As a transporter of dry-bulk commodities, Castor Maritime (NASDAQ:CTRM) suffered during the pandemic-disrupted year of 2020. Of course, that is putting it very mildly. Following a catastrophic erosion of demand — which saw oil prices drop briefly into negative territory — CTRM stock was basically on life support.
However, a group of intrepid social media warriors decided to save the day. Prior to the massive spike in sentiment toward Castor Maritime in late December 2020, the CTRM stock price was meandering around 16 cents or so.
A month later, shares were trading hands at roughly 40 cents. Then, a week (plus a few days) of shake-and-bake saw CTRM stock jump past 60 cents. Another week passed and suddenly, Castor shares blew past the pivotal and psychologically significant $1 mark.
Technically, CTRM was no longer a penny stock. But with the inevitable correction of the wild rally, shares now find themselves just pennies above a buck. Can prospective buyers (well, speculators really) expect an encore performance? Or is this a done deal, a future bag-holding experience masquerading itself as an opportunity?
CTRM Stock Gets Internet Catalyst
In a write-up about CTRM stock for Benzinga, I mentioned that one of the catalysts for Castor is the power of the internet:
When the masses start moving, it’s difficult to stop this kinetic energy. Plus, profitability inspires more people to get on board the trade. Social media users have coined the term “YOLO” for this phenomenon, which stands for “you only live once.”
As well, I mentioned the law of small numbers, where it doesn’t take that much “effort” to deliver outsized percentage gains on stocks with low price tags. But are these comfortable enough reasons to take a wager?
Technical Indicators Suggest Concerns
I should point out that it’s not just speculation-related factors that may support a higher valuation for CTRM stock. Rather, you have the classic argument that this too shall pass. What I mean is, immediacy bias has us thinking that we’ll never get over the novel coronavirus pandemic. But eventually, we will and you’ll want to get in on something like CTRM ahead of the wave.
After all, once you read about Castor Maritime’s recovery on the Wall Street Journal, it’s already too late.
Nevertheless, the question is whether CTRM stock is the right platform to actualize this broader bullish thesis. Undoubtedly, the legions of Castor fans on social media have answered with a resounding “yes.” If so, somebody needs to tell the company’s equity price chart.
Here’s the issue. Since Jan. 27 — when CTRM stock closed at 53 cents — the volume level has consistently declined as shares went on to hit incredible plateaus. For instance, on Feb. 8, when shares hit an intra-day high of $1 and closed at a tick under 99 cents, volume was down nearly 33% from the Jan. 27 session.
Three days later, when CTRM closed at $1.73, volume did pick up higher. However, compared to the Jan. 27 session, volume was down almost 22%. And throughout March, volume is muted relative to what we saw in January and February.
Put another way, volume isn’t confirming the bullishness in CTRM stock. That’s one of the factors technical analysts look for when determining if a pattern is genuinely forecasting a directional move. In this case, you want more people to buy into CTRM as it makes its way higher, not fewer.
Since the bulk of bullish trades occurred under $1, it seems betting above that is a risky proposition.
Don’t Ignore Fundamentals
Finally, I’ll leave you with this: it’s not just the technicals that hang a worrying cloud over CTRM stock. The fundamentals are also not particularly encouraging.
Keep in mind that in the years leading up to 2020, the global shipping industry wasn’t looking too hot. Back in 2019, the headlines from mainstream media reports indicated that investors were concerned about an economic slowdown. Of course, one of the biggest headwinds was the U.S.-China trade war, though it wasn’t the only challenge.
Then, you had the novel coronavirus pandemic, possibly the worst thing you could imagine happen at the worst of times. But then, Presidents Trump and Biden throw a few bucks at the American people and suddenly, we’re back on the bull market?
I don’t want to speak too firmly but I’m very tempted to call B.S. on this one.
At the end of the day, I can’t tell you what to do with your money. What I can suggest is to perform your due diligence. But if you’re curious, I’m staying away from this one. There are now too many questions for me to feel comfortable at this price.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.