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: Jiayin Group Inc. (NASDAQ: JFIN)
Today’s penny stock pick is the finance platform, Jiayin Group Inc. (NASDAQ: JFIN).
Jiayin Group Inc. operates as an online individual finance platform that connects individual investors and individual borrowers in China. The company is focused on the online individual finance segment which facilitates mid-to long-term loans. It generates revenues from fees charged for its services in matching investors and borrowers and other services that the firm provides over the term of a loan. Geographically, the company generates a majority of its revenue from the People’s Republic of China.
Website: www.jiayinfintech.cn
Latest 10-k report (20-F): https://sec.report/Document/0001564590-21-022515/
Analyst Consensus: According to TipRanks, based on 1 analyst giving stock ratings to Jiayin Group in the past 3 months, the stock’s average price target is $10.40, which is 109.26% Upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Investors responding positively to the company’s second-quarter 2021 unaudited financial results.
- The company’s entry into the non-fungible token (NFT) space in spring. As part of the Ethereum blockchain, NFT is a disruptive technology redefining fine art collection.
- Analyst reiterating a buy rating and setting a high price target for the stock.
Recent Analyst Ratings | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: 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 currently looks poised for a breakout from the falling wedge pattern.
JFIN – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX line are above the -DI line, and the ADX line has moved 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 are now gaining 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 Bullish Stoch: In the daily chart, the %K line is above the %D line of the stochastic. This indicates a possible bullish setup.
#6 Above Support Area: The weekly chart shows that the stock is currently trading above a support area. This has been marked as a pink color dotted line. This is a possible bullish sign.
JFIN – Weekly Chart
#7 Bullish RSI: The RSI is currently moving higher from oversold levels and is now above 50, indicating the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for JFIN is above the price of $5.20.
Target Prices: Our target prices are $7.00 and $9.00
Stop Loss: To limit risk, place a stop loss at $4.10. Note that the stop loss is on a closing basis.
Our target potential upside is 35% to 73%
For a risk of $1.10, our first target reward is $1.80, and the second target reward is $3.80. 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:
- The company has a history of losses. JFIN had accumulated deficits of RMB2,047.5 million, RMB1,519.7 million, and RMB1,266.8 million (US$194.1 million) as of December 31, 2018, 2019, and 2020, respectively.
- Chinese stocks that list on American stock exchanges are always a bit riskier, given that they face more severe threats on the regulatory front.
- The company is currently facing domestic regulation uncertainties on P2P lending.
- On March 15, 2019, the National People’s Congress adopted the Foreign Investment Law of the PRC, which became effective on January 1, 2020, and replaced three existing laws regulating foreign investment in China. Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law of the PRC and how it may impact the viability of the company’s current corporate structure, corporate governance, and business operations.
- The company has ongoing investigations. Pomerantz LLP is investigating claims on behalf of investors of Jiayin Group Inc. The investigation concerns whether Jiayin and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. Silver Law Group is also investigating Jiayin Group Inc. on behalf of investors in the company regarding whether the company and its officers or directors engaged in securities fraud.
- The company’s previous surge was purely a momentum move. Jiayin suddenly became a favorite on Robin Hood and saw more users jump on board with it. After the spike happened, the shares were dumped after pocketing the profits. This could get repeated.
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.
This is the #1 Stock to Buy for the AI Tidal Wave [sponsor]Marc Chaikin warned people about NVDA before its 2023 bull run - now he's naming his next pick or the AI tidal wave. Learn more here.