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: Silvercorp Metals Inc. (NYSE: SVM)
Today’s penny stock pick is the Canadian-based, China-focused precious metals company, Silvercorp Metals Inc. (NYSE: SVM)
Silvercorp Metals Inc., together with its subsidiaries, engages in the acquisition, exploration, development, and mining of mineral properties in China. The company primarily explores silver, gold, lead, and zinc metals. It holds a 100% interest in the Kuanping silver-lead-zinc-gold project located in Shanzhou District, Sanmenxia City, Henan Province, China; the Ying project located in the Ying Mining District in Henan Province, China; Gaocheng (GC) mine located in Guangdong Province, China; and Baiyunpu (BYP) mine located in Hunan Province, China.
Website: https://silvercorpmetals.com
Latest 10-k report: https://www.sec.gov/Archives/edgar/data/1340677/000117625623000109/exhibit99-1.htm
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for SVM in the last 3 months, the stock has an average price target of $4.73, which is nearly 72% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- SVM’s Q2 production and sales show an increase in gold production and overall positive performance.
- The Company’s Kuanping Silver-Lead-Zinc-Gold Project received a mining license from the Department of Natural Resources, Henan Province, China in 2022. The Kuanping Mining License covers 6.97 square kilometres and is valid until March 13, 2029.
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.
SVM – Daily Chart
#2 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#3 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.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a resistance-turned-support area, which is marked as a pink color dotted line. This looks like a good area for the stock to move higher.
SVM – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 MACD above Signal Line: In the weekly chart as well, 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 SVM is above the price of $2.77.
Target Prices: Our first target is $3.30. If it closes above that level, the second target price is $3.80.
Stop Loss: To limit risk, place a stop loss at $2.45. Note that the stop loss is on a closing basis.
Our target potential upside is 19% to 37%.
For a risk of $0.32, our first target reward is $0.53, and the second target reward is $1.03. 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:
- SVM has a history of name changes. The company was known as Spokane Resources Ltd until 2001 when it was renamed to SKN Resources Ltd. The company changed its name to Silvercorp Metals Inc. in May 2005.
- Mineral Reserve and Mineral Resource estimates may not reflect the amount of minerals that may ultimately be extracted. Any material change in the quantity of Mineral Resources, Mineral Reserves, mineralization, or grade may affect the economic viability of the Company’s projects.
- All of the Company’s material mining operations are located in China and hence subject to additional political, economic, and other uncertainties not necessarily present for activities taking place in other jurisdictions.
- SVM’s directors and officers may have conflicts of interest. The company’s directors and officers are also holding positions as directors and/or officers of other companies. Situations may arise where the directors and officers may be in direct competition with the Company.
- The Company is a strategic investor in multiple companies including New Pacific Metals Corp, a Canadian public company listed on the TSX under the symbol “NUAG”; and Tincorp Metals Inc., a Canadian public company listed on the TSX-V under the symbol “TIN”. These companies are subject to a number of risks and may prove unprofitable.
- Hedge Funds Decreased Holdings by 100.0K 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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