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: Rekor Systems, Inc. (NASDAQ: REKR)
Today’s penny stock pick is the technology company, Rekor Systems, Inc. (NASDAQ: REKR).
Rekor Systems, Inc. provides infrastructure solutions for transportation, public safety, and urban mobility markets in the United States and internationally. The company’s platforms include Rekor One, an AI-powered roadway intelligence platform; Rekor Command, a comprehensive cross-agency platform that offers various applications for traffic management centers, freeway service patrol, first responders, and maintenance crews; Rekor Discover, a platform that ingests data from its hardware and automates comprehensive analytics and actionable insights about the movement of objects across the roadway; and Rekor Scout platform, which automates previously manual processes with collaborative solutions that keep all stakeholders apprised of developing situations and accelerate reaction times to incidents and offenders.
It also offers Rekor AutoNotice, a cloud-based financial management application that delivers a turnkey information and citation management solution for cities, states, and municipalities for primary and secondary offenses; and Rekor CarCheck, which allows its AI based vehicle and license plate recognition technology to be accessed for a range of commercial applications. In addition, the company offers Rekor Edge Max System, a fixed traffic data collection system that captures and transforms roadway data into holistic traffic insights; Rekor Edge Pro, a vehicle recognition solution that is used on a standalone basis or integrated into a network; and Rekor Edge Flex, a portable data collection system.
Further, it provides traffic services, including traditional traffic studies, which deliver data and insights for planning and management of roadway infrastructure and commercial initiatives; innovative AI-driven traffic studies for traffic management; and traffic engineering services. Rekor Systems, Inc. has a strategic partnership with SoundThinking, Inc. to develop end-to-end public safety solutions.
Website: https://www.rekor.ai/
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for REKR in the last 3 months, the stock has an average price target of $4.50, which is nearly 116% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company secured certification for New Jersey’s $13M statewide ALPR program, gaining access to $10M grant funding for ALPR deployment.
- The company recently signed a pilot deal with the state of New York. It’s also cutting annual costs by $15 million.
- Recent interest in stock by the meme crowd.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern: 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.
REKR – 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 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#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 SMA, indicating that the bulls are gaining control.
REKR – Weekly Chart
#6 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 REKR is above the price of $2.15.
Target Prices: Our first target is $3.50. If it closes above that level, the second target price is $4.70.
Stop Loss: To limit risk, place a stop loss at $1.30. Note that the stop loss is on a closing basis.
Our target potential upside is 63% to 119%.
For a risk of $0.85, our first target reward is $1.35, and the second target reward is $2.55. 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.
REKR – Consolidated Statements of Operations
- As of September 2024, Rekor Systems had US$15.8m of debt, up from US$11.2m a year ago.
- On December 13, 2018, the company received a letter from the Nasdaq indicating that the Company is required to maintain a minimum bid price of $1 per share of its common stock.
- Despite being a loss-making company, the executives are being paid significant compensation.
REKR – Executive Compensation
- The company has ongoing legal proceedings. On October 23, 2023, HCW filed a complaint in the New York State Supreme Court asserting a claim for breach of contract against the Company relating to the July Warrant Exercise Transaction. In 2023 two previous employees of the Company filed a complaint with OSHA against the Company.
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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