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: Bakkt Holdings, Inc. (NYSE: BKKT)
Today’s penny stock pick is the company that offers a platform for crypto and redeeming loyalty points, Bakkt Holdings, Inc. (NYSE: BKKT).
Bakkt Holdings, Inc.’s institutional-grade technology platform offers various solutions, such as Custody, an institutional-grade custody solution for market participants; Crypto Connect, a platform that enables consumers, businesses, and institutions to buy, sell, and store crypto in a digital experience; Crypto Rewards that focuses on enabling customers to earn crypto rewards, as well as redeem existing reward currencies into crypto; and Crypto Payouts for customers to automatically invest a portion of payments into crypto.
Its platform also offers a range of loyalty solutions, including redemption solutions for various rewards categories comprising merchandise, gift cards, and digital experiences; travel solutions that offer a retail e-commerce booking platform, as well as live-agent booking and servicing; and unified shopping experience.
Website: https://www.bakkt.com
Latest 10-k report: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001820302/255eaf2b-a5c8-435e-aea5-ee84eb7d8106.pdf
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for BKKT in the last 3 months, the stock has an average price target of $1.10.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently relaunched its custody platform with enhanced capabilities, including segregated on-chain wallet addresses, the ability to configure security processes in the application, and access to more reporting features. In addition, the redesigned Bakkt Custody platform will add six more digital tokens for a total of eight coins.
- The company is partnering with existing and new clients, focusing on Latin America, Europe, and Asia. In Latin America, Bakkt is collaborating with Hapi to enhance crypto trading in Mexico, Argentina, and soon Brazil. In Europe, Bakkt plans to launch in Spain and offer services in the UK and EU with 3.0verse.
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. Once the stock breaks out of the falling wedge pattern, it could move higher.
BKKT – 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 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.
BKKT – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart and is also moving higher from oversold levels, 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 BKKT is above the price of $1.20.
Target Prices: Our first target is $1.70. If it closes above that level, the second target price is $2.10.
Stop Loss: To limit risk, place a stop loss at $0.80. Note that the stop loss is on a closing basis.
Our target potential upside is 42% to 75%.
For a risk of $0.30, our first target reward is $0.50, and the second target reward is $0.90. 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. BKKT generated net losses of $153.1 million, $139.2 million, and $79.6 million in the periods of October 15, 2021 through December 31, 2021 and January 1, 2021 through October 14, 2021, and the year ended December 31, 2020, respectively.
BKKT – Consolidated Statements of Operations
- The company has a limited operating history, as it was founded in 2018. This makes it difficult to accurately forecast the future results of operations
- Hedge Funds Decreased Holdings by 240.0K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
BKKT – Executive Compensation
- The company faces substantial and increasingly intense competition worldwide in the loyalty, rewards, payment, cryptoasset, and investment industries.
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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