We recently started a 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: Evolve Transition Infrastructure LP (NYSE: SNMP)
Today’s penny stock pick is Evolve Transition Infrastructure LP (NYSE: SNMP), a company primarily in the business of crude petroleum & natural gas.
Evolve Transition Infrastructure LP is focused on the acquisition, development, ownership, and operation of midstream and other energy-producing assets.
The company operates through two segments: the Midstream business which includes the Catarina gathering system; and the Production segment, which includes oil and natural gas reserves located in the Eagle Ford Shale in South Texas and in other areas of Texas and Louisiana, as well as properties in the Mid-Continent region. Geographically, it operates through the region of the United States and derives the majority of the revenue from the Midstream segment.
Website: https://evolvetransition.com/
Latest 10-k report: https://sec.report/Document/0001362705-21-000017/snmp-20201231x10k.htm
Analyst Consensus: Not covered by analysts.
Potential Catalysts / Reasons for the Hype:
- Company insiders recently buying the stock.
SNMP – Insider Transactions
- The news regarding a $750 million sustainable infrastructure joint venture with Nuvve and Stonepeak, to use electric buses as energy storage with V2G tech. Dubbed Levo Mobility, the project will look to deploy turnkey EV charging and transportation-as-a-service (TaaS) for school buses and other commercial fleets. SNMP owns a proprietary vehicle-to-grid (V2G) platform that is managed by Stonepeak. The JV will target thousands of zero-emission buses in implementing its “V2G hubs” and TaaS solutions.
- The news of Northwest Advanced Bio-Fuels securing construction equity commitment MOU for sustainable aviation fuel project in Washington State. The $600 million investment is anticipated to be made through SP Holdings LLC, partner of SNMP.
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 broken out of a Symmetrical Triangle pattern. This pattern is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
SNMP – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX lines are above the -DI line, and the ADX line has currently moved 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates possible bullishness.
#5 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.
#6 Double Bottom Pattern: The weekly chart shows that the stock has been forming a double bottom pattern. This is marked in pink color. A double bottom pattern is a bullish reversal pattern and a breakout from it indicates that the stock could move upwards. Currently, the stock looks poised for a breakout, which is a possible bullish sign.
SNMP – Weekly Chart
#7 Bullish MACD: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color), indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for SNMP is above the price of $1.70.
Target Prices: Our target prices are $2.50 and $3.50.
Stop Loss: To limit risk, place a stop loss at $1.30. Note that the stop loss is on a closing basis.
Our target potential upside is 47% to 77%.
For a risk of $0.40, our first target reward is $0.80, and the second target reward is $1.30. 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 significant debt and very low cash. This points to the possibility of more stock issuance and further liquidity.
SNMP – Balance Sheet
- SNMP is a loss-making company. The company had reported a net loss of $118,761,000 for the year ending December 31, 2020, and a net loss of $51,142,000 for the year ending December 31, 2019.
SNMP – Consolidated Statements of Operations
- The company had changed its name from Sanchez Midstream Partners LP to Evolve Transition Infrastructure LP in February 2021.
- Sanchez had reportedly sold off its midstream operations to reduce debt and increase shareholder equity to regain compliance with NYSE-American listing requirements.
- The latest rally is said to be powered by 70% Dark Pool buyers. (Dark pools are private exchanges for trading securities that are not accessible by the investing public.) This lack of visibility is not typically a good sign.
- Mesquite is SNMP’s most significant customer and accounted for approximately 80% of its total revenue and substantially all of midstream business revenue for the year ended December 31, 2020.
- Despite being a high-debt, loss-making company, the company executives are drawing significant compensation year-over-year.
SNMP – Executive Compensation
- On April 3, 2020, SNMP received notice from the NYSE American stating that the company was below compliance with Section 1003(a)(i) of the Company Guide. Unless the company regains compliance by October 3, 2021, and provides quarterly updates to the NYSE American concurrent with the company’s interim and annual SEC filings, the initiation of delisting proceedings could happen.
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.
Fed's Stealthy Move Could Crash U.S. Market [sponsor]A new, secretive move being carried out by the Fed that has nothing to do with lowering or raising interest rates... could soon have an enormous impact on your wealth. According to Dan Ferris, the banking expert who once predicted the collapse of Lehman Brothers, "Millions are about to be blindsided." More here.