Trade This $2 Stock for a 76%-135% Potential Return

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: Olaplex Holdings, Inc. (NASDAQ: OLPX)

Today’s penny stock pick is the beauty company, Olaplex Holdings, Inc. (NASDAQ: OLPX).

Olaplex Holdings, Inc. develops, manufactures, and sells haircare products in the United States and internationally. The company offers hair care shampoos and conditioners for use in treatment, maintenance, and protection of hair, as well as oil, moisture mask, and nourishing hair serum. It also provides in-salon services for repairing and shaping curls.

In addition, the company offers hair care products to professional hair salons, retailers, and everyday consumers. It distributes its products through professional distributors in salons, directly to retailers for sale in their physical stores, e-commerce sites, and its website, as well as third party e-commerce platforms.

Website:  https://olaplex.com/

Latest 10-K report:  https://ir.olaplex.com/sec-filings/all-sec-filings/content/0001868726-25-000013/olpx-20241231.htm

Analyst Consensus: As per TipRanks Analytics, based on 7 Wall Street analysts offering 12-month price targets for OLPX in the last 3 months, the stock has an average price target of $1.98, which is nearly 20% upside from current levels.

Potential Catalysts / Reasons for the Hype:

• The company’s new launches like Lashbond Building Serum and other extensions into immune/cardio-related degraders (via partnerships) are gaining traction. Strategic shifts align with premium beauty trends.
• Hedge Funds Increased Holdings by 159.5K Shares Last Quarter.
  

  Hedge Funds | Source: TipRanks.com

• Rumors of takeover offer from Germany’s Henkel, signaling strategic value. A takeover by a company like Henkel provides Olaplex with massive global distribution and the R&D budget it currently lacks.
• Bank of America recently issued a bullish note on the beauty sector for 2026, forecasting industry revenue growth to double compared to 2025.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out 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.

#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 Bullish Stoch:  The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.

#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.

#6 MACD above Signal Line: In the weekly chart, 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 OLPX is above the price of $1.70.

Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $4.00.

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 76% to 135%.

For a risk of $0.70, our first target reward is $1.30, and the second target reward is $2.30. 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:

1. The company has been reporting decreasing net income year over year.
   

   OLPX – Consolidated Statements of Operations

2. Increasing rivalry in the hair care space, with potential patent expirations eroding its moat in bond-building tech. Analysts have warned that some of Olaplex’s core bond-building patents are nearing expiration or being challenged by competitors (L’Oréal, K18), threatening their moat.
3. Corporate Insiders placed Informative Sells of Shares Worth $474.3K in the Last 3 Months.
   

   Insiders | Source: TipRanks.com

4. The company has ongoing legal proceedings. On November 17, 2022, a putative securities class action was filed against the Company and certain of its current and former officers and directors in the United States District Court for the Central District of California, captioned Lilien v. Olaplex Holdings, Inc. et al., No. 2:22-cv-08395. On November 15, 2023, a purported derivative action was filed against the Company, Advent International Corporation, and certain of the Company’s current and former officers and directors in the United States District Court for the Central District of California, captioned Ciuffo v. Dagousset, et al., No. 2:23-cv-09712-SVW-SK. On February 9, 2023, twenty-eight plaintiffs filed Albahae, et al. v. Olaplex Holdings, Inc., et al., No. 2:23-cv-00982, a complaint alleging personal and economic injury and asserting claims for breach of warranty, negligence/gross negligence, products liability, unjust enrichment, and violations of California False Advertising Law and Unfair Competition Law, against the Company and Cosway Company, Inc. On March 22, 2024, a purported derivative action was filed against the Company, Advent International Corporation, and certain of the Company’s current and former officers and directors in the United States District Court for the Central District of California, captioned Hutchinson v. Advent International Corporation, et al., No. 2:24-cv-02364.
5. The company has customer concentration risk. During the year ended December 31, 2024, three of the Company’s customers represented 39% of the Company’s total net sales, in aggregate.

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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