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: Canaan Inc. (NASDAQ: CAN)

Today’s penny stock pick is the technology company focusing on ASIC high-performance computing chip design, Canaan Inc. (NASDAQ: CAN).

Canaan Inc. engages in the research, design, and sale of integrated circuits (IC), and the lease of final mining equipment by integrating IC products for bitcoin mining and related components in the People’s Republic of China. It is also involved in the assembly and distribution of mining equipment and spare parts, and the distribution of artificial intelligence products, as well as the mining business.

Website:  https://investor.canaan-creative.com/

Latest 10-k report:   https://investor.canaan-creative.com/static-files/0605660a-4132-490e-9085-756705545d35

Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for CAN in the last 3 months, the stock has an average price target of $2.70, which is nearly 178% upside from current levels.

Analysts | Source: TipRanks.com

Potential Catalysts / Reasons for the Hype:

  • Canaan reported a 136% year-over-year revenue increase to $82.8M in Q1 2025, achieving positive gross profit for the first time in over two years. This reflects robust demand for its A15 series mining rigs.
  • Hedge Funds Increased Holdings by 80.3K Shares Last Quarter.

    Hedge Funds | Source: TipRanks.com

  • Bitcoin’s price rally and macroeconomic tailwinds like surging money supply, fiscal risks are driving demand for mining equipment.
  • Canaan is pivoting to Bitcoin self-mining, expanding its hashrate capacity threefold in the past 12 months. This diversification could stabilize revenue and capitalize on Bitcoin’s value appreciation. It could also lead to new business segments or joint ventures, potentially in AI or blockchain computing, given CAN’s supercomputing chip expertise.
  • A $30M share buyback program and insider purchases by the CEO and CFO signal confidence in Canaan’s undervaluation and future growth, boosting retail investor sentiment.
  • The launch of the Avalon Q, a home-friendly Bitcoin miner using a standard 110V outlet, is generating buzz as a potential game-changer for retail miners, possibly boosting sales.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern for the past several months. These are marked as purple lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out of the falling wedge pattern with a high volume. Once the stock breaks out of the falling wedge pattern, it could move higher.

CAN – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates 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 dotted line. This looks like a good area for the stock to move higher.

CAN – 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 CAN is above the price of $1.05.

Target Prices: Our first target is $1.80. If it closes above that level, the second target price is $2.50.

Stop Loss: To limit risk, place a stop loss at $0.60. Note that the stop loss is on a closing basis.

Our target potential upside is 71% to 138%.

For a risk of $0.45, our first target reward is $0.75, and the second target reward is $1.45. 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:

  1. The company has a history of net losses. CAN recorded a net loss of US$249.8 million in 2024 and a net loss of US$414.2 million in 2023.

    CAN – Consolidated Statements of Operations

  2. Canaan’s revenue is heavily tied to Bitcoin mining equipment sales, making it vulnerable to Bitcoin price fluctuations. In 2022, 2023, and 2024, sales of Bitcoin mining machines and related parts and accessories accounted for 94.8%, 83.1%, and 82.6% of CAN’s revenues, respectively. A significant drop in BTC prices could reduce demand for mining rigs, impacting revenue.
  3. S. tariff threats, including a proposed 35% tariff on Canada and broader trade tensions, could disrupt Canaan’s supply chain or increase costs, as the company is China-based but serves global markets.
  4. The Bitcoin mining equipment market is competitive, with rivals like Bitmain and MicroBT vying for market share. Canaan’s ability to maintain technological leadership and pricing power is critical but challenging.
  5. Potential regulatory crackdowns on cryptocurrency mining in key markets like China, the U.S. could dampen demand for Canaan’s products. Environmental concerns about energy-intensive mining may also lead to restrictions.

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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