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: Iamgold Corp (NYSE: IAG)
Today’s penny stock pick is the gold mining company, Iamgold Corp (NYSE: IAG).
Iamgold Corp explores for, develops, and operates gold mining properties in North and South America, and West Africa. The company owns interests in the Rosebel mine located in Suriname, South America; the Essakane mine situated in Burkina Faso, West Africa; the Westwood mine located in Quebec, Canada. Its exploration and development projects include the Boto gold project in Senegal; the Diakha-Siribaya gold project in Mali; the Pitangui project in Brazil; the Côté gold project in Ontario; and the Karita gold project in Guinea, as well as holds interest in the Loma Larga, a gold, silver, and copper project in southern Ecuador.
Website: www.iamgold.com
Latest 10-k report: https://sec.report/Document/0001062993-21-001650/
Analyst Consensus: As per TipRanks Analytics, based on 17 Wall Street analysts offering 12-month price targets for IAG in the last 3 months, the stock has an average price target of $3.21, which is nearly 9% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company and Resource Capital Fund VII L.P. (RCF VII), a fund managed by RCF Management L.L.C. announced a collaboration agreement.
- BMO Capital recently upgraded the stock and set a price target of $3.25.
Analysts | Source: TipRanks.com
- The Cote Gold 70/30 JV in Ontario is scheduled for first pour in 2024.
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.
IAG – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The weekly chart shows that the stock had taken support at the 23.6% Fibonacci support level of the upmove before starting to move higher. This is a possible bullish sign.
IAG – Weekly Chart
#7 Price above MA: The stock is currently above its 50-week SMA, indicating that the bulls have currently gained control.
#8 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#9 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 IAG is above the price of $3.00.
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 $2.00. Note that the stop loss is on a closing basis.
Our target potential upside is 57% to 100%.
For a risk of $1.00, our first target reward is $1.70, and the second target reward is $3.00. 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.
IAG – Net Loss
- Hedge Funds Decreased Holdings by 3.7M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite having a history of losses, the company executives are being paid significant compensation.
IAG – 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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