We recently started a series called “Penny Stock of the Day”. These ideas are geared for 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: Seanergy Maritime Holdings Corp. (NASDAQ: SHIP)
Today’s penny stock pick is the international shipping company, Seanergy Maritime Holdings Corp. (NASDAQ: SHIP).
Seanergy Maritime Holdings Corp. is an international shipping company that provides marine dry bulk transportation services through the ownership and operation of dry bulk vessels. It generates a majority of its revenue from the vessels. The company’s fleet of vessels includes Fellowship, Championship, Partnership, Knightship, Lordship, Gloriuship, Leadership, Geniuship, Premiership, and Squireship.
Website: www.seanergymaritime.com
Latest 10-k report (20-F): https://sec.report/Document/0001140361-21-011092/
Analyst Consensus: Based on 2 Wall Street analysts offering 12 month price targets for Seanergy Maritime in the last 3 months, the stock’s average price target is $1.50. On August 12, 2021, Noble Financial analyst Poe Fratt had reiterated the ‘Buy’ rating for the stock and offered a price target of $1.50, which is a 28.21% upside from the last close.
SHIP – Analyst Targets
Potential Catalysts / Reasons for the Hype:
- The company reporting positive financial results for the Second Quarter, and strong Q3 guidance.
- SHIP authorizing the buyback of 17 million shares.
- The company refinancing its indebtedness and regaining NASDAQ compliance.
- The rumors are that the Capesize sector will have significant upside when compared to other dry bulk sectors. Seanergy focuses exclusively on the Capesize sector.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Broken Downtrend: The daily chart shows that the stock has currently broken out of the prevailing downtrend. This downtrend line has been marked in purple color. This is a possible bullish indication.
SHIP – 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 has started to move higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above both 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.
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#7 Possible Accumulation: The weekly chart shows that the stock has been moving in a sideways range with historic high volumes over the past several weeks. This usually indicates an accumulation area. An accumulation area represents a period of implicit buying of shares, typically by institutional buyers, while the price remains fairly stable.
SHIP – Weekly Chart
#8 Bullish Stoch: The weekly chart also shows that the %K line is above the %D line of the stochastic. This is 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 SHIP is above the price of $1.20.
Target Prices: Our first target is $1.50. If it closes above that level, the second target price is $2.00.
Stop Loss: To limit risk, place a stop loss at $1.01. Note that the stop loss is on a closing basis.
Our target potential upside is 25% to 67%.
For a risk of $0.19, our first target reward is $0.30, and the second target reward is $0.80. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- SHIP has been a loss-making company. As per the latest annual report, the company had a net loss of $18.36 million, $11.70 million, and $21.06 million for the years ended December 31, 2020, 2019, and 2018, respectively.
SHIP – Consolidated Statements of Loss – Annual Report
- The company has performed reverse splits multiple times to keep compliance in the last 5 years. The first split for SHIP took place on January 08, 2016. This was a 1 for 5 reverse split. SHIP’s second split took place on March 20, 2019. This was a 1 for 15 reverse split. SHIP’s third split took place on June 30, 2020. This was a 1 for 16 reverse split. A company with a history of splits and reverse splits to stay afloat is not typically a good bet.
- The company had received written notification from The Nasdaq Stock regarding non-compliance with Nasdaq Listing Rule 5550(a)(2), concerning the minimum bid price of the Company’s common stock. This could happen in the future too, and the company may get delisted.
- In spite of the refinancing of $104.3 million during Q2, the company still has significant debt. The company had reported Long-term debt and other financial liabilities of $203.83 million as of June 30, 2021.
SHIP – Q2 – Debt
- On looking up the company headquarters on Google maps, it appears to be abandoned.
- Despite being a loss-making company, SHIP was making acquisitions of Capesize Vessels. This points to uncontrolled spending and bad financing. Unless limited, it could create further debt for the company.
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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