We recently started a series called “Penny Stock of the Day”. These ideas are geared toward 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: TETRA Technologies, Inc. (NYSE: TTI)
Today’s penny stock pick is the energy services and solutions company, TETRA Technologies, Inc. (NYSE: TTI).
TETRA Technologies, Inc. is a diversified oil and gas services company, focused on completion fluids and associated products and services, water management, frac flowback, production well testing, offshore rig cooling, and compression services. It operates through two segments, Completion Fluids & Products Division and Water & Flowback Services.
The Completion Fluids & Products segment manufactures and markets clear brine fluids, additives, and associated products and services to the oil and gas industry for use in well drilling, completion, and workover operations in the United States, as well as in Latin America, Europe, Asia, the Middle East, and Africa.
This segment also markets liquid and dry calcium chloride products; and TETRA PureFlow ultra-pure zinc bromide to battery technology companies. The Water & Flowback Services segment provides water management services for onshore oil and gas operators. This segment also offers frac flowback, production well testing, and other associated services in oil and gas producing regions in the United States and Mexico, as well as in various basins in Latin America, Africa, Europe, and the Middle East.
Website: https://www.tetratec.com
Latest 10-k report: https://d18rn0p25nwr6d.cloudfront.net/CIK-0000831641/dbb4e561-adb9-4b67-a307-c84152106875.pdf
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for TTI in the last 3 months, the stock has an average price target of $6.75, which is nearly 64% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company has reported increased net income over the past few years.
TTI – Consolidated Statements of Income
- The increasing global demand for oil.
- The company is advancing its strategic initiatives by introducing Tetra X and TETRA Oasis TDS. Textra X is a new corrosion inhibitor for high-temperature downhole well environments, while Oasis TDS serves the oil and gas industry by helping mineral extraction.
- The company is also pursuing energy storage, lithium, and other avenues.
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.
TTI – 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 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 is a possible bullish indication. The stock is also trading above its 50-week as well as 200-week SMA, indicating that the bulls are firmly in control.
TTI – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for TTI is above the price of $4.20.
Target Prices: Our first target is $4.90. If it closes above that level, the second target price is $5.50.
Stop Loss: To limit risk, place a stop loss at $3.80. Note that the stop loss is on a closing basis.
Our target potential upside is 17% to 39%.
For a risk of $0.40, our first target reward is $0.70, and the second target reward is $1.30. 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 customer concentration risk. In fiscal 2024, TTI generated 44.0% of its revenue from contracts with U.S. federal, state, and local government agencies. Any disruption in government funding or in the company’s relationship with those agencies could adversely affect its business.
- TTI has ongoing legal proceedings. On July 15, 2019, following an initial January 14, 2019 filing, the Civil Division of the United States Attorney’s Office filed an amended complaint in the intervention of three qui tam actions filed against the company’s subsidiary, Tetra Tech EC, Inc. The complaint alleges False Claims Act violations and breach of contract related to TtEC’s contracts to perform environmental remediation services at the former Hunters Point Naval Shipyard in San Francisco, California.
- The company is engaged in a highly competitive business with many regional, national, and international companies. Certain of these competitors have greater financial and other resources than TTI.
- TTI’s revenue is down from last year as it posted $142 million in Q3, a decline of 6% year-over-year.
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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