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: Petros Pharmaceuticals Inc. (NASDAQ: PTPI)
Today’s penny stock pick is the pharmaceutical company, Petros Pharmaceuticals Inc. (NASDAQ: PTPI).
Petros Pharmaceuticals Inc. focuses on men’s health therapeutics. The company engages in the commercialization and development of Stendra, an approved PDE-5 inhibitor prescription medication for the treatment of erectile dysfunction (ED).
It also develops and commercializes H100, a patented topical formulation candidate for the treatment of acute Peyronie’s disease; and markets its own line of ED products in the form of vacuum erection device products.
Website: https://www.petrospharma.com/
Latest 10-k report: https://sec.report/Document/0001104659-21-044794/
Analyst Consensus: Not Covered By Analysts.
Potential Catalysts / Reasons for the Hype:
- The company topped the Fintel leaderboard for the week. The stock has 25.4% of its float short with short interest up 459% in recent weeks, according to Fintel, making it a prime short squeeze candidate.
- Corporate Insiders Bought Shares Worth $4.3M in the Last 3 Months.
Insiders | Source: TipRanks.com
Insiders | Source: TipRanks.com
- Rumors that the company’s erectile dysfunction (ED) medication, Stendra® will receive the over-the-counter (OTC) status from FDA soon. On Wednesday, December 8, Petros Pharmaceuticals had reported positive over-the-counter (OTC) draft label comprehension study results for STENDRA (avanafil).
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. The stock is also trading above its 50-day as well as 200-day SMA, indicating that the bulls have gained control.
PTPI – 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 started moving higher from below the +DI and -DI lines.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, indicating bullishness.
#4 Bullish MACD: In the daily chart, the MACD line is above the MACD Signal line, indicating possible bullishness.
#5 Downtrend Broken: The weekly chart shows that the stock has broken out of a downtrend and started a new uptrend. This is a possible bullish indication.
PTPI – Weekly Chart
#6 Bullish Stoch: The %K line of the stochastic is above the %D line in the weekly chart as well. It is also moving higher from oversold levels, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for PTPI is above the price of $4.05.
Target Prices: Our target prices are $5.10 and $6.00.
Stop Loss: To limit risk, place a stop loss below $3.40. Note that the stop loss is on a closing basis.
Our target potential upside is 26% to 48%.
For a risk of $0.65, our first target reward is $1.05, and the second target reward is $1.95. 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:
- Petros had a net loss of $20.6 million for the year ended December 31, 2020. As of December 31, 2020, Petros had an accumulated deficit of $61.7 million.
PTPI – Annual Report – Net Loss
- The company has not filed its 10-Q for Q3.
- Despite being a loss-making company, the executives are being paid significant compensation.
PTPI – Executive Compensation
- The company recently sold warrants at $1.71 because they do not have the working capital. When analyzing the Q2 10-Q report, we can see that the company’s current assets are less than accrued expenses and accrued inventory purchases.
PTPI – Q2 10Q
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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