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: Endeavour Silver Corp. (NYSE: EXK)
Today’s penny stock pick is the silver mining company, Endeavour Silver Corp. (NYSE: EXK).
Endeavour Silver Corp. engages in the acquisition, exploration, development, extraction, processing, refining, and reclamation of mineral properties in Chile and the United States. It explores gold and silver deposits, and precious metals. Endeavor has two silver/gold mines in Mexico namely Guanacevi and Bolanitos and a silver / gold mine that is under construction in Jalisco called Terronera. The company was formerly known as Endeavour Gold Corp. and changed its name to Endeavour Silver Corp. in September 2004.
Website: https://www.edrsilver.com
Latest 10-k report: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001277866/000106299324006089/form40f.htm
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for EXK in the last 3 months, the stock has an average price target of $3.68, which is nearly 27% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company has met or exceeded production guidance for three consecutive years and has future exploration opportunities.
- Hedge Funds Increased Holdings by 35.7K Shares Last Quarter.
Hegde Funds | Source: TipRanks.com
- EXK recently reported that its decision to increase its mine and production capacity at Guanacevi surpassed its initial targets.
- Experts are projecting significant growth for silver in 2024. Silver is predicted to hit $34.70 this year.
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.
EXK – 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 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. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
EXK – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 Bullish RSI: The RSI is above 50 and moving higher, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for EXK is above the price of $3.00.
Target Prices: Our first target is $3.80. If it closes above that level, the second target price is $4.50.
Stop Loss: To limit risk, place a stop loss at $2.50. Note that the stop loss is on a closing basis.
Our target potential upside is 27% to 50%.
For a risk of $0.50, our first target reward is $0.80, and the second target reward is $1.50. 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’s operating costs are at their peak, requiring EXK to focus on cost discipline to offset inflationary and foreign exchange pressures.
- EXK needs to bring Terronera into production in 2024. Any delay could significantly impact the company’s plans for production growth and margin expansion.
- The company has risks related to increased interest rates; precious and base metal price fluctuations; fluctuations in the currency markets (particularly the Mexican peso, Canadian dollar, and United States dollar); and Ukraine-Russian and Israel-Palestine conflicts.
- EXK’s future development is contingent on the Company’s ability to acquire new projects and to successfully integrate the acquisitions, as well as its ability to obtain adequate financing for planned mine development and further exploration programs.
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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