Look For This High Risk / High Reward Stock to Bounce From Here

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: Mind Medicine (MindMed) Inc. (NASDAQ: MNMD)

Today’s penny stock pick is the medicinal chemicals & botanical products company, Mind Medicine (MindMed) Inc. (NASDAQ: MNMD).

Mind Medicine (MindMed) Inc. is a psychedelic medicine biotech company. MNMD discovers, develops, and deploys psychedelic inspired medicines and therapies to address addiction and mental illness. The company is assembling a compelling drug development pipeline of innovative treatments based on psychedelic substances, including Psilocybin, LSD, MDMA, DMT, and an Ibogaine derivative, 18-MC.

Website:  https://mindmed.co/

Latest 10-k report:  https://mindmed.co/wp-content/uploads/2021/03/2020-year-end-FS.pdf

Analyst Consensus: Based on three Wall Street analysts offering 12-month price targets for MNMD in the last 3 months, the stock has an average price target of $6.48 which is a 134.79% upside from current levels.

Potential Catalysts / Reasons for the Hype:

• The launch of a new program meant to deploy MDMA for the treatment of social anxiety in diagnoses that include autism spectrum disorder.
• Upcoming earnings on November 12, 2021.
• Mind Medicine is working on Project Lucy, a commercial drug development program for treating anxiety disorders. The company plans to present its IND application for Project Lucy in Q3 2021. MindMed expects to launch the phase 2B clinical trial shortly after that.
• Upcoming trial results in December.
• The current surge also appears to be a speculative play based on FDA approvals.

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, indicating possible bullishness.

#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and ADX line are above the -DI line, and the ADX line has started to move higher from below the +DI and -DI lines.

#3 Price above MA: The stock is currently above the 50-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 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 38.20% Fibonacci support level of the upmove before moving higher, as seen in the weekly chart. This indicates bullishness.

#6 Bullish RSI: The RSI had moved higher after reaching oversold levels and is now above 50. This is a possible bullish sign.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for MNMD is above the price of $3.05.

Target Prices: Our target prices are $4.20 and $6.00.

Stop Loss: To limit risk, place a stop loss at $2.40. Note that the stop loss is on a closing basis.

Our target potential upside is 38% to 97%.

For a risk of $0.65, our first target reward is $1.15, and the second target reward is $2.95. This is a nearly 1:2 and 1:5 risk-reward trade.

In other words, this trade offers 2x to 5x more potential upside than downside.

Potential Risks / Red Flags:

1. The company has reported significant losses year-over-year.
   

   MNMD – Consolidated Statements of Loss

2. MindMed’s prospects lie in the hands of its clinical trials. If the data from ongoing research studies come back negative, the value of MindMed will drastically decline.
3. The company has a negative insider confidence signal. Corporate Insiders had sold shares worth C$5.6 million in the last 3 months.
   

   MNMD – Insider Sentiment | Source: TipRanks.com

4. The company has significant competition. Alternatives to 18-MC, MindMed’s drug to combat opioid addiction, have already been developed and are being tested.

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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