We recently started a series called “Penny Stock of the Day”. These ideas are geared towards 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: Express, Inc. (NYSE: EXPR)
Today’s penny stock pick is the American fashion retailer, Express, Inc. (NYSE: EXPR).
Express, Inc. provides apparel and accessories for women and men for various occasions under the Express brand. The company sells its products through its e-commerce website, express.com; and mobile app, as well as franchisees Express locations in Latin America. As of January 29, 2022, it operated 561 stores in 46 states across the United States, as well as in Puerto Rico.
Website: www.express.com
Latest 10-k report: https://sec.report/Document/0001483510-22-000015
Analyst Consensus: Not Covered by Analysts.
Potential Catalysts / Reasons for the Hype:
- The stock price seems to be influenced by the broader rally in the “meme stocks”.
- Hedge Funds Increased Holdings by 129.2K Shares Last Quarter.
Hedge Fund | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out a symmetrical triangle pattern, which is marked as pink color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
NCR – 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 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#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 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The weekly chart shows that the stock had taken support at the 38.2% Fibonacci support level of the upmove before starting to move higher. This is a possible bullish sign.
EXPR – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#7 Bullish RSI: In the weekly chart, the RSI is moving higher and is currently nearing 50. 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 EXPR is above the price of $3.80.
Target Prices: Our first target is $5.50. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $2.80. Note that the stop loss is on a closing basis.
Our target potential upside is 45% to 84%.
For a risk of $1.00, our first target reward is $1.70, and the second target reward is $3.20. 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.
EXPR – Consolidated Statements of Income
- The company has multiple ongoing legal proceedings.
- In a complaint filed in January 2017 by Mr. Jorge Chacon in the Superior Court for the State of California for the County of Orange, certain subsidiaries of the Company were named as defendants in a representative action alleging violations of California state wage and hour statutes and other labor standards. The lawsuit seeks unspecified monetary damages and attorneys’ fees.
- In July 2018, former associate Ms. Christie Carr filed suit in Alameda County Superior Court for the State of California naming certain subsidiaries of the Company as defendants in a representative action alleging violations of California State wage and hour statutes and other labor standard violations. The lawsuit seeks unspecified monetary damages and attorneys’ fees.
- In August 2018, former associate Ms. Leticia Rosete filed suit in Los Angeles County Superior Court for the State of California naming certain subsidiaries of the Company as defendants in a representative action alleging violations of California state wage and hour statutes and other labor standard violations (including claims for discrimination, harassment, retaliation, etc.). On September 8, 2021, the Rosete case was settled.
- On January 29, 2019, Mr. Jorge Chacon filed a second representative action in the Superior Court for the State of California for the County of Orange alleging violations of California state wages and hour statutes and other labor standard violations, which was removed to federal court by the Company and is now pending in the United States District Court for the Central District of California. The lawsuit seeks unspecified monetary damages and attorneys’ fees. In June 2021, a portion of Mr. Chacon’s claims in this action was certified as a class action. Plaintiff and the Company both filed Motions for Summary Judgement on February 28, 2022. No trial date has been set.
- Despite being a loss-making company, the executives are being paid significant compensation.
EXPR – Executive Compensation -Summary Compensation Table
- The company faces substantial competition in the specialty retail apparel and accessories industry, including from individual and chain specialty apparel retailers, local, regional, national, and international department stores, and eCommerce businesses.
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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