By Trades Of The Day Research Team, Trades Of The Day, 2024-06-06
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: Petco Health and Wellness Company, Inc. (NASDAQ: WOOF)
Today's penny stock pick is the pet health and wellness company, Petco Health and Wellness Company, Inc. (NASDAQ: WOOF).
Petco Health and Wellness Company, Inc. operates as a health and wellness company and focuses on enhancing the lives of pets, pet parents, and its Petco partners in the United States, Mexico, and Puerto Rico. The company provides veterinary care, grooming, training, tele-health, and Vital Care and pet health insurance services, as well as veterinary services through Vetco mobile clinics.
It also offers pet consumables, supplies, and services through its petco.com, petcoach.co, petinsurancequotes.com, and pupbox.com websites. The company offers its products under the WholeHearted, Reddy, and Well & Good brands.
Website: https://corporate.petco.com
Latest 10-k report: https://ir.petco.com/static-files/de462517-9dbe-4695-b99c-7db1308c83e2
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for WOOF in the last 3 months, the stock has an average price target of $2.64.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Corporate Insiders placed Informative Buys of Shares Worth $2.3M in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company recently announced leadership WOOF is expanding the Executive Leadership Team to include: Tim Buckenberger, SVP, Merchandise Planning, Inventory & Supply Chain; Steve Janowiak, VP Digital; Stephen Reyes, SVP, Services; James Roth, Chief Stores Officer; and Shari White, Interim Chief Merchant.
On analyzing the company's stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as purple color lines. This is a possible bullish indication.
WOOF – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#6 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.
WOOF – Weekly Chart
#7 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 WOOF is above the price of $4.25.
Target Prices: Our first target is $5.60. If it closes above that level, the second target price is $6.80.
Stop Loss: To limit risk, place a stop loss at $3.40. Note that the stop loss is on a closing basis.
Our target potential upside is 32% to 60%.
For a risk of $0.85, our first target reward is $1.35, and the second target reward is $2.55. 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.
