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: Enservco Corporation (NYSEAMERICAN: ENSV)
Today’s penny stock pick is the diversified national provider of specialized well-site services to the domestic onshore conventional and unconventional oil and gas industries, Enservco Corporation (NYSEAMERICAN: ENSV).
Enservco Corporation provides well enhancement and fluid management services to the onshore oil and natural gas industry in the United States. It offers frac water heating, hot oiling, pressure testing, acidizing, and water hauling, as well as well site construction services. The company owns and operates a fleet of approximately 318 specialized trucks, trailers, frac tanks, and other well-site related equipment.
It operates in the eastern United States region comprising the southern region of the Marcellus Shale formation and the Utica Shale formation in eastern Ohio; Rocky Mountain region consisting of western Colorado and southern Wyoming, central Wyoming, western North Dakota, and eastern Montana; and the Central United States region, including Eagle Ford Shale and East Texas Oilfield in Texas.
Website: https://www.enservco.com
Latest 10-k report: https://sec.report/Document/0001437749-22-016757
Analyst Consensus: Not covered by analysts as per TipRanks.
Potential Catalysts / Reasons for the Hype:
- The company reported earnings for its fiscal first quarter of 2022. ENSV’s Q1 revenue was up 67% YOY to $8.6 million from $5.1 million
- The Company posted gains across all service offerings based on increased customer activity driven by higher commodity prices.
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.
ENSV – 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 MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls have currently gained 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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#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. The stock is also trading above its 50-week SMA. All these are possible bullish indications.
ENSV – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 ENSV is above the price of $2.20.
Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $4.00.
Stop Loss: To limit risk, place a stop loss at $1.70. Note that the stop loss is on a closing basis.
Our target potential upside is 36% to 82%.
For a risk of $0.50, our first target reward is $0.80, and the second target reward is $1.80. 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 net losses. Net loss for the year ended December 31, 2021, was approximately $8.1 million compared to a net loss of approximately $2.5 million for the year ended December 31, 2020.
ENSV – Consolidated Statements of Operations
- The company has an ongoing legal proceeding. On November 8, 2021, Amanda Mordica, a Texas resident, filed a complaint in Texas State Court in Atascosa County, against the Company, its wholly owned subsidiary, Heat Waves Hot Oil Service LLC, and two individual former Company employees alleging negligence by the Company and its subsidiary in connection with a traffic accident sustained by Ms. Mordica on November 19, 2019.
- ENSV has significant debt obligations under the 2022 Financing Facilities. In March 2022, the company refinanced approximately $13.8 million outstanding under its Credit Facility with East West Bank for approximately $8.4 million in cash plus future unsecured payments of up to $1.0 million. Despite significantly reducing its debt, the company still has monthly payments to lenders of a minimum of $168,000.
- Despite being a loss-making company, the executives are being paid significant compensation.
ENSV – Executive Compensation
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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