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: American Resources Corporation (NASDAQ: AREC)
Today’s penny stock pick is the coking coal company, American Resources Corporation (NASDAQ: AREC).
American Resources Corporation engages in the production of rare earth and critical mineral concentrates for the infrastructure and electrification markets. It operates through the American Infrastructure (AIC), ReElements (RLMT), and Electrified Materials Corporation (EMC) segments. The American Infrastructure segment engages in the extraction, processing, transportation, and distribution of coal with a focus on metallurgical quality coal to the steel industry.
Its ReElements segment provides final stage, separated, and purified rare earth and critical elements to the electrification industry supply chain, which are used to manufacture permanent magnets and battery materials. The Electrified Materials segment aggregates and processes used metals for recycling into new steel-based products for the recovery and sale of recovered metal and steel.
Website: https://www.americanresourcescorp.com/
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for AREC in the last 3 months, the stock has an average price target of $6.00, which is nearly 85% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s underlying business is shifting toward high-margin rare earth refining through its subsidiary, ReElement Technologies.
- On January 5, 2026, AREC announced a $200 million equity facility, providing the massive capital runway needed to scale its Supersite in Marion, Indiana. This significantly reduces the immediate risk of a “cash crunch.”
- AREC’s ReElement division has achieved 99.9% purity in refined rare earth oxides (like Neodymium and Praseodymium). As the U.S. pushes for a domestic supply chain to rival China, AREC is one of the few functional midstream refiners.
- A new partnership with SAGINT (announced Dec 2025) implements tokenized mineral tracking. This could end up being a massive moat for securing high-value defense contracts that require verifiable mineral provenance.
- Heavyweights like Millennium, Two Sigma, and JPMorgan have recently initiated or increased stakes, bringing institutional credibility.
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.
AREC – 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 looks like a good area for the stock to move higher. The stock is also trading above its 50-week as well as 200-week SMA, indicating that the bulls are gaining control.
AREC – 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 AREC is above the price of $3.40.
Target Prices: Our first target is $4.70. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $2.60. Note that the stop loss is on a closing basis.
Our target potential upside is 38% to 76%.
For a risk of $0.80, our first target reward is $1.30, and the second target reward is $2.60. 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.
AREC – Consolidated Statements of Operations
- There is execution risk for the ReElement technology. Though it is revolutionary in labs, it still needs to prove it can run profitably at massive commercial scales without constant capital injections.
- Hedge Funds Decreased Holdings by 10.5K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Rare earth markets are prone to price swings and are dominated by China. Any delays in US policy implementation or global oversupply could hinder progress.
- Corporate Insiders placed Informative Sells of Shares Worth $12.8M in the Last 3 Months.
Insiders | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
AREC – 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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