Although penny stocks are wildly dangerous, they’re also tempting due to the tremendous upside potential that they offer. Further, they offer leverage without the complexities involved in some of the more esoteric strategies implemented in the financial markets. For those who are willing to accept the high risks involved, Gaia Inc (GAIA) could be an intriguing idea.
To be clear, we’re firmly talking about a speculative opportunity here. Sure, GAIA stock may be up over 8% since the start of the year. At the same time, it’s priced at under five bucks a pop, meaning that it’s liable to go anywhere. For example, on Tuesday, GAIA lost nearly 7% of equity value. For the trailing five sessions, the security is down roughly 6%.
Another high-risk element to consider is its business. An American media company founded in 1988, Gaia operates within a narrow content band, focusing on themes such as yoga, mindfulness and alternative medicine. It has also delved in conspiracy theories and pseudoscience, which is a double-edged sword. On one end, because of its promotion of misinformation, Gaia has been deplatformed across major social media sites.
On the other hand, deplatforming — particularly for the promotion of alternative truths — can be viewed as a badge of honor. And that’s where the fundamental argument for GAIA stock comes into play.
According to its public profile, Gaia’s television network had over half-a-million subscribers in 185 countries (as of September 2018). Last year, the subscription count increased to 806,000. For people who are convinced that mainstream structures are hiding or otherwise obfuscating certain realities, Gaia may be an attractive outlet.
As intriguing as the narrative for GAIA stock is, it doesn’t necessarily provide actionable insights. Ultimately, a public company isn’t valued by intrinsic fundamentals, much like a car isn’t priced based on how much horsepower it produces. Rather, it comes down to what a buyer is willing to pay.
Statistically, it’s possible to look back in time to decipher the conditions that sparked a higher likelihood of upside success in GAIA stock. However, the problem in finance is that traditional measurement metrics — such as share price — are non-stationary; that is, they often fluctuate across time and context. To remedy this problem, one can impose stationarity by converting price action into a first-order (mathematically irreducible) metric such as market breadth: sequences of accumulative and distributive sessions.
Using this framework, GAIA stock is on pace to clock by Friday a 6-4-U sequence: six up weeks, four down weeks, with a net positive trajectory across the 10-week period. What’s intriguing here is that in 62.69% of cases, the following week’s price action (meaning the business week beginning June 23) results in upside, with a median return of 2.73%.
To be clear, that’s a median return based on the historical response of the 6-4-U. Because GAIA stock has already had a rough patch, it’s possible that — if upside materializes — the return could be bigger than advertised.
What we do know is that, as a baseline, the chance that GAIA stock will rise on any given week is only 49.73%. Therefore, from a gambler’s perspective — and it is a gamble — an incentive exists to take a swing.
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