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: IM Cannabis Corp (NASDAQ: IMCC)
Today’s penny stock pick is the medicinal chemicals & botanical products company, IM Cannabis Corp (NASDAQ: IMCC).
IM Cannabis Corp engages in breeding, growing, and supply of medical cannabis products in Israel, Germany, and Canada. It offers strains under the Roma, Dairy Queen, London, Tel Aviv, Paris, and Pandora Box brands; and CBD oil products under the IMC brand. The company also offers its intellectual property related services to the medical cannabis industry.
In Israel, Focus Medical Herbs Ltd. a licensed producer with an exclusive commercial agreement with IMC to distribute its production under the IMC brand, distributes IMC-branded products through a network of pharmacies including Super Pharm, Israel’s largest pharmacy chain.
Latest 10-k report: https://sec.report/Document/0001062993-21-003822/form40f.htm
Analyst Consensus: According to TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for IMCC in the last 3 months, the stock has a ‘Moderate Buy’ rating and a $7.61 price target.
Potential Catalysts / Reasons for the Hype:
- The news that Germany is moving forward on recreational use of cannabis.
- IMCC had doubled its footprint in Germany to around 80,000 sq. ft., and boosted its storage capacity to seven tons of cannabis.
On analyzing the company’s stock charts, there seem to be multiple 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.
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and ADX line are above the -DI line, and the ADX line has currently moved 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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend, which is marked as a pink color line. This indicates bullishness.
#5 Above Support Area: The weekly chart shows that the stock is trading above a support area, which is marked as an orange color dotted line. This is a possible bullish indication.
#6 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD Signal line, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for IMCC is above the price of $3.60.
Target Prices: Our target prices are $4.60 and $5.50.
Stop Loss: To limit risk, place a stop loss below $3.00. Note that the stop loss is on a closing basis.
Our target potential upside is 28% to 53%.
For a risk of $0.60, our first target reward is $1.00, and the second target reward is $1.90. 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 has a history of increasing net losses.
- There are ongoing lawsuits against Focus Medical Herbs Ltd.
- On August 19, 2019, a motion was filed for approval of a class action against 17 companies operating in the field of medical cannabis in Israel, including Focus alleging that the Companies did not accurately mark the concentration of active ingredients in their products.
- On October 6, 2019, Focus received a decision regarding a petition that was filed against the MOH, concerning the new regulatory framework of the cannabis market.
- On October 30, 2019, Focus was served with a motion for approval of a class action against it, the Medical Cannabis Unit of the IMCA, and five other companies related to the cannabis market in Israel. The motion was filed in connection to a stopping of supplies of medical cannabis by way of direct supply. The legal causes alleged in the motion are the following: discrimination in violation of the Equal Rights for Persons with Disabilities Act, 1988 and a restrictive arrangement contrary to the Economic Competition Law, 1988.
- Only on March 1, 2021, the company was listed and commenced trading on NASDAQ under the ticker symbol IMCC.
- Corporate Insiders had Sold Shares Worth $16.6K in the Last 3 Months.
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!
— 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.Retire Early With $3 Wonder Stock? [sponsor]
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