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: Seelos Therapeutics Inc. (NASDAQ: SEEL)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Seelos Therapeutics Inc. (NASDAQ: SEEL).
Seelos Therapeutics Inc. focuses on the development and commercialization of novel technologies and therapeutics for the treatment of central nervous system, respiratory, and other disorders.
The company’s lead programs are SLS-002, an intranasal racemic ketamine for the treatment of acute suicidal ideation and behavior in patients with major depressive disorders; SLS-005, a protein stabilizer for the treatment of amyotrophic lateral sclerosis and Sanfilippo syndrome; and SLS-006, a partial dopamine agonist for the treatment of patients with Parkinson’s disease (PD).
Its preclinical programs include SLS-007, an anti-alpha-synuclein peptidic inhibitor to treat patients with PD; SLS-008, an orally available antagonist for chemoattractant receptor-homologous molecule for the treatment of chronic inflammation in asthma and pediatric orphan indications; SLS-004 for the treatment of PD; SLS-010, an oral histamine H3A receptor antagonist for narcolepsy and related disorders; and SLS-012, an injectable therapy for post-operative pain management.
Website: www.seelostherapeutics.com
Latest 10-k report: https://www.sec.gov/Archives/edgar/data/1017491/000113626121000034/form10k.htm
Analyst Consensus: As per TipRanks analytics, SEEL has an average price target of $10.20 based on 5 analysts giving stock ratings to Seelos Therapeutics in the past 3 months. This target represents a 295.35% change from the last price of $2.58.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s investigational drug SLS-005 (Trehalose) received a “May Proceed” notice and Central IRB approval for the HEALEY ALS Platform Trial.
- Roth Capital upgrading the stock again with an $8 price target.
Recent Analyst Ratings | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock was forming a falling wedge pattern for the past several weeks. These are marked as pink color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out of the falling wedge pattern with high volume, indicating possible bullishness. The stock is also trading above its 50-day SMA, indicating that the bulls are slowly gaining control.
SEEL – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI 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 Bullish MACD: The MACD line (blue color) has crossed above the signal line (orange color). This is a possible bullish setup.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line. It is also moving higher from oversold levels. All these are positive indications.
#5 Above Support Area: The weekly chart shows that the stock is trading above a strong support area, which is marked as a purple color dotted line. This is a possible bullish indication.
SEEL – Weekly Chart
#6 Bullish Stoch: In the weekly chart as well, the %K line of the stochastic is above the %D line and is also moving higher from oversold levels. All these are positive indications.
#7 Bullish RSI: The RSI is currently moving higher after reaching oversold levels, and is currently near 50, 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 SEEL is if it closes above the near-term resistance level. This translates to a price of above $3.10.
However, you can purchase half the intended quantity of shares of SEEL above the price of $2.70. These buy levels are marked as green color dotted lines in the daily chart.
Target Prices: Our target prices are $4.50 and $6.50.
Stop Loss: To limit risk, place a stop loss at $1.80 (for entry near $2.70) and $2.20 (for entry near $3.10). Note that the stop loss is on a closing basis.
Our target potential upside is 45% to 141%.
- Entry near $2.70: For a risk of $0.90, our first target reward is $1.80, and the second target reward is $3.80. This is a nearly 1:2 and 1:4 risk-reward trade.
- Entry near $3.10: For a risk of $0.90, our first target reward is $1.40, and the second target reward is $3.40. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- SEEL has been a loss-making company. For the year ended December 31, 2020, the company’s net loss was $19 million.
SEEL – Consolidated Statements of Operations and Comprehensive Loss
- The company has a history of many offerings at the expense of the investor.
- Despite reporting losses year-over-year, the company executives are drawing significant compensation.
SEEL – Executive Compensation
- On November 11, 2020, the company had received written notice from Nasdaq indicating that, for the last thirty consecutive business days, the bid price for its common stock had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2).
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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