By Trades Of The Day Research Team, Trades Of The Day, 2024-06-11
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: Tellurian Inc. (NYSE: TELL)
Today's penny stock pick is the Texas-based natural gas company, Tellurian Inc. (NYSE: TELL).
Tellurian Inc. engages in the natural gas business worldwide. It operates through three segments: The Upstream, The Midstream, and The Marketing & Trading. The company produces, gathers, purchases, sells, and delivers natural gas; acquires and develops natural gas assets; and develops, constructs, and operates liquefied natural gas terminals and pipelines.
Website: https://www.tellurianinc.com
Latest 10-k report: https://ir.tellurianinc.com/financials-filings-and-presentations/all-sec-filings/content/0000061398-24-000009/0000061398-24-000009.pdf
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for TELL in the last 3 months, the stock has an average price target of $1.38, which is nearly 58% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Aethon Energy Management LLC announced an agreement to acquire Tellurian's integrated upstream assets for $260 million, alongside a Heads of Agreement for Aethon to purchase two million tons per annum of liquified natural gas from Tellurian's Driftwood LNG plant.
- Rafferty Asset Management LLC increased its position in shares of Tellurian Inc. by 124.5% during the 4th quarter, according to its most recent disclosure with the Securities and Exchange Commission (SEC).
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.
TELL – 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.
TELL – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 MACD above Signal Line: In the weekly chart as well, 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 TELL is above the price of $0.92.
Target Prices: Our first target is $1.60. If it closes above that level, the second target price is $2.20.
Stop Loss: To limit risk, place a stop loss at $0.50. Note that the stop loss is on a closing basis.
Our target potential upside is 74% to 139%.
For a risk of $0.42, our first target reward is $0.68, and the second target reward is $1.28. 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. TELL‘s consolidated Net loss was approximately $166.2 million for the year ended December 31, 2023, and approximately $49.8 million in 2022.
TELL – Consolidated Statements of Operations
- The company will be required to seek additional equity and/or debt financing in the future to complete the Driftwood Project and to grow its other operations, and may not be able to secure such financing on acceptable terms, or at all. This is because the company is not anticipated to generate any significant revenue from the Driftwood Project for multiple years, and the cash flow from its other lines of business is expected to be modest for an extended period.
- Hedge Funds Decreased Holdings by 32.9K Shares Last Quarter.
