We recently started a series called “Penny Stock of the Day”. These ideas are geared for 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: Clearsign Technologies Corp (NASDAQ: CLIR)
Today’s penny stock pick is an emerging leader in industrial combustion and sensing technologies, Clearsign Technologies Corp (NASDAQ: CLIR).
Clearsign Technologies Corp designs and develops products and technologies to enhance operational performance, energy efficiency, emission reduction, safety, and overall cost-effectiveness of industrial and commercial systems in the United States and the People’s Republic of China.
Its ClearSign Core Burner Technology consists of an industrial burner body and a downstream porous ceramic structure or metal flame stabilizing device; ClearSign Core Plug & Play technology provides direct burner replacement for traditional refinery process heaters; and ClearSign Eye Flame Sensor, an electrical flame sensor for industrial applications.
The company also provides ClearSign Core Boiler Burner; and ClearSign Core Flaring Burners technologies. It serves energy, institutional, commercial and industrial boiler, chemical, and petrochemical industries.
Website: www.clearsign.com
Latest 10-k report: https://sec.report/Document/0001104659-21-044241/
Analyst Consensus: Based on 1 Wall Street analyst offering 12-month price targets for CLIR in the last 3 months, the stock has an average price target of $6.00. This is a nearly 211% Upside from the last close of $1.93.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The positive response to the company announcing that it has received a purchase order from a Fortune 500 national refiner in connection with the first phase of the project to retrofit two process heaters with eight ClearSign Core burners each to be installed in their Midwest refinery.
- The upcoming Quarterly earnings call.
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 was forming a falling wedge pattern for the past several weeks. These are marked as purple color 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, indicating possible bullishness.
CLIR – 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 has started to move 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 Stoch: The %K line of the stochastic is above the %D line and moving higher, indicating possible bullishness.
#5 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.
#6 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 sign.
CLIR – Weekly Chart
#7 Bullish Stoch: The weekly chart shows that the %K line of the stochastic is above the %D line and is also moving higher from oversold levels. All these are possible bullish signs.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CLIR is above the price of $2.05.
Target Prices: Our target prices are $3.00 and $4.00.
Stop Loss: To limit risk, place a stop loss at $1.50. Note that the stop loss is on a closing basis.
Our target potential upside is 46% to 95%.
For a risk of $0.55, our first target reward is $0.95, and the second target reward is $1.95. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- CLIR has incurred losses since its inception. The company has reported a net loss of $6.8 million for the year ended December 31, 2020.
CLIE – Net Loss
- The company was formerly known as ClearSign Combustion Corporation and changed its name ClearSign Technologies Corporation in November 2019.
- CLIR had received a notification from Exxon Mobil Corp to put on hold the testing of its ClearSign Core process burners to be installed at the Baytown refinery. A major energy company with significant funding backing out of the multi-burner project does not appear to be a good sign for CLIR.
- There are rumors that not enough steps are being taken to protect the technology from piracy in China.
- Despite being a loss-making company, the executives are being paid significant compensation.
CLIR – 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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