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: Liquidia Corp (NASDAQ: LQDA)
Today’s penny stock pick is the pharmaceutical company, Liquidia Corp (NASDAQ: LQDA).
Liquidia Corporation develops, manufactures, and commercializes various products for unmet patient needs in the United States. Its product candidates include LIQ861, an inhaled dry powder formulation of treprostinil for the treatment of pulmonary arterial hypertension; and LIQ865, a sustained-release formulation of bupivacaine for the treatment of local post-operative pain. The company also distributes generic treprostinil injection in the United States.
Latest 10-k report: https://sec.report/Document/0001437749-20-005249/ (2020)
Analyst Consensus: Based on 3 Wall Street analysts offering 12-month price targets for LQDA in the last 3 months, the stock has an average price target of $4.33 and an average rating of ‘Moderate Buy’. The average price target is a 41.04% upside from the last close.
Potential Catalysts / Reasons for the Hype:
- The U.S. Patent Trial and Appeal Board ruling in LQDA’s favor in review against United Therapeutics Corporation patent.
- Upcoming PDUFA goal date of November 7, 2021, for LIQ861 (treprostinil).
On analyzing the company’s stock charts, there seem to be multiple 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.
#2 Double Bottom Pattern: The daily chart shows that the stock is currently forming a double bottom pattern, within the downtrend channel. This is shown in blue color. A double bottom pattern is a strong bullish pattern and a breakout from it would indicate that the stock could surge higher.
#3 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 has currently started moving higher from below the +DI and -DI lines.
#4 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.
#5 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.
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#7 Downtrend Broken: The weekly chart shows that the stock has broken out of the prevailing downtrend. The downtrend line is marked in pink color. The stock is also trading above its 50-week SMA. All these are possible bullish signs.
#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, the ideal buy level for LQDA is above the price of $3.25.
Target Prices: Our first target is $4.50. If it closes above that level, the second target price is $5.50.
Stop Loss: To limit risk, place a stop loss at $2.50. Note that the stop loss is on a closing basis.
Our target potential upside is 39% to 69%.
For a risk of $0.75, our first target reward is $1.25, and the second target reward is $2.25. 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:
- LQDA has not released the latest annual report.
- The company had incurred net losses of $47.6 million, $53.1 million, and $29.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.
- The company has not commenced commercial operations to date and its future profitability is uncertain.
- In June 2020, United Therapeutics Corporation (UTC) filed a complaint for patent infringement against the Company in the U.S. District Court for the District of Delaware asserting infringement of U.S. Patents. The trial is set to begin in March 2022.
- In spite of reporting losses year-over-year, the company executives are drawing significant compensation.
- LQDA faces significant competition from industry players worldwide. For instance, the company’s lead program, LIQ861, faces competition from the likes of Tyvaso, marketed by United Therapeutics, Ventavis, marketed by Actelion, TreT, licensed from MannKind, by United Therapeutics, and Orenitram, which is administered orally, and Remodulin, which is administered parenterally, both of which are marketed by United Therapeutics.
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!
— 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.The #1 Stock Under $5 [sponsor]
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