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: TMC the metals company Inc. (NASDAQ: TMC)
Today’s penny stock pick is the deep-sea minerals exploration company, TMC the metals company Inc. (NASDAQ: TMC).
TMC the metals company Inc. focuses on the collection, processing, and refining of polymetallic nodules found on the seafloor in California. It primarily explores for nickel, cobalt, copper, and manganese products. The company holds exploration and commercial rights in three polymetallic nodule contract areas in the Clarion Clipperton Zone of the Pacific Ocean. Its products are used in electric vehicles (EV), renewable energy storage markets, EV wiring, energy transmission, manganese alloy production required for steel production, and other applications. The company was formerly known as Sustainable Opportunities Acquisition Corporation and changed its name to TMC the metals company Inc.
Website: https://metals.co
Latest 10-k report: https://investors.metals.co/static-files/766a997a-8e8c-4013-ae2e-f666aa8f5be0
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for TMC in the last 3 months, the stock has an average price target of $4.00, which is nearly 274% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- TMC successfully produced high temperature material (calcine) during the first phase of a commercial-scale campaign to process a 2,000-tonne sample of deep-seafloor polymetallic nodules at its partner PAMCO’s Hachinohe Rotary Kiln Electric-Arc Furnace facility in Hachinohe, Japan.
- The company entered into a loan agreement with Allseas Investments SA, securing a $5 million loan to support general corporate activities and repay existing debts. The loan aims to bolster TMC’s working capital and settle a $2 million short-term loan from Argentum Cedit Virtuti GCV, which reached maturity on the same day the new loan was obtained.
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 with a high volume. Once the stock breaks out of the falling wedge pattern, it could move higher.
TMC – 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 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.
TMC – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#6 Bullish RSI: In the weekly chart, the RSI is currently moving higher from oversold levels. 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 TMC is above the price of $1.10.
Target Prices: Our first target is $1.60. If it closes above that level, the second target price is $2.00.
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 45% to 82%.
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. The company reported a net loss of $73.8 million for the year ended December 31, 2023, and a net loss of $171 million in the prior year.
TMC – Consolidated Statements of Operations
- The company has a history of legal proceedings. On October 28, 2021, a shareholder filed a putative class action against the company, one of its executive and former directors in federal district court for the Eastern District of New York, captioned Caper v. TMC The Metals Company Inc. F/K/A Sustainable Opportunities Acquisition Corp., Gerard Barron and Scott Leonard. On January 23, 2023, investors in the 2021 private placement from the Business Combination filed a lawsuit against the company in the Commercial Division of New York Supreme Court, New York County, captioned Atalaya Special Purpose Investment Fund II LP et al. v. Sustainable Opportunities Acquisition Corp. n/k/a TMC The Metals Company Inc., Index No. 650449/2023 (N.Y. Sup. Ct.).
- Hedge Funds Decreased Holdings by 580.9K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- In February 2022, TMC received letters from the SEC notifying of an investigation and requesting the voluntary production of documents and information regarding the company’s 2020 acquisition of Tonga Offshore Mining Limited from Deep Sea Mining Finance Ltd. and TMC’s Business Combination with SOAC.
- Corporate Insiders placed Informative Sells of Shares Worth $291.0K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
TMC – 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.
Nvidia's Secret Partner... This Is The New AI Chip Powerhouse [sponsor]I bet you've never heard of it... but this newly public company is set to become key to Nvidia's seat on the AI throne. And for now... you can get in while it's still cheap. Details Here! Find Out What It Is Right Here.