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: Second Sight Medical Products Inc. (NASDAQ: EYES)
Today’s penny stock pick is the electromedical & electrotherapeutic apparatus company, Second Sight Medical Products Inc. (NASDAQ: EYES).
Second Sight Medical Products Inc. develops, manufactures, and markets implantable visual prosthetics that are intended to deliver artificial vision to blind individuals. It develops technologies to treat the population of sight-impaired individuals.
The company offers the Orion Visual Cortical Prosthesis System, an implanted cortical stimulation device, which is intended to provide useful artificial vision to individuals who are blind due to various causes, including glaucoma, diabetic retinopathy, optic nerve injury or disease, and eye injury.
Latest 10-k report: https://sec.report/Document/0001564590-21-013636/
Analyst Consensus: Not Covered By Analysts
Potential Catalysts / Reasons for the Hype:
- The news that the company has been granted US patent number 11,173,305 titled “Method and apparatus to provide safety checks for neural stimulation”.
- Rumors of a possible buyout.
- Rumors that Elon Musk’s startup neuralink may collaborate with EYES.
On analyzing the company’s stock charts, there seem to be multiple 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. The stock is also trading above its 50-day moving average, indicating that the bulls are slowly gaining control.
#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 is currently moving 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 Stoch: In the daily chart shows that the %K line of the stochastic is above the %D line and is also currently moving higher, indicating bullishness.
#5 Above Support Area: The weekly chart shows that the stock has currently bounced higher from a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
#6 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for EYES is above the price of $3.48.
Target Prices: Our target prices are $4.00 and $4.50.
Stop Loss: To limit risk, place a stop loss at $3.18. Note that the stop loss is on a closing basis.
Our target potential upside is 15% to 29%.
For a risk of $0.30, our first target reward is $0.52, and the second target reward is $1.02. 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:
- The company has history of significant losses.
- Even though the FDA approved Second Sight’s Argus 2s Retinal Prosthesis, it is yet to see any production.
- Despite being a loss-making company, the executives are being paid hundreds of thousands of dollars as compensation.
- The company had received multiple notices from Nasdaq. On October 2020, the company received a letter from the Nasdaq market confirming that it may face delisting. On January 4, 2021, Nasdaq notice was sent as the Company had not held an annual meeting of shareholders within twelve months of the end of the Company’s fiscal year end.
- The company’s $6.8m offering in May 2020, and underwritten public offering in June 2021, which saw 10,000,000 shares of its common stock sold for $5.00 per share, tallying up to $50 million, has resulted in significant dilution.
- On June 1, 2021, the Company received a summons from Pixium Vision SA relating to a suit filed in the Commercial Court of Paris.
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.Wall Street legend warns "A strange day is coming" [sponsor]
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