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: Nokia Oyj (NYSE: NOK)
Today’s penny stock pick is the communication equipment company, Nokia Oyj (NYSE: NOK).
Nokia Oyj provides mobile, fixed, and cloud network solutions worldwide. The company operates through four segments: Network Infrastructure, Mobile Networks, Cloud and Network Services, and Nokia Technologies. The company provides fixed networking solutions, such as fiber and copper-based access infrastructure, in-home Wi-Fi solutions, and cloud and virtualization services; IP networking solutions, including IP access, aggregation, and edge and core routing for residential, mobile, enterprise and cloud applications; optical networks solutions that provide optical transport networks for metro, regional, and long-haul applications, and subsea applications; and submarine networks for undersea cable transmission.
It serves its products and services to communications service providers, webscales and hyperscalers, digital industries, and government. The company also offers mobile technology products and services for radio access networks and microwave radio links for transport networks, network management solutions, as well as network planning, optimization, network deployment, and technical support services.
In addition, it offers cloud and network services, including core network solutions, such as voice and packet core; business applications, such as security, automation, and monetization; cloud and cognitive services; and enterprise solutions, including private wireless and industrial automation. Further, the company licenses intellectual property, including patents, technologies, and the Nokia brand.
Website: https://www.nokia.com
Latest 10-k report: https://nokia.gcs-web.com/static-files/9ea1ad2d-a9be-40eb-a744-1f3b083a604c
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for NOK in the last 3 months, the stock has an average price target of $4.70, which is nearly 28% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Nokia announced that it will begin a 600 million euro ($653 million) share buyback this quarter.
- Hedge Funds Increased Holdings by 7.2M 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 Symmetrical Triangle Pattern: The daily chart shows that the stock is currently forming 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.
NOK – 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.
NOK – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 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 NOK is above the price of $3.90.
Target Prices: Our first target is $5.00. If it closes above that level, the second target price is $5.70.
Stop Loss: To limit risk, place a stop loss at $3.30. Note that the stop loss is on a closing basis.
Our target potential upside is 28% to 46%.
For a risk of $0.60, our first target reward is $1.10, and the second target reward is $1.80. 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.
NOK – Consolidated Statements of Operations
- The company is currently defending itself against multiple litigations and proceedings, including Mass labor litigation in Brazil; Asbestos litigation in the United States; and intellectual property rights litigations against Continental, OPPO, Vivo, Amazon, and HP.
- NOK is dependent on a limited number of customers and large multi-year agreements. The loss of a single customer or contract, operator consolidation, unfavorable contract terms, or other issues related to a single agreement may have a material adverse effect on the company’s business and financial condition.
- Despite being a loss-making company, the executives are being paid significant compensation.
NOK – 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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