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: Clever Leaves Holdings Inc. (NASDAQ: CLVR)
Today’s penny stock pick is the pharmaceutical company, Clever Leaves Holdings Inc. (NASDAQ: CLVR).
Clever Leaves Holdings Inc. operates as a cannabis company. The company operates through two segments, Cannabinoid and Non-Cannabinoid. The Cannabinoid segment engages in the cultivation, extraction, manufacturing, and commercialization of cannabinoid products internationally.
The Non-Cannabinoid segment is involved in formulating, manufacturing, marketing, selling, distributing, and commercializing homeopathic and other natural remedies, wellness products, detoxification products, nutraceuticals, and nutritional and dietary supplements for mass retailers, specialty and health retailers, and distributors in the United States.
Website: https://cleverleaves.com/en/home/
Latest 10-k report: https://sec.report/Document/0001819615-22-000056
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for CLVR in the last 3 months, the stock has a rating of ‘Moderate Buy’.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The overall surge in cannabis stocks as the industry awaits a vote from Capitol Hill on a bill for the nationwide legalization of marijuana. The Cannabidiol and Marihuana Research Expansion Act had received a unanimous Senate vote last week.
- The company reported strong Q4 2021 earnings. The quarter saw revenue hit $4.2 million, a gain of roughly 25%.
- Hedge Funds Increased Holdings by 506.1K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
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 color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out from the falling wedge pattern and is currently moving higher with historic high volume. Once the stock breaks out of the falling wedge pattern, it could move higher.
CLVR – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#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 indication.
CLVR – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 MACD above Signal Line: In the weekly chart as well, 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 CLVR is above the price of $4.35. Alternatively, you can purchase the shares of CLVR if it corrects to the price of around $2.90. The buy levels are marked as green color dotted lines in the charts.
Target Prices: Our first target is $5.40. If it closes above that level, the second target price is $8.00.
Stop Loss: To limit risk, place a stop loss at $3.70 (for entry near $4.35) and $1.30 (for entry near $2.90). Note that the stop loss is on a closing basis.
Our target potential upside is 24% to 176%.
- Entry near $4.35: For a risk of $0.65, our first target reward is $1.05, and the second target reward is $3.65. This is a nearly 1:2 and 1:6 risk-reward trade.
- Entry near $2.90: For a risk of $1.60, our first target reward is $2.50, and the second target reward is $5.10. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 6x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses, including a net loss of approximately $45.7 million in the year ended December 31, 2021. The company also has had negative cash flows from operations since its inception.
CLVR – Consolidated Statements of Operations and Comprehensive Loss
- Despite being a loss-making company, the executives are being paid significant compensation.
CLVR – Executive Compensation
- Corporate Insiders Sold Shares Worth $185.5K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company is facing increasing competition for its products, particularly in the nutraceutical industry. The company’s business would be affected if pharmaceutical companies attempt to enter the cannabis industry and, in particular, the medical cannabis industry through the development and distribution of synthetic products that emulate the effects of and treatment provided by naturally occurring cannabis.
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.