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: Gold Royalty Corp. (NYSE: GROY)
Today’s penny stock pick is the metals-focused royalty company, Gold Royalty Corp. (NYSE: GROY).
Gold Royalty Corp. provides financing solutions to the metals and mining industry. It focuses on acquiring royalties, streams, and similar interests at varying stages of the mine life cycle to build a portfolio offering near, medium, and longer-term attractive returns for its investors. The company’s portfolio consists of net smelter return royalties ranging from 0.5% to 2.0% on 17 gold properties.
Website: https://www.goldroyalty.com
Latest 10-k report: https://www.goldroyalty.com/_resources/financials/GROY-2022-20F.pdf?v=0.894
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for GROY in the last 3 months, the stock has an average price target of $3.67, which is nearly 146% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The overall bullishness in gold prices.
- Positive quarterly report for Q3, with increasing Revenue, decreasing operating costs, and positive free cash flow in 2024.
- Upcoming royalties on top-tier developers going into production in the first quarter of 2024.
- Corporate Insiders placed Informative Buys of Shares Worth $120.6K in the Last 3 Months.
Insiders | 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.
GROY – 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.
GROY – 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 GROY is above the price of $1.55.
Target Prices: Our first target is $2.30. If it closes above that level, the second target price is $2.80.
Stop Loss: To limit risk, place a stop loss at $1.15. Note that the stop loss is on a closing basis.
Our target potential upside is 48% to 81%.
For a risk of $0.40, our first target reward is $0.75, and the second target reward is $1.25. 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.
GROY – Consolidated Statements of Loss
- The company owns passive interests in mining properties and is unable to control or influence the exploration, development, or operations. This makes it difficult to ensure properties are developed or operated in the company’s best interest.
- The company’s royalty revenues for the fiscal year 2022 came from a small number of operating properties – royalty interests in the Canadian Malartic Mine, Isabella Pearl Mine, Jerritt Canyon Mine (NSR only), Borden Mine, and Marigold Mine properties.
- Despite being a loss-making company, the executives are being paid significant compensation.
GROY – 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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