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: Archer Aviation Inc. (NYSE: ACHR)
Today’s penny stock pick is the drone maker, Archer Aviation Inc. (NYSE: ACHR).
Archer Aviation Inc. engages in designs, develops, and operates electric vertical takeoff and landing aircraft for use in urban air mobility. The company was formerly known as Atlas Crest Investment Corp. and changed its name to Archer Aviation Inc. The company is headquartered in San Jose, California.
Website: https://www.archer.com
Latest 10-k report: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001824502/1626c6e5-0a38-4a1c-8d91-feef3f7285ca.pdf
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for ACHR in the last 3 months, the stock has an average price target of $7.63, which is nearly 81% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Archer Aviation secured an additional $55 million investment from Stellantis (STLA) through a strategic funding agreement.
- Cathie Wood’s Ark Invest purchased 406,912 shares of ACHR stock, adding up to an investment of roughly $1.51 million.
- Corporate Insiders placed Informative Buys of Shares Worth $55.0M in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Increased Holdings by 3.2M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as purple color lines. This is a possible bullish indication.
ACHR – 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.
ACHR – 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, 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 ACHR is above the price of $4.30.
Target Prices: Our first target is $5.50. If it closes above that level, the second target price is $6.40.
Stop Loss: To limit risk, place a stop loss at $3.60. Note that the stop loss is on a closing basis.
Our target potential upside is 28% to 49%.
For a risk of $0.70, our first target reward is $1.20, and the second target reward is $2.10. 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. As of December 31, 2023, ACHR incurred a net loss of $457.9 million, and a net loss of approximately $1,148.8 million since inception.
ACHR – Consolidated Statements of Operations
- The company has a history of legal proceedings, including the Wisk Litigation and settlement. On April 6, 2021, Wisk Aero LLC brought a lawsuit against the Company in the United States District Court for the Northern District of California alleging misappropriation of trade secrets and patent infringement.
- The company was incorporated in October 2018 and has a limited operating history in designing, developing, and working to certify an eVTOL aircraft. ACHR has not yet obtained FAA certification for its eVTOL aircraft under development and is yet to manufacture or deliver any aircraft to customers, which makes evaluating the company’s business and future prospects difficult and increases the risk of investment.
- Despite being a loss-making company, the executives are being paid significant compensation.
ACHR – 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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