We recently started a series called “Penny Stock of the Day”. These ideas are geared toward 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: Imperial Petroleum Inc. (NASDAQ: IMPP)
Today’s penny stock pick is the international seaborne transportation services company, Imperial Petroleum Inc. (NASDAQ: IMPP).
Imperial Petroleum Inc. provides international seaborne transportation services to oil producers, refineries, and commodities traders. It carries refined petroleum products, such as gasoline, diesel, fuel oil, and jet fuel, as well as edible oils and chemicals, crude oils, iron ore, coal and grains, and minor bulks, such as bauxite, phosphate, and fertilizers. As of March 28, 2023, the company owned and operated a fleet of five medium range refined petroleum product tankers; one Aframax tanker; two suezmax tankers; and four handysize drybulk carriers with a total capacity of 807,804 deadweight tons.
Website: https://www.imperialpetro.com
Latest 10-k report: https://www.sec.gov/ix?doc=/Archives/edgar/data/1876581/000119312524094635/d708015d20f.htm
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering rating for IMPP in the last 3 months, the stock has an average rating of “Moderate Buy”.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company has been reporting increased net income over the past few years.
IMPP – Consolidated Statements of Operations
- The company has a robust balance sheet with short-term assets exceeding liabilities and no debt burden, enhancing financial stability.
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.
IMPP – 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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#5 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.
IMPP – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 IMPP is above the price of $3.40.
Target Prices: Our first target is $4.10. If it closes above that level, the second target price is $4.80.
Stop Loss: To limit risk, place a stop loss at $3.00. Note that the stop loss is on a closing basis.
Our target potential upside is 21% to 41%.
For a risk of $0.40, our first target reward is $0.70, and the second target reward is $1.40. 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 cyclical nature of the demand for seaborne transportation of oil and petroleum products may lead to significant changes in the company’s chartering and vessel utilization, which may result in difficulty finding profitable charters for its vessels.
- Changes in fuel, or bunker, prices may adversely affect profits.
- The company had received written notification from Nasdaq, dated June 17, 2022, indicating that because the closing bid price of its common stock for 30 consecutive business days, from May 5, 2022, to June 16, 2022, was below the minimum $1.00 per share bid price requirement for continued listing on the Nasdaq Capital Market, the Company was not in compliance with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2).
- IMPP has a small fleet, consisting of nine tankers and two drybulk carriers. Therefore, any limitation in the availability or operation of these vessels could have a material adverse effect on the company’s business, results of operations, and financial condition.
- The company has customer concentration risk. IMPP derives a significant part of its revenue from a small number of charterers. For the year ended December 31, 2021, four customers accounted for 61% of revenues and for the year ended December 31, 2022, two customers accounted for 33% of revenues.
- There are also a few headwinds like low spot rates industrywide, declining Chinese oil imports, lower crude exports from the Middle East, and lower-than-usual operational utilization due to some minor incidents involving Imperial’s fleet.
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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