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: Ideanomics Inc. (NASDAQ: IDEX)
Today’s penny stock pick is the global electric vehicle company, Ideanomics Inc. (NASDAQ: IDEX).
Ideanomics, Inc. focuses on driving the adoption of commercial electric vehicles, associated energy consumption, and developing financial services and fintech products. Its Ideanomics Mobility division facilitates the adoption of electric vehicles by commercial fleet operators. This division also offers solutions for the procurement, financing, charging, and energy management needs for fleet operators of commercial electric vehicles. The company’s Ideanomics Capital division provides fintech services
Website: www.ideanomics.com
Latest 10-k report: https://sec.report/Document/0001104659-21-044740/
Analyst Consensus: Not covered by analysts.
Potential Catalysts / Reasons for the Hype:
- The Bipartisan Infrastructure Framework which includes $7.5 billion for electric buses.
- JPMorgan’s comment that fuel-cell vehicles are set for big gains in China’s commercial truck market.
- California’s ban on the sale of new gasoline-powered vehicles from 2035.
- Increasing cash on hand, and dropping debt to equity ratio.
- Ideanomics had launched a tender offer to increase its ownership stake in Energica from 20% to approximately 70% after Energica nearly doubled its sales in 2020. In response to increasing consumer and dealer interest, the two Ideanomics divisions are poised to team up to rollout a new Dealer Floor Plan financing arrangement with the goal of more than doubling Energica dealers in the United States by the end of 2021.
- News that Ideanomics Subsidiary WAVE will Collaborate with Kenworth for the development of 1-Megawatt wireless charging pads.
- Upcoming 2021 third-quarter financial results on November 15th, 2021.
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 was forming a falling wedge pattern for the past several weeks. 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 of the falling wedge pattern with high volume, indicating possible bullishness.
IDEX – 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 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 Bullish Stoch: The %K line of the stochastic is above the %D line in the daily chart and is also moving up from oversold levels, indicating bullishness.
#5 Cup and Handle Pattern: The weekly chart shows that the stock is currently forming a cup and handle pattern, which is marked in blue color. This is a possible bullish indication. The stock is also on an uptrend, as shown by the pink color dotted line.
IDEX – Weekly Chart
#6 Bullish Stoch: In the weekly chart as well, the %K line of the stochastic is above the %D line and is currently moving up from near oversold levels. This indicates a possible bullish setup.
#7 Bullish RSI: The RSI is currently moving higher after reaching oversold levels, 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 IDEX is above the price of around $2.40.
Target Prices: Our target prices are $3.40 and $4.20.
Stop Loss: To limit risk, place a stop loss at $1.80. Note that the stop loss is on a closing basis.
Our target potential upside is 42% to 75%.
For a risk of $0.60, our first target reward is $1.00, and the second target reward is $1.80. 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:
- The Company is currently subject to an investigation by the SEC and has been continuously responding to various information requests from the SEC.
- On July 19, 2019, a purported class action lawsuit captioned Rudani v. Ideanomics, et al. Inc., was filed in the United States District Court for the Southern District of New York against the Company and certain of its current and former officers and directors. The Complaint alleged purported misstatements made by the Company in 2017 and 2018.
- On July 10, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Toorani v. Ideanomics, et al., 1:20-cv-05333. The Complaint alleges violations of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and corporate waste and seeks monetary damages and other relief on behalf of the Company.
- On September 11, 2020, the Company was named as a nominal defendant, and certain of its former officers and directors were named as defendants, in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Elleisy, Jr. v. Ideanomics, et al, 20-cv-5333, alleging violations and allegations similar to the Toorani litigation.
- The company was termed ‘borderline fraud’ and ‘most suspicious stocks trading on the market’, according to a report by Cho research. The report puts in many compelling arguments as well.
- Corporate Insiders Sold Shares Worth $1.0M in the Last 3 Months.
- There is an ongoing “In re Ideanomics, Inc. Securities Litigation” against IDEX. The litigation alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 arising from certain purported misstatements by the Company beginning in March 2020 regarding its MEG division.
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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