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: Gemini Therapeutics, Inc. (NASDAQ: GMTX)
Today’s penny stock pick is the clinical stage precision medicine company, Gemini Therapeutics, Inc. (NASDAQ: GMTX).
Gemini Therapeutics, Inc. engages in developing various therapeutic compounds for treating genetically defined age-related macular degeneration (AMD) and linked ocular disorders. Its lead candidate is GEM103, a recombinant form of the human complement factor H protein that is in a Phase 2a trials in dry AMD patients with a complement factor H protein risk variant.
Latest 10-k report: https://sec.report/Document/0001213900-21-018272/
Analyst Consensus: According to TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for GMTX in the last 3 months, the stock has a ‘Strong Buy’ rating and a $22.50 price target, which is a nearly 653% upside from current levels.
Potential Catalysts / Reasons for the Hype:
- Analysts at H.C. Wainwright started covering Gemini with a buy rating. In the note to investors, analyst Matthew Caufield described the lead candidate in Gemini’s pipeline, GEM103, as a platform catalyst. Caulield also touted GEM307, another treatment in Gemini’s pipeline, as offering further potential to advance treatments rooted in Complement Factor H (CFH) regulation, an approach that has created intrigue along with ocular and retinal gene therapies.
- The company’s upcoming meeting with the FDA in 4Q’21. GMTX anticipates initiating its late-stage study of GEM103 for geographic atrophy (GA) secondary to dry AMD in the first quarter of 2022.
- GEM103 updated safety information presented during AAO including no increased risk for CNV observed to date in ongoing ReGAtta Phase 2a study.
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.
#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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend, which is marked as a pink color line. This indicates bullishness.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line and is also moving higher from oversold levels. This indicates bullishness.
#6 Bullish MACD: In the weekly chart as well, the MACD line is above the MACD Signal line, 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 GMTX is above the price of $4.00. However, you can purchase half the intended quantity of shares of GMTX above the price of $3.20.
Target Prices: Our target prices are $4.90 and $6.30.
Stop Loss: To limit risk, place a stop loss below $2.30 (for entry near $3.20) and $3.40 (for entry near $4.00). Note that the stop loss is on a closing basis.
Our target potential upside is 23% to 97%.
- Entry near $3.20: For a risk of $0.90, our first target reward is $1.70, and the second target reward is $3.10. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $4.00: For a risk of $0.60, our first target reward is $0.90, and the second target reward is $2.30. 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:
- For the years ended December 31, 2020 and December 31, 2019, Gemini reported net losses of $40.8 million and $41.4 million. As of December 31, 2020, Gemini had an accumulated deficit of $112.8 million. For the period from June 25, 2020 (inception) through December 31, 2020, GMTX had a net loss of approximately $812,000.
- The company had commenced trading its shares on the Nasdaq Global Market only from October 2020, after the completion of its business combination with FS Development Corp., a special purpose acquisition company (SPAC) sponsored by Foresite Capital.
- GMTX’s main candidate, GEM-103 seems to have mixed efficacy (at 9 months).
- The company is expected to release its study data for the Factor H therapy in Q4 2021. In case the data is disappointing, the price could plummet.
- As of December 31, 2020, the Company had not commenced any operations. All activity for the period from June 25, 2020 (inception) through December 31, 2020 only relates to the Company’s formation and the initial public offering.
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.