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: Rumble Inc. (NASDAQ: RUM)
Today’s penny stock pick is the video sharing platform operator, Rumble Inc. (NASDAQ: RUM).
Rumble Inc. operates rumble.com, a platform where users can subscribe to channels to stay in touch with creators, and access video on-demand (VOD) and live content streamed by creators. It also operates locals.com, a subscription platform for creators and subscribers to engage through VOD, podcasts, live chat, polls, and community discussions; and Rumble Advertising Center (RAC), an online advertising management exchange. The company was founded in 2013 and is headquartered in Longboat Key, Florida.
Website: https://www.rumble.com
Latest 10-k report: https://s3.amazonaws.com/sec.irpass.cc/2730/0001213900-23-024638.pdf
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for RUM in the last 3 months, the stock has an average rating of “Moderate Buy”.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Rumble announced a partnership with Barstool Sports, a widely recognized sports, lifestyle, and entertainment brand. Barstool Sports will also utilize Rumble Cloud as its primary service provider for essential cloud services such as computing, storage, and network requirements.
- Ron DeSantis’s recent endorsement of Trump is anticipated to amplify Rumble’s prominence in the digital media space.
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 with a high volume. Once the stock breaks out of the falling wedge pattern, it could move higher. The stock currently appears to be showing signs of a major accumulation.
RUM – 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 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.
RUM – 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 RUM is above the price of $4.95.
Target Prices: Our first target is $5.90. If it closes above that level, the second target price is $6.80.
Stop Loss: To limit risk, place a stop loss at $4.40. Note that the stop loss is on a closing basis.
Our target potential upside is 19% to 37%.
For a risk of $0.55, our first target reward is $0.95, and the second target reward is $1.85. 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.
RUM – Consolidated Statements of Comprehensive Loss
- The company has multiple ongoing legal proceedings. This includes a lawsuit filed by Kosmayer Investment Inc.; a patent infringement lawsuit in the United States District Court for the Middle District of Florida by Interactive Content Engines LLC; and a putative class action lawsuit alleging violations of the Video Privacy Protection Act in the United States District Court for the Middle District of Florida.
- Corporate Insiders placed Informative Sells of Shares Worth $9.9M in the Last 3 Months.
Insiders | Source: TipRanks.com
- RUM has customer concentration risk. A material portion of the company’s revenue is generated from a small number of advertisers, the loss of which could materially harm the company’s results of operations.
- Hedge Funds Decreased Holdings by 4.9K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
RUM – Executive Compensation
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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