We recently started a new 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: iFresh Inc. (NASDAQ: IFMK)
Today’s penny stock pick is the supermarket company, iFresh Inc. (NASDAQ: IFMK).
iFresh Inc. is an Asian/Chinese grocery supermarket chain in the North-Eastern U.S. providing food and other merchandise hard to find in mainstream grocery stores. It has two reportable and operating segments: Retail segment and Wholesale segment.
The company offers seafood, vegetables, meat, fruit, frozen goods, groceries, and bakery products. Its brand portfolio includes Family Elephant, Feiyan, Green Acre, Golden Smell, Redolent, and I FRESH. The company also distributes its products to wholesale stores, retail supermarkets, and restaurants. As of August 10, 2020, it operated nine retail supermarkets and two in-house wholesale businesses.
Website: www.ifreshmarket.com
Latest 10-k report: Not available for 2021
10-k as of March 1, 2020: https://sec.report/Document/0001213900-20-021922/
Analyst Consensus: Not Rated
Potential Catalysts / Reasons for the Hype:
- The company’s shares were trading higher Thursday on abnormal volume levels. However, no company-specific news announcements were found to justify the price action.
- As per rumors, the current surge was caused due to a small company investing $499,000 on IFMK, resulting in a 35% upmove.
- Nearly 72.91% of the shares are held by insiders. Yet, none of the shares were sold by insiders even when the stock had a significant upmove.
- Rumors of higher profit aided by the general uptick in deliveries due to covid-19 impact.
- The company operates in densely populated cities or minority communities. Such locations are usually not catered by other large supermarkets. Consequently, there is a now growing number of non-Asian shoppers due to quality, convenience, and selection.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Consolidation Area: The daily chart shows that the stock was trading within a consolidation area for the past several days. This is marked in the daily chart as a purple color rectangle. Currently, the stock looks poised for a breakout from this consolidation area. Once a stock breaks out from a consolidation area with a high volume, it usually moves higher.
IFMK – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX line are above the -DI line, and the ADX line has started to move higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above both 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 Stoch: The %K line is above the %D line of the stochastic. It is also moving higher from oversold levels. All these indicate possible bullishness.
#6 Bullish Reversal Candle: The weekly chart shows that the stock has recently formed a bullish reversal candle. This is marked as a pink color ellipse. This indicates the possibility of an upmove in the near-term.
IFMK – Weekly Chart
#7 Bullish RSI: The RSI is currently above 50 and moving higher, indicating the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for IFMK is above the price of $1.50.
Target Prices: Our target prices are $2.50 and $3.50.
Stop Loss: To limit risk, place a stop loss at $1.20. Note that the stop loss is on a closing basis.
Our target potential upside is 67% to 133%.
For a risk of $0.30, our first target reward is $1.00, and the second target reward is $2.00. This is a nearly 1:3 and 1:7 risk-reward trade.
In other words, this trade offers 3x to 7x more potential upside than downside.
Potential Risks / Red Flags:
- The company reported declining net sales year over year. iFresh’s net sales were $89.5 million and $125.4 million for the years ended March 31, 2020, and 2019, respectively. This is a decrease of $36.0 million, or 28.7% year-over-year.
IFMK – Net Sales
- The company has been a loss-making company. iFresh’s net loss was $8.3 million for the year ending March 31, 2020, and $12 million of net loss for the year ending March 31, 2019.
IFMK – Net Loss
- The company has not yet filed the 10-K and 10-Q reports for this year.
- iFresh had previously received delisting notices from Nasdaq. On December 17, 2019, iFresh Inc. had received a letter from the Listing Qualifications Staff of the Nasdaq Stock Market LLC, which stated that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2), which requires an issuer to maintain a minimum closing bid price of $1.00 per share.
- Despite being a loss-making company with declining sales, the company’s executive compensation had increased year-over-year.
IFMK – Executive Compensation
- The company has a history of litigations – Leo J. Motsis, as Trustee of the 140-148 East Berkeley Realty Trust v. Ming’s Supermarket, Inc.; Leo J. Motsis, as Trustee of the 140-148 East Berkeley Realty Trust v. Ming’s Supermarket, Inc.; Leo J. Motsis, as Trustee of the 140-148 East Berkeley Realty Trust v. Ming’s Supermarket, Inc.; JD Prroduce Maspeth LLC v. iFresh, Inc. alt; and JD Prroduce Maspeth LLC v. iFresh, Inc. alt.
- From January to June 2020, the Company had failed to make a loan payment of $1,194,878. Consequently, on August 6, 2020, the Company received the 3rd forbearance agreement from Key Bank.
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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