly Chart_
#7 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 OMEX is above the price of $4.50.
Target Prices: Our first target is $5.20. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $4.10. Note that the stop loss is on a closing basis.
Our target potential upside is 16% to 33%.
For a risk of $0.40, our first target reward is $0.70, and the second target reward is $1.50. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses. OMEX’s net losses were $23.1 million in 2022, $10.0 million in 2021, and $14.8 million in 2020.
OMEX – Consolidated Statements of Operations
- The company has pledged certain assets, such as equipment and shares of subsidiaries, as collateral under its loan agreements. Some suppliers have the ability to seize some of the assets if timely payments are not made. The loss of such assets could adversely affect OMEX’s operations.
- Despite being a loss-making company, the executives are being paid significant compensation.
OMEX – Executive Compensation
- The company has significant debt. The financial debt of the company was $46.7 million as of December 31, 2022, and $41.9 million as of December 31, 2021.
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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