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: Ur-Energy Inc. (NYSE: URG)
Today’s penny stock pick is the uranium mining company, Ur-Energy Inc. (NYSE: URG).
Ur-Energy Inc. engages in the acquisition, exploration, development, and operation of uranium mineral properties. The company holds interests in 12 projects located in the United States. Its flagship property is the Lost Creek project comprising a total of approximately 1,800 unpatented mining claims and three Wyoming mineral leases covering an area of approximately 35,400 acres located in the Great Divide Basin, Wyoming. URG relies primarily on selling uranium to generate sales. Its lead mining facility Lost Creek has a life of ten years and the capability to produce 2.2 million pounds per year.
Website: https://www.ur-energy.com
Latest 10-k report: https://www.ur-energy.com/investors/sec-filings/annual-reports/content/0001654954-24-002673/0001654954-24-002673.pdf
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for URG in the last 3 months, the stock has an average price target of $2.20, which is nearly 85% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company is expected to benefit from clean energy initiatives in the Inflation Reduction Act which seeks to maintain more than 90 nuclear reactors in America.
- Hedge Funds Increased Holdings by 209.8K 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 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.
URG – Daily Chart
#2 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#3 Bullish RSI: The RSI is above 50 and moving higher, 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 a pink color dotted line. This looks like a good area for the stock to move higher.
URG – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 URG is above the price of $1.25.
Target Prices: Our first target is $1.70. If it closes above that level, the second target price is $2.00.
Stop Loss: To limit risk, place a stop loss at $1.00. Note that the stop loss is on a closing basis.
Our target potential upside is 36% to 60%.
For a risk of $0.25, our first target reward is $0.45, and the second target reward is $0.75. 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.
URG – Consolidated Statement of Operations
- The uranium market is volatile and has limited customers. Maintaining the demand for uranium at current levels and future growth in demand will depend upon the continued acceptance of nuclear technology as a means of generating electricity.
- Corporate Insiders placed Informative Sells of Shares Worth $187.2K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company is currently depleting its mineral resources and would need to develop additional resources to sustain ongoing operations.
- Additional funds will be required for working capital and exploration and development activities at the company’s properties including Lost Creek Property and for the construction and development of its Shirley Basin Project. URG already has approximately $4.3 million in principal under its State Bond Loan.
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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