This High Risk / High Reward Stock is in a Bullish Setup

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: Asensus Surgical Inc. (NYSE: ASXC)

Today’s penny stock pick is the medical device company, Asensus Surgical Inc. (NYSE: ASXC).

Asensus Surgical, Inc. engages in the research, development, and sale of medical device robotics to enhance minimally invasive surgery in the United States, Europe, and Asia. It digitizes the interface between the surgeon and the patient to pioneer a new era of Performance-Guided surgery by unlocking clinical intelligence for surgeons to enable consistently superior outcomes and a new standard of surgery.

The company’s products include the Senhance Surgical system, a multi-port robotic surgery system that allows up to four arms to control robotic instruments and a camera; and SurgiBot System, a single-port robotically enhanced laparoscopic surgical platform. Its products also comprise instruments; and Senhance ultrasonic system, an advanced energy device to deliver controlled energy to ligate and divide tissue.

Website:  https://asensus.com/

Latest 10-k report: https://sec.report/Document/0001437749-21-005730/

Analyst Consensus: As per TipRanks Analytics, based on one wall street analyst offering 12-month price targets for ASXC in the last 3 months, the stock has an average price target of $4.00, which is nearly 73% upside from current levels.

Potential Catalysts / Reasons for the Hype:

• The company’s positive Q3 report. The report states that “for the full year 2021, the Company continues to expect to initiate 10 – 12 new Senhance programs.”
• The initiation of four new Senhance Surgical systems, three in Japan and one in Russia.

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 purple 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.

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

#3 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.

#4 Above Support Area: The weekly chart shows that the stock is trading above a strong support area, which is marked as a pink color dotted line. This is a possible bullish indication.

#5 Double Bottom Pattern Breakout: The weekly chart shows that the stock had broken out of a double bottom pattern, which is marked in blue color. This is a possible bullish sign.

#6 Bullish Stoch: In the weekly chart, the %K line of the stochastic is above the %D line and is currently moving up from oversold levels. This indicates 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 ASXC is above the price of around $2.40.

Target Prices: Our target prices are $3.80 and $4.50.

Stop Loss: To limit risk, place a stop loss at $1.60. Note that the stop loss is on a closing basis.

Our target potential upside is 58% to 88%.

For a risk of $0.80, our first target reward is $1.40, and the second target reward is $2.10. 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:

1. The company has a history of net losses. For the year ended December 31, 2020, the company had reported a net loss of $59 million.
   

   ASXC -Consolidated Statements of Operations and Comprehensive Loss

2. The company was formerly known as TransEnterix, Inc. and changed its name to Asensus Surgical, Inc. in February 2021.
3. Despite being a loss-making company, the executives are being paid significant compensation.
   

   ASXC – Executive Compensation

4. ASXC had raised over $130 million in January by massively diluting shareholder value.

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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