We recently started a series that highlights trade setups with penny stocks. These ideas are geared towards traders with an extremely high risk appetite.
Our penny stock candidate 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: Argo Blockchain plc (NASDAQ: ARBK)
Today’s penny stock pick is the cryptocurrencies mining company, Argo Blockchain plc (NASDAQ: ARBK).
Argo Blockchain PLC is a global data center business that provides a powerful and efficient platform for cryptocurrency mining operations. The company engages in the bitcoin and other cryptocurrencies mining business worldwide. It engages in mining purpose-built computers for complex cryptographic algorithms.
Website: https://www.argoblockchain.com
Latest 10-k report: https://assets-global.website-files.com/6192808c25837d3716982433/645284010d1f194ac5681b00_Argo%20Blockchain%20-%20Form%2020-F%202022.pdf
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for ARBK in the last 3 months, the stock has an average price target of $2.50.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The ongoing surge in bitcoin prices. Several analysts suggest that Bitcoin’s value could skyrocket to nearly $160,000 by 2024. This surge is anticipated due to the Bitcoin halving event and the growing excitement around potential spot ETFs in the United States.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Breakout From Consolidation Area: The daily chart shows that the stock has been consolidating within a price range for the past few weeks. This area is marked as a purple color rectangle. The stock has now broken out from this consolidation area with high volume and is currently trading above it. The breakout level of this consolidation area typically acts as a good support level.
ARBK – 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 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 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.
ARBK – Weekly Chart
#6 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.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ARBK is above the price of $3.55.
Target Prices: Our first target is $4.80. If it closes above that level, the second target price is $5.80.
Stop Loss: To limit risk, place a stop loss at $2.80. Note that the stop loss is on a closing basis.
Our target potential upside is 35% to 63%.
For a risk of $0.75, our first target reward is $1.25, 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:
- The company has a history of net losses. ARBK reported net losses of $(240.8) million (£(194.7) million) and $41 million (£30.8 million) in the year ended December 31, 2022, and December 31, 2021, respectively.
ARBK – Consolidated Statements of Operations
- The company was formerly known as GoSun Blockchain Limited and changed its name to Argo Blockchain plc in December 2017.
- The company has a limited operating history, and has risks like recurring losses from operations, pending maturities of and debt service on its outstanding indebtedness, and macro-economic conditions in the crypto-currency markets. In addition, the company’s total revenue and cash flow are substantially dependent on the market value of digital assets and the volume of digital assets received from ARBK’s mining efforts.
- Hedge Funds Decreased Holdings by 40.5K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- ARBK is currently subject to a class action lawsuit. The case, Murphy vs Argo Blockchain plc et al, was filed in the Eastern District of New York on January 26, 2023.
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.