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: Leap Therapeutics Inc. (NASDAQ: LPTX)
Today’s penny stock pick is the biopharmaceutical company, Leap Therapeutics Inc. (NASDAQ: LPTX).
Leap Therapeutics Inc. acquires and develops therapies for the treatment of cancer. Its lead clinical-stage programs include DKN-01, a monoclonal antibody that inhibits Dickkopf-related protein 1 that is in multiple clinical trials for treating esophagogastric cancer, hepatobiliary cancer, gynecologic cancers, and prostate cancer.
Website: www.leaptx.com
Latest 10-k report: https://sec.report/Document/0001104659-21-035227/
Analyst Consensus: According to TipRanks analytics, LPTX has an average price target of $4.00, which is a 116.22% upside from current levels. This is based on 3 Wall Street analysts offering 12-month price targets for Leap Therapeutics in the last 3 months.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Encouraging updated data for DKN-01 in Endometrial Cancer Demonstrating Single Agent Activity in Biomarker-selected Patients, recently Presented at Association for Cancer Research (AACR) Virtual Special Conference.
- Upcoming presentation of initial data from the DisTinGuish study, a Phase 2a clinical trial evaluating Leap’s anti-Dickkopf-1 (DKK1) antibody, DKN-01, in combination with tislelizumab, BeiGene’s Ltd.’s anti-PD-1 antibody, with or without chemotherapy, in patients with gastric or gastroesophageal junction cancer (G/GEJ), at the European Society for Medical Oncology (ESMO) Congress in September.
- Multiple analysts rating the stock as a ‘buy’.
Recent Analyst Ratings | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as purple color lines. This is a possible bullish indication.
LPTX – 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 moved 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 are currently in 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 Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates possible bullishness.
#6 Above Support Area: The weekly chart shows that the stock is moving higher after taking support near a long-term support area. This is marked as a pink color dotted line. An upmove from this area looks like a bullish sign.
LPTX – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 Bullish MACD: The weekly chart also shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of LPTX above the price of $1.95. The rest of the shares can be purchased above the price of $2.90.
Target Prices: Our first target price is $2.90. If it closes above that level, the second target price is $4.50.
Stop Loss: To limit risk, place a stop loss at $1.40 (for entry near $1.95) and $2.10 (for entry near $2.90). Note that the stop loss is on a closing basis.
Our target potential upside is 49% to 131%.
- Entry near $1.95: For a risk of $0.55, our first target reward is $0.95, and the second target reward is $2.55. This is a nearly 1:2 and 1:5 risk-reward trade.
- Entry near $2.90: For a risk of $0.80, our target reward (TP#2) is $1.60. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Potential Risks / Red Flags:
- LPTX has incurred net losses in each year since its inception in 2011. The company’s net loss was $27.5 million for the year ended December 31, 2020, and $32.9 million for the year ended December 31, 2019. As of December 31, 2020, the company had an accumulated deficit of approximately $223.0 million.
LPTX – Annual Report | Consolidated Statement Of Operations
- The company was formerly known as HealthCare Pharmaceuticals, Inc. and changed its name to Leap Therapeutics, Inc. in November 2015.
- The company’s latest quarterly report also shows that LPTX is a loss-making company. The company has reported a net loss of $18,660,000 during the six months ended June 30, 2021.
LPTX – Q2 Report | Consolidated Statement Of Operations
- The company has multiple ongoing legal proceedings. In 2016, a patent covering the use of the TRX518 antibody in combination with a chemotherapeutic agent for treating cancer was granted to us by the EPO. In March 2017, notices of opposition to this patent were filed at the EPO by ten different entities, including several major pharmaceutical companies. In December 2019, a patent covering the use of the TRX518 antibody in combination with the chemotherapeutic agent, gemcitabine, for treating a colon tumor or adenocarcinoma of the colon, was granted to us by the EPO. A Notice of Opposition was filed against the patent by a single opponent, Sanofi, on September 25, 2020.
- Despite being a loss-making company, LPTX executives are drawing significant compensation.
LPTX – Executive Compensation
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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