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: Fortuna Mining Corp. (NYSE: FSM)
Today’s penny stock pick is the mining company, Fortuna Mining Corp. (NYSE: FSM).
Fortuna Mining Corp. engages in precious and base metal mining in Argentina, Burkina Faso, Mexico, Peru, and Côte d’Ivoire. It operates through Mansfield, Sanu, Sango, Cuzcatlan, Bateas, and Corporate segments. The company primarily explores silver, lead, zinc, and gold. Its flagship project is the Séguéla gold mine, which consists of approximately 62,000 hectares and is in the Worodougou Region of the Woroba District, Côte d’Ivoire. The company was formerly known as Fortuna Silver Mines Inc. and changed its name to Fortuna Mining Corp. in June 2024.
Website: https://www.fortunamining.com/
Latest 10-k report: https://fortunamining.com/wp-content/uploads/2023/10/form_40-f_fiscal_2023.pdf
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for FSM in the last 3 months, the stock has an average price target of $5.75, which is nearly 23% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reported record production results for the fourth quarter and the full year 2024 from its five operating mines abroad.
- FSM also has ambitious exploration plans for 2025, with a total mineral exploration budget of $41.0 million.
- The company’s leach pad expansion at the Lindero mine in Argentina, a project with a budget of $42 million, is expected to be completed by early 2025. It is poised to considerably increase the mine’s capacity and extend its operational life by an additional decade. FSM is also actively pursuing high-value exploration opportunities to bolster its resource base and uncover new mining prospects.
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 formed 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.
FSM – 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 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.
FSM – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for FSM is above the price of $4.80.
Target Prices: Our first target is $6.30. If it closes above that level, the second target price is $7.50.
Stop Loss: To limit risk, place a stop loss at $3.90. Note that the stop loss is on a closing basis.
Our target potential upside is 31% to 56%.
For a risk of $0.90, our first target reward is $1.50, and the second target reward is $2.70. 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.
FSM – Consolidated Statements of Operations
- There is a degree of uncertainty attributable to the estimation of Mineral Resources, Mineral Reserves and expected mineral grades, as it is determined and valued based on assumed or estimated future prices, cut-off grades and operating costs. Any material reduction in estimates of mineralization, or in the Company’s ability to develop its properties and extract and sell such minerals, could have an adverse effect on the Company’s business, financial condition, or results of operations.
- The Company’s operations are subject to political and other risks in the regions in which it operates. FSM is also subject to extensive environmental regulation.
- The mining industry is intensely competitive in all of its phases. The Company may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on FSM.
- Compania Minera Cuzcatlan S.A. de C.V., the wholly owned subsidiary that operates the San Jose mine, has an ongoing legal proceeding (the “Mexican Legal Proceedings”) over the 12-year extension of its Environmental Impact Authorization with the Secretaría de Medio Ambiente y Recursos Naturales after it annulled the mine’s EIA on January 5, 2023.
- Despite being a loss-making company, the executives are being paid significant compensation.
FSM – 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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