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: Denison Mines Corp. (NYSE: DNN)
Today’s penny stock pick is the uranium exploration and development company Denison Mines Corp. (NYSE: DNN).
Denison Mines Corp. engages in the exploration and development of uranium. The firm has interest in the McClean Lake and Mill, Wheeler River, Waterbury, Midwest, and Hook-Carter projects. It operates through the following segments: Mining, Closed Mines, and Corporate and Other.
Website: https://denisonmines.com
Latest 10-k report: https://denisonmines.com/site/assets/files/6356/2022-12-dmc-annual-report.pdf
Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for DNN in the last 3 months, the stock has an average price target of $1.99, which is nearly 33% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The recent uptick in uranium prices. According to a recent Reuters report, demand for uranium reactors may jump by 28% by 2030.
- The stock’s investor sentiment is highly positive.
Investors | Source: TipRanks.com
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.
DNN – 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 SMA as well as 200-day SMA, indicating that the bulls have 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 as well as 200-week SMA, indicating that the bulls are in control.
DNN – 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 DNN is above the price of $1.55.
Target Prices: Our first target is $2.20. If it closes above that level, the second target price is $2.70.
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 42% to 74%.
For a risk of $0.35, our first target reward is $0.55, and the second target reward is $1.15. 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:
- Corporate Insiders placed Informative Sells of Shares Worth $427.7K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company’s three-year revenue growth rate sits at 8.4% below breakeven. Its free cash flow growth during the same period also sits in negative territory.
- Hedge Funds Decreased Holdings by 1.1M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has a long history of name changes.
- Denison Nickel Mines, Limited was incorporated by letters patent on November 30, 1936. On May 18, 1949, Denison Nickel Mines, Limited changed its name to North Denison Mines Limited.
- On February 17, 1954, North Denison Mines Limited changed its name to Consolidated Denison Mines Limited
- On March 24, 1960, an amalgamation of Consolidated Denison Mines Limited and Can-Met Explorations Limited occurred, and was given a new company name: Denison Mines Limited.
- On February 12, 1973, the company amalgamated with Stanrock Uranium Mines Limited.
- On May 24, 2002, by Articles of Amendment, the company changed its name to Denison Energy Inc.
- On September 23, 2003, by Articles of Incorporation Denison Mines Inc. was created. On March 8, 2004 Reorganization of Denison Energy Inc. – Mining and Environmental services businesses were transferred to Denison Mines Inc.
- On December 1, 2006 Arrangement between International Uranium Corporation, IUC Subco, and Denison Mines Inc. occurred. The Amalgamated Company was named Denison Mines Corp.
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.