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: New York Community Bancorp, Inc. (NYSE: NYCB)
Today’s penny stock pick is the financial services company that operates as the bank holding company for Flagstar Bank, New York Community Bancorp, Inc. (NYSE: NYCB).
New York Community Bancorp, Inc. provides banking products and services in the United States. The company’s deposit products include interest-bearing checking and money market, savings, non-interest-bearing, and retirement accounts, as well as certificates of deposit.
Its loan products comprise multi-family loans; commercial real estate loans; acquisition, development, and construction loans; commercial and industrial loans; one-to-four family loans; specialty finance loans and leases; warehouse loans; and other loans, such as home equity lines of credit, boat and recreational vehicle indirect lending, point of sale consumer loans, and other consumer loans, including overdraft loans.
The company offers cash management products; non-deposit investment and insurance products; and online banking, mobile banking, and bank-by-phone services. It primarily serves individuals, small and mid-size businesses, and professional associations.
Website: https://ir.mynycb.com/
Analyst Consensus: As per TipRanks Analytics, based on 15 Wall Street analysts offering 12-month price targets for NYCB in the last 3 months, the stock has an average price target of $4.13, which is nearly 22% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s CEO Joseph Otting said in the release that they have a clear path to profitability over the following two years. The CEO said that the bank will have higher profitability and capital levels by the end of 2026.
- Corporate Insiders placed Informative Buys of Shares Worth $972.1K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Increased Holdings by 607.5K 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.
NYCB – 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 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.
#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.
NYCB – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart and is also moving higher from oversold levels, indicating possible bullishness.
#6 Oversold 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 NYCB is above the price of $3.50.
Target Prices: Our first target is $5.00. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $2.70. Note that the stop loss is on a closing basis.
Our target potential upside is 43% to 71%.
For a risk of $0.80, our first target reward is $1.50, and the second target reward is $2.50. 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:
- NYCB reported a net loss of $79 million for the year ended December 31, 2023.
NYCB – Consolidated Statements of Operations
- NYCB has posted a quarterly loss of $335 million on a rising tide of soured commercial loans and higher expenses. The company’s loans in the commercial real estate and multifamily property space were revealed to be in danger.
- The company has ongoing legal proceedings, contingencies, and commitments. On February 24, 2012, the Bank entered into a Settlement Agreement with the DOJ under which NYCB agreed to make future payments totaling $118 million in annual increments of up to $25 million upon meeting certain conditions. As of December 31, 2021, and December 31, 2020, excluding the fair value liability relating to the DOJ Liability, the company’s total accrual for contingent liabilities and settled litigation was $9 million and $7 million, respectively.
- As of December 31, 2023, $37.3 billion, or 44.0 percent of NYCB’s total loans and leases, held for investment portfolio consisted of multi-family loans and $10.5 billion or 12.4 percent consisted of CRE loans. These types of loans generally expose a lender to a greater risk of non-payment and loss.
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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Source: Trades of the Day