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: Cadiz Inc. (NASDAQ: CDZI)

Today’s penny stock pick is the water solutions company, Cadiz Inc. (NASDAQ: CDZI).

Cadiz Inc. provides water solutions in the United States. The company operates in two segments, Land and Water Resources; and Water Filtration Technology. It offers water supply, water storage, water conveyance, and water filtration services. The company also provides water filtration solutions for impaired or contaminated groundwater sources. In addition, it is involved in the cultivation of grain crops, including alfalfa. The company serves public and private water systems, government agencies, and commercial businesses.

Website:  https://www.cadizinc.com/

Latest 10-K report:  https://s3.amazonaws.com/sec.irpass.cc/2950/0001437749-25-009714.pdf

Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for CDZI in the last 3 months, the stock has an average price target of $3.00.

Analysts | Source: TipRanks.com

Potential Catalysts / Reasons for the Hype:

  • California and Southwest face chronic shortages; CDZI’s projects (e.g., Mojave Groundwater Bank) position it as a key player. Analysts highlight $800M+ potential in new infrastructure.
  • Hedge Funds Increased Holdings by 46.0K Shares Last Quarter.

    Hedge Funds | Source: TipRanks.com

  • The company has been signing agreements, such as a recent one with San Bernardino Valley and Fontana Water Company for perchlorate treatment, and another for hydrogen-solar development, which could be positive for future revenue.
  • The company’s recent investments and partnerships include $8M stake by Alyeska Investment Group, and MOUs with Hoku Energy for clean energy.
  • As per tradingview, the company’s price target is $10.00 as per one analyst.

    Analysts| source: tradingview.com

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 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.

CDZI – 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 and 200-day SMA, indicating that the bulls have currently gained control.

#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates 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 dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are gaining control.

CDZI – Weekly Chart

#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 CDZI is above the price of $3.75.

Target Prices: Our first target is $5.20. If it closes above that level, the second target price is $6.20.

Stop Loss: To limit risk, place a stop loss at $3.00. Note that the stop loss is on a closing basis.

Our target potential upside is 39% to 65%.

For a risk of $0.75, our first target reward is $1.45, and the second target reward is $2.45. 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 a history of net losses.

    CDZI – Consolidated Statements of Operations

  2. The company faces environmental and regulatory opposition. CDZI is facing criticism over aquifer extraction in California deserts translating to potential delays from permits or lawsuits.
  3. The company’s recent capital raises (e.g., $50M for groundwater bank) could cause dilution risk. In addition, retail owns 34%, exposing to sentiment swings
  4. CDZI has significant debt. The company’s assets have been pledged as collateral for $60.6 million of senior secured debt outstanding as of December 31, 2024.
  5. Despite being a loss-making company, the executives are being paid significant compensation.

    CDZI – Executive Compensation

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