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: Tilray Inc. (NASDAQ: TLRY)
Today’s penny stock pick is the international producer and distributor of medicinal and recreational cannabis, Tilray Inc. (NASDAQ: TLRY).
Tilray Inc. engages in the research, cultivation, production, marketing, and distribution of medical cannabis products. It operates through five segments: Cannabis Business, Distribution Business, Beverage Alcohol Business, Wellness Business, and Business Under Development.
The company provides medical and adult-use cannabis products; pharmaceutical and wellness products; beverage alcohol products; and hemp-based food and other wellness products. It offers its products to retailers, wholesalers, patients, physicians, pharmacies, clinics, hospitals, governments, and researchers. The company operates Tilray Medical, a medical platform that provides GMP-certified flowers, oils, vapes, edibles, and topicals. It has operations in Canada, the United States, Europe, Australia, New Zealand, Latin America, and internationally.
Website: https://www.tilray.com
Latest 10-k report: https://sec.report/Document/0001564590-21-038648
Analyst Consensus: As per TipRanks Analytics, based on 7 Wall Street analysts offering 12-month price targets for TLRY in the last 3 months, the stock has an average price target of $5.39, which is nearly 46% upside from current levels.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The US. Bloomberg reported that Senate Democrats plan to introduce a bill to decriminalize marijuana at the federal level next week.
- German Chancellor Olaf Scholz is reportedly intent on legalizing adult-use cannabis there by 2024. Tilray would presumably be a huge beneficiary, already having a state-of-the-art medical facility in Germany.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: 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 currently looks poised for a breakout from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
TLRY – 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 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#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 an orange color dotted line. This is a possible bullish indication.
TLRY – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, 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 TLRY is above the price of $3.75.
Target Prices: Our first target is $4.80. If it closes above that level, the second target price is $6.50.
Stop Loss: To limit risk, place a stop loss at $3.10. Note that the stop loss is on a closing basis.
Our target potential upside is 28% to 73%.
For a risk of $0.65, our first target reward is $1.05, and the second target reward is $2.75. 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:
- The company has a history of net losses. For the fiscal year ending May 31, 2021, the Company reported a consolidated net loss of $336,014 and a consolidated net loss of $100,833 and $36,093 for the years ending May 31, 2020, and May 31, 2019, respectively.
TLRY – Consolidated Statements of Loss and Comprehensive Loss
- Hedge Funds Decreased Holdings by 145.2K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
TLRY – 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.
Legendary Stockpicker: "Buy this A.I. stock NOW" [sponsor]His award-winning system pinpointed NVDA and META before both stocks doubled. Now it's flashing "BUY" on this under-the-radar A.I. stock. MORE HERE...