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: Unity Biotechnology Inc. (NASDAQ: UBX)
Today’s penny stock pick is the startup biotechnology company, Unity Biotechnology Inc. (NASDAQ: UBX).
Unity Biotechnology Inc. engages in the research and development of therapeutics to slow, halt, or reverse diseases of aging. The company’s lead drug candidate is UBX1325, which is in Phase I clinical trial for the treatment of age-related diseases of the eye, including age-related macular degeneration, diabetic macular edema, and diabetic retinopathy.
It is also developing UBX1967 for the treatment of ophthalmologic diseases; UBX2050, a human anti-Tie2 agonist monoclonal antibody for the treatment of age-related eye diseases; and UBX2089, an a-Klotho hormone drug candidate for multiple neurology indications.
Website: www.unitybiotechnology.com
Latest 10-k report: https://sec.report/Document/0001564590-21-014854
Analyst Consensus: According to TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for UBX in the last 3 months, the stock has a ‘Moderate Buy’ rating and a price target of $7.00, which is a 120.82% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The news of positive data from Phase 1 single ascending dose (SAD) safety study of UBX1325 in patients with advanced disease from diabetic macular edema (DME) or wet age-related macular degeneration (AMD)
- C Wainwright reiterating buy rating for the company
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 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, indicating possible bullishness. The stock is also trading above its 50-day SMA, indicating that the bulls have currently gained control.
UBX – Daily Chart
#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 currently moved 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#5 Above Support Area: The weekly chart shows that the stock is trading above a support area, which is marked as an orange color dotted line. This is a possible bullish indication.
UBX – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, and is also moving higher from oversold levels. All this indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for UBX is above the price of $3.45.
Target Prices: Our target prices are $5.00 and $7.00.
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 45% to 103%.
For a risk of $0.95, our first target reward is $1.55, and the second target reward is $3.55. 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:
- The company has incurred net losses each year since its inception. UBX’s net losses were $93.8 million and $82.2 million for the years ended December 31, 2020, and 2019, respectively.
UBX – Net Loss
- The company was formerly known as Forge, Inc. and changed its name to Unity Biotechnology, Inc. in January 2015.
- UBX’s lead anti-aging program had faced the chopping block recently following a major Phase II flop. The company’s arthritis drug, UBX0101 had failed phase 2 trials as it didn’t beat the placebo group.
- Despite reporting losses year over year, the company executives are being paid significant compensation.
UBX – Executive Compensation
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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