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: Ardelyx Inc. (NASDAQ: ARDX)
Today’s penny stock pick is the biopharmaceutical company, Ardelyx Inc. (NASDAQ: ARDX).
Ardelyx Inc. develops and sells medicines for the treatment of kidney and cardiorenal diseases in the United States and internationally.
The company’s lead product candidate is tenapanor, which has completed Phase 3 clinical trial for the treatment of patients with irritable bowel syndrome with constipation, as well as in Phase 3 clinical trial for the treatment of hyperphosphatemia in end-stage renal disease patients on dialysis.
It also develops RDX013, a small molecule potassium secretagogue program that is in Phase 2 clinical trial for the treatment of patients with hyperkalemia; and RDX020, a small molecule program for the treatment of metabolic acidosis.
Website: www.ardelyx.com
Latest 10-k report: https://sec.report/Document/0001558370-21-002500
Analyst Consensus: As per TipRanks Analytics, the stock’s average price target is $2.00 based on 3 Wall Street analysts offering 12-month price targets for ARDX in the last 3 months.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The news of Citigroup raising Ardelyx Price Target from $7 to $13.
- ARDX’s recent FDA Approval for IBSRELA® (Tenapanor).
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Channel Breakout: The daily chart shows that the stock was forming a trend channel for the past several days. This is 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 channel with high volume, indicating possible bullishness.
ARDX – Daily Chart
#2 Bullish RSI: The RSI is currently moving higher after reaching oversold levels, and is currently above 50. This is a possible bullish indication.
#3 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI and the ADX line are currently above the -DI line, and the ADX line is moving higher from below the +DI and -DI lines.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line in the daily chart and is also moving up from oversold levels, indicating bullishness.
#5 Bullish Divergence: In the weekly chart as well, the %K line of the stochastic is above the %D line. This indicates a possible bullish setup. There is also a bullish divergence between the stochastic and price, which is marked as blue color dotted lines. While the price formed a lower low, the stoch formed a higher low. A bullish divergence is usually the sign of a possible upmove in the near-term.
ARDX – Weekly Chart
#6 Oversold RSI: The RSI is currently starting to move higher after reaching oversold levels, indicating that a reversal may be imminent.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ARDX is above the price of around $1.20.
Target Prices: Our target prices are $1.70 and $2.20.
Stop Loss: To limit risk, place a stop loss at $0.90. Note that the stop loss is on a closing basis.
Our target potential upside is 42% to 83%.
For a risk of $0.30, our first target reward is $0.50, and the second target reward is $1.00. 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 a history of net losses.
ARDX – Statement of Operations Data
- The company was formerly known as Nteryx, Inc. and changed its name to Ardelyx, Inc. in June 2008.
- Despite reporting significant losses year over year, the company executives are being paid significant compensation.
ARDX – Executive Compensation
- The company has never generated any revenue from product sales and is substantially dependent on the success of the lead product candidate, tenapanor. The company notes in its annual report that it may never be profitable.
- The company had received FDA approval for the New Drug Application (NDA) for tenapanor for the treatment of IBS-C in adults in September 2019. However, ARRX has not commercialized tenapanor for IBS-C in the United States or entered into a collaborative partnership for such commercialization.
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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