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: ChargePoint Holdings, Inc. (NYSE: CHPT)
Today’s penny stock pick is the American electric vehicle infrastructure company, ChargePoint Holdings, Inc. (NYSE: CHPT).
ChargePoint Holdings, Inc. provides electric vehicle (EV) charging networks and charging solutions in the United States and internationally. It offers a portfolio of hardware, software, and services for commercial, fleet, and residential customers.
Website: https://www.chargepoint.com
Latest 10-k report: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001777393/1e4d698e-7294-4b5c-a20b-0a283c34c074.pdf
Analyst Consensus: As per TipRanks Analytics, based on 12 Wall Street analysts offering 12-month price targets for CHPT in the last 3 months, the stock has an average price target of $3.43, which is nearly 87% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Vanguard Group Inc. boosted its stake in ChargePoint Holdings, Inc, by 12.9% during the 3rd quarter, according to its most recent Form 13F filing with the Securities and Exchange Commission (SEC).
- ChargePoint and AcBel Polytech, a Kinpo Group subsidiary specializing in power supply manufacturing, had recently entered an agreement to develop EV charging solutions collaboratively.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: 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 currently looks poised for a breakout from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
CHPT – 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 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#4 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.
CHPT – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#6 Bullish RSI: In the weekly chart, the RSI is currently moving higher from oversold levels. 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 CHPT is above the price of $1.85.
Target Prices: Our first target is $2.70. If it closes above that level, the second target price is $3.20.
Stop Loss: To limit risk, place a stop loss at $1.40. Note that the stop loss is on a closing basis.
Our target potential upside is 46% to 73%.
For a risk of $0.45, our first target reward is $0.85, and the second target reward is $1.35. 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. CHPT incurred net losses of $457.6 million, $345.1 million, and $132.2 million for the fiscal years ended January 31, 2024, 2023, and 2022, respectively.
CHPT – Consolidated Statements of Operations
- The company has headwinds like slower EV adoption, a shift by commercial customers, and increased competition.
- Corporate Insiders placed Informative Sells of Shares Worth $2.9M in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Decreased Holdings by 4.7M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has ongoing class action lawsuits and derivative actions.
- Despite being a loss-making company, the executives are being paid millions as compensation.
CHPT – 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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