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: Globus Maritime Limited (NASDAQ: GLBS)
Today’s penny stock pick is the integrated dry bulk shipping company, Globus Maritime Limited (NASDAQ: GLBS).
Globus Maritime Limited provides marine transportation services worldwide. It owns, operates, and manages a fleet of dry bulk vessels that transport iron ore, coal, grain, steel products, cement, alumina, and other dry bulk cargoes. As of March 20, 2023, the company’s fleet includes nine vessels with a total carrying capacity of 626,257 deadweight tonnage. It charters its vessels to operators, trading houses, shipping companies and producers, and government-owned entities.
Website: https://www.globusmaritime.gr
Latest 10-k report: https://www.sec.gov/ix?doc=/Archives/edgar/data/1499780/000110465923034445/glbs-20221231.htm
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for GLBS in the last 3 months, the stock has an average price target of $3.50, which is nearly 230% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The shipping rates are anticipated to go higher due to macroeconomic phenomena like higher oil prices and a blockage plaguing the Panama Canal. This could provide higher revenues and net income in the short and medium term for Globus Maritime.
- The company recently reported Q1 earnings per share at $-0.09, which has increased by 40.0% compared to Q4, which was -0.15.
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 blue 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.
GLBS – Daily Chart
#2 Price above MAs: The stock is currently above its 50-day SMA as well as 200-day SMA, indicating that the bulls have currently gained control.
#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 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 looks like a good area for the stock to move higher.
GLBS – Weekly Chart
#5 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.
#6 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, 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 GLBS is above the price of $1.10.
Target Prices: Our first target is $1.70. If it closes above that level, the second target price is $2.00.
Stop Loss: To limit risk, place a stop loss at $0.80. Note that the stop loss is on a closing basis.
Our target potential upside is 55% to 82%.
For a risk of $0.30, our first target reward is $0.60, and the second target reward is $0.90. 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 received in the past, and most recently on March 6, 2020, written notifications from Nasdaq related to Nasdaq Listing Rule 5450(a)(1). The notice indicated that because the closing bid price of GLBS’s common stock for the last 30 consecutive business days was below $1.00 per share, the company no longer met the minimum bid price continued listing requirement. Consequently, GLBS could be delisted from Nasdaq, which could affect their market price and liquidity.
- The company conducts a substantial amount of business in China. A decrease in the level of imports to and exports from China could adversely affect the company’s business, operating results, and financial condition. Although the charters GLBS enters into with Chinese counterparties are not governed by Chinese law, the company may have difficulties enforcing a judgment rendered by an arbitration tribunal or by an English or U.S. court (or other non-Chinese court) in China. The level of imports to and exports from China may also be adversely affected by changes in political, economic, and social conditions and any relevant policies of the Chinese government.
- The dry bulk vessel charter market remains significantly below its high in 2008.
- The aging of the fleet may result in increased operating costs in the future. As of December 31, 2022, and 2021, the weighted average age of the vessels in GLBS’s fleet was 11.2 and 10.2 years, respectively. As the fleet ages, the company will incur increased costs to operate and maintain the vessels.
- There is now a rise in fuel prices as a result of the developments in Ukraine and the sanctions against Russia, the imposition of sulfur oxide emissions limits in January 2020, and reductions of carbon emissions from January 2023 under new regulations adopted by the International Maritime Organization. This may adversely affect GLBS’s profits.
- The company has significant outstanding warrants. Shares to be issued pursuant to the exercise of the outstanding warrants could cause the market price of GLBS’s shares to decline and could have an adverse effect on its earnings per share.
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.