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: Aditxt Inc. (NASDAQ: ADTX)
Today’s penny stock pick is the biotechnology company, Aditxt Inc. (NASDAQ: ADTX).
Aditxt Inc. develops technologies that focus on improving the health of the immune system through immune reprogramming and monitoring. It develops AditxtScore that allows individuals to understand, manage, and monitor their immune profiles in order to be informed about attacks on or by their immune system; and Apoptotic DNA Immunotherapy, a nucleic acid-based technology that utilizes an approach that mimics the way the body naturally induces tolerance to its own tissues. The company is also developing ADi products for organ transplantation, including skin grafting, autoimmune diseases, and allergies. Aditxt, Inc. has a license agreement with Loma Linda University and Leland Stanford Junior University.
Website: https://aditxt.com/
Latest 10-k report: https://sec.report/Document/0001213900-21-017776/
Analyst Consensus: Not covered by analysts
Potential Catalysts / Reasons for the Hype:
- Aditxt’s recently announced deal to acquire a biopharmaceutical company specializing in commercializing a Covid-19 antiviral oral therapy. The oral antiviral pill is currently in its final phase 3 trial.
- Positive insider sentiment, with Corporate Insiders buying shares worth $58.9K in the Last 3 Months.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: The daily chart shows that the stock has been forming a falling wedge pattern for the past several months. These are marked as pink color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock currently looks poised for a breakout from the falling wedge pattern.
ADTX – 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 has moved higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls are now gaining 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 Double Bottom Pattern: The weekly chart shows that the stock is currently forming a double bottom pattern. This is marked in purple color. A double bottom pattern is a strong bullish pattern and a breakout from it would indicate that the stock could surge higher.
ADTX – Weekly Chart
#6 Bullish Stoch: In the weekly chart, the %K line is above the %D line of the stochastic. This indicates 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 ADTX above the price of $3.20. The remaining shares can be purchased once the stock breaks out of the double bottom pattern, at around $5.40.
Target Prices: Our target prices are $5.40 and $8.00.
Stop Loss: To limit risk, place a stop loss at $1.85 (for entry near $3.20) and $3.90 (for entry near $5.40). Note that the stop loss is on a closing basis.
Our target potential upside is 48% to 150%.
- Entry near $3.20: For a risk of $1.35, our first target reward is $2.20, and the second target reward is $4.80. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $5.40: For a risk of $1.50, our target reward (TP#2) is $2.60. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company was incorporated on September 28, 2017, and has not generated revenues to date. In fact, ADTX has been a loss-making company. The net loss for the years ended December 31, 2020, and 2019, was $9,149,227 and $5,827,728, respectively, and the company’s accumulated deficit as of December 31, 2020, was $20,879,178.
ADTX – Annual Report – Net Loss
- The company was formerly known as ADiTx Therapeutics, Inc. and changed its name to Aditxt, Inc. on July 2021.
- As per the latest quarterly report, during the six months ended June 30, 2021, the Company had a net loss of $12,558,103 and cash of $8,610,125 at June 30, 2021.
ADTX – Q2 Report – Net Loss
- Despite being a loss-making company, the company executives are being paid hundreds of thousand dollars as compensation.
ADTX – Executive Compensation
- The purchase of the company is being done with debt sales and 50% dilution. ADTX is said to be planning to use the net proceeds of approximately $10.1 million from the offering to fund a $6.5M loan to the biopharmaceutical company commercializing COVID-19 antiviral oral therapy, and for general corporate and working capital purposes, including the purchase of fixed assets.
- The company’s presentation shows that the periosis clinical trial has been moved from 2021 to 2022. It is rumored that this was done because they are out of cash and need to raise money, given their cash at hand back in March was just $14m. The presentation also doesn’t mention anything about still pursuing EUA for their adtxscore.
- The Company, Amro Albanna (President and Chief Executive Officer), and Dr. Shahrokh Shabahang (Chief Innovation Officer) were named as cross-defendants in a counterclaim filed by Christopher Sechrist in an action entitled Shahrokh Shabahang v. Christopher Sechrist, San Bernardino County Superior Court Case No. CIVDS1831323.
- The company CEO, Amro Albanna, is a party to litigation matters related to Innovation Economy Corporation (IEC), a company in which Mr. Albanna served as the CEO and a Director from 2010 until 2017.
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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