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: Progenity Inc. (NASDAQ: PROG)
Today’s penny stock pick is the biotechnology company, Progenity Inc. (NASDAQ: PROG).
Progenity, Inc. provides develops and commercializes molecular testing products in the United States. It offers Innatal, a noninvasive prenatal screening test offered to women early in pregnancy to screen for chromosome abnormalities, such as down syndrome, trisomy 18, trisomy 13, and sex chromosome disorders through the analysis of cell-free DNA; Preparent that screens for carrier status of hereditary diseases prior to or early in pregnancy; and Riscover, a hereditary cancer screen that analyzes 31 genes associated with inherited risk of 12 types of cancers, including the BRCA1/2 genes for hereditary breast, ovarian, colorectal, endometrial, pancreatic, and other cancer syndromes, as well as for the five genes associated with Lynch syndrome.
The company also provides Resura, a noninvasive prenatal test for families at risk for rare single gene disorders; and Preecludia, a preeclampsia rule-out test. In addition, it offers anatomic and molecular pathology tests, and COVID-19 PCR testing services, as well as test products that include chromosomal microarray for pregnancy loss, which evaluates the genetic cause of miscarriage; maternal serum screening for chromosomal disorders; and preimplantation genetic testing for use with artificial reproductive technologies. Further, the company develops therapeutic solutions for gastrointestinal-related disorders, such as PGN-001, PGN-300, PGN-600, and PGN-OB2. It also owns and operates laboratory.
Website: https://www.progenity.com/
Latest 10-k report: https://sec.report/Document/0001564590-21-014182/
Analyst Consensus: Based on 2 Wall Street analysts offering 12-month price targets for PROG in the last 3 months, the stock has an average price target of $3.50 and an average rating of ‘Moderate Buy’.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Retail investors identifying the company as a potential short squeeze, as the stock has a very high short interest ratio.
- Rumors of precludes partnership announcement to be announced very soon.
- Rumors about the company looking into getting a buyer for Avero for 100 million.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern with high volume. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as purple color lines. Once a stock breaks out from a symmetrical triangle pattern, it usually moves higher.
PROG – Daily Chart
#2 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as orange color lines. This is a possible bullish indication.
#3 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 started to move higher from below the +DI and -DI lines.
#4 Price above MA: The stock is currently above the 50-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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of the prevailing downtrend. The downtrend line has been marked in pink color. This is a possible bullish indication.
PROG – 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, the ideal buy level for PROG is above the price of $2.50.
Target Prices: Our first target is $4.00. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss at $1.55. Note that the stop loss is on a closing basis.
Our target potential upside is 60% to 100%.
For a risk of $0.95, our first target reward is $1.50, and the second target reward is $2.50. 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:
- PROG’s accumulated deficit as of December 31, 2020, was $541.3 million. For the year ended December 31, 2020, the company had a net loss of $192.5 million.
PROG – Consolidated Statements of Operations
- Progenity, Inc. was formerly known as Ascendant MDX, Inc. and changed its name to Progenity, Inc. in November 2013.
- Despite being a loss-making company, the executives are being paid significant compensation.
PROG – Executive Compensation
- The company has multiple legal proceedings. This includes Federal Investigations, an inquiry from the Texas Health & Human Services Commission Office of Inspector General, Natera Lawsuit alleging infringement of six Natera patents based on a portion of the company’s NIPT product offering, Ravgen Lawsuit, and IPO Litigation. All these could result in significant losses for the company.
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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