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: Rewalk Robotics Ltd (NASDAQ: RWLK)
Today’s penny stock pick is the medical device company, Rewalk Robotics Ltd (NASDAQ: RWLK).
Rewalk Robotics Ltd designs, develops, and commercializes wearable robotic exoskeletons for individuals with mobility impairments or other medical conditions in Israel, the United States, Europe, the Asia-Pacific, Latin America, and Africa.
It offers ReWalk Personal and ReWalk Rehabilitation for spinal cord injuries and everyday use by paraplegic individuals at home and in communities; ReStore, a soft exo-suit intended for use in the rehabilitation of individuals with lower limb disability due to stroke; and MyoCycle and MediTouch tutor movement biofeedback devices for use at home or in clinic.
Website: www.rewalk.com
Latest 10-k report: https://sec.report/Document/0001178913-21-000678/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for Rewalk Robotics in the last 3 months, the stock has an average price target of $3.50, which is a 35.14% upside from current levels.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The stock’s recent upmove is chiefly a case of traders on social media coming together to push shares higher. The short-squeeze has retail and meme stock traders pumping up the shares. There is now a major uptick in discussions about the company shares on platforms like Discord, Twitter, StockTwits, and Facebook and investors are encouraging each other to “burn the short-sellers”, resulting in the current surge.
- In its most recent balance sheet from Q2 2021, the company posted a strong cash position of almost $65 million. In addition, it brought in $1.4 million in revenue in the second quarter.
- Rumors about share buyback and raised guidance for 2022.
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.
RWLK – 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 is currently moving 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 of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#6 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as an orange color dotted line. This is a possible bullish indication.
RWLK – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for RWLK is if it corrects to the price of $2.07. Alternatively, you can purchase the shares of RWLK above the price of $2.65. These levels are marked as green color dotted lines in the daily chart.
Target Prices: Our first target is $3.50. If it closes above that level, the second target price is $4.50.
Stop Loss: To limit risk, place a stop loss at $1.25 (for entry near $2.07) and $2.10 (for entry near $2.65). Note that the stop loss is on a closing basis.
Our target potential upside is 32% to 117%.
- Entry near $2.07: For a risk of $0.82, our first target reward is $1.43, and the second target reward is $2.43. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $2.65: For a risk of $0.55, our first target reward is $0.85, and the second target reward is $1.85. 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 incurred net losses and negative cash flow from operations since its inception. For the full year ended December 31, 2020, the Company incurred a consolidated net loss of $13 million and has an accumulated deficit in the total amount of $181.4 million.
RWLK – Net Loss – Consolidated financial data
- The company was formerly known as Argo Medical Technologies Ltd. and changed its name to ReWalk Robotics Ltd.
- The company had received a warning letter from the FDA in 2016, over a failure to submit a post-market surveillance report on its ReWalk exoskeleton device addressing issues with injuries during falls while operating the device.
- Despite making losses year-over-year, the company executives are being paid significant compensation, and their total pay nearly doubled.
RWLK – Executive Compensation
- The company had received a notification letter on March 24, 2020, from The Nasdaq Stock Market LLC indicating that the Company did not satisfy the requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a) (“Rule 5550(a)”) to maintain a minimum bid price of $1 per share.
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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