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: Organigram Holdings Inc. (NASDAQ: OGI)
Today’s penny stock pick is the Canda-based cannabis company, Organigram Holdings Inc. (NASDAQ: OGI).
Organigram Holdings Inc. engages in the production and sale of cannabis and cannabis-derived products in Canada. It offers medical cannabis products, including cannabis flowers, gummies, cannabis oils, and vaporizers for civilian patients and veterans; adult use recreational cannabis under the SHRED, Big Bag O’ Buds, Monjour, SHRED’ems, Edison Cannabis Co., Edison JOLTS, Tremblant, and Laurentian brands; and cannabis edibles products and concentrates.
The company also engages in the wholesale shipping of cannabis plant cuttings, dried flowers, blends, pre-rolls, and cannabis derivative-based products to retailers and wholesalers for adult-use recreational cannabis. It sells its products through online, as well as telephone channels.
Website: https://www.organigram.ca
Latest 10-k report: https://investors.organigram.ca/sites/default/files/documents/2022%20OGI%20Annual%20Report.pdf
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for OGI in the last 3 months, the stock has an average price target of $2.63, which is nearly 42% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The House of Representatives is set to meet to discuss several pot-related measures this week. The bill is expected to be accompanied by separate amendments that affect the cannabis industry, notably one that would block the military from testing certain of its members for weed.
- The march toward full U.S. legalization continues to gather pace.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern for the past several months. These are marked as purple color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
OGI – 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 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.
OGI – 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 OGI is above the price of $1.90.
Target Prices: Our first target is $2.70. If it closes above that level, the second target price is $3.40.
Stop Loss: To limit risk, place a stop loss at $1.40. Note that the stop loss is on a closing basis.
Our target potential upside is 42% to 79%.
For a risk of $0.50, our first target reward is $0.80, 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. Net loss for the year ended August 31, 2022, was $(14,283) compared to $(130,704) for the prior year comparative period.
OGI – Consolidated Statements of Operations
- The company has a history of legal proceedings.
- On March 3, 2017, a claim in connection with a proposed class-action lawsuit was filed with the Supreme Court of Nova Scotia seeking to represent a class who purchased medical marijuana that was the subject of the Company’s product recalls in December 2016 and January 2017 as it may have contained trace elements of the pesticides myclobutanil and bifenazate which are not approved for use by licensed producers.
- On June 16, 2020, a claim in connection with a proposed national consumer protection class-action lawsuit was filed with the Court of Queen’s Bench in Alberta seeking damages against several Canadian cannabis companies including OGI. The claim makes allegations with respect to the content of THC and CBD in the companies’ products.
- The company’s accumulated deficit, as of August 31, 2022, is $513,166.
- During the year ended August 31, 2022, the Company’s three customers accounted for more than 10% of the Company’s net revenue.
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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