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: Navios Maritime Holdings Inc. (NYSE: NM)
Today’s penny stock pick is the seaborne shipping and logistics company, Navios Maritime Holdings Inc. (NYSE: NM).
Navios Maritime Holdings Inc. operates as a seaborne shipping and logistics company in North America, Australia, Europe, Asia, South America, and internationally. The company operates through two segments, Dry Bulk Vessel Operations, and Logistics Business. It focuses on the transportation and transshipment of dry bulk commodities, including iron ores, coal, and grains. The Dry Bulk Vessel Operations segment engages in the transportation and handling of bulk cargoes through the ownership, operation, and trading of vessels and freight. This segment charters its vessels to trading houses, producers, and government-owned entities. The Logistics Business segment operates ports and transfer station terminals, as well as upriver transport facilities in the Hidrovia region; and handles vessels, barges, push boats, and cabotage business. This segment provides its integrated transportation, storage, and related services through its port facilities, cargo barges, and product tankers to mineral and grain commodity providers, as well as to users of refined petroleum products.
Website: www.navios.com
Latest 10-k report: https://sec.report/Document/0001193125-21-140923/
Analyst Consensus: Not Covered By Analysts.
Potential Catalysts / Reasons for the Hype:
- The company reported financial results for the fourth quarter and year ended December 31, 2021. NM’s revenue had a 53.2% increase to $156.8 million in Q4 2021, and a 40.6% increase to $585.8 million in FY 2021.
- Hedge Funds Increased Holdings by 185.4K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
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 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 has currently broken out from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
NM – 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 is currently moving higher from below the +DI and -DI lines.
#3 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#4 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#5 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 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
NM – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, and is also moving higher from oversold levels, indicating possible bullishness.
#8 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates 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 NM is above the price of $3.90.
Target Prices: Our first target is $4.80. If it closes above that level, the second target price is $5.50.
Stop Loss: To limit risk, place a stop loss at $3.40. Note that the stop loss is on a closing basis.
Our target potential upside is 23% to 41%.
For a risk of $0.50, our first target reward is $0.90, and the second target reward is $1.60. 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 net losses.
NM – Net Loss
- On April 18, 2018, the company was notified by the NYSE that it was no longer in compliance with the NYSE’s continued listing standards because the average closing price of the company’s common stock over a consecutive 30 trading-day period was less than $1.00 per common share.
- Despite being a loss-making company, the aggregate annual compensation (bonus) paid to NM’s current executive officers was approximately $3.0 million for the year ended December 31, 2020.
- The company shareholders have serious dilution risk following the company’s $550m refinancing deal.
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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