This High Risk / High Reward Stock Just Broke Out

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: Assertio Holdings Inc. (NASDAQ: ASRT)

Today’s penny stock pick is the American specialty pharmaceutical company, Assertio Holdings Inc. (NASDAQ: ASRT).

Assertio Holdings Inc. provides medicines in the areas of neurology, hospital, and pain and inflammation. The company’s pharmaceutical products include INDOCIN, an oral solution and a suppository form for the treatment of moderate to severe rheumatoid arthritis, including acute flares of chronic disease; moderate to severe ankylosing spondylitis and osteoarthritis; and acute painful shoulder and gouty arthritis.

It also provides CAMBIA, a non-steroidal anti-inflammatory drug (NSAID) for the treatment of migraine, nausea, photophobia, and phonophobia; Zipsor, an NSAID for relief of mild to moderate acute pain; and SPRIX, an NSAID for the short-term management of moderate to moderately severe pain that requires analgesia at the opioid level.

Website:  www.assertiotx.com

Latest 10-k report:  https://sec.report/Document/0001808665-21-000019/

Analyst Consensus: Based on 1 Wall Street analyst offering 12-month price targets for ASRT in the last 3 months, the stock has an average price target of $4.00 and an average rating of ‘Moderate Buy’. The average price target is a 139.52% upside from the last close.

Source: TipRanks.com

Recent Analyst Ratings | Source: TipRanks.com

Potential Catalysts / Reasons for the Hype:

  • The news that ASRT acquired Otrexup (methotrexate) from Antares Pharma (NASDAQ: ATRS) for $44 million. Otrexup is a once weekly single dose auto-injector containing a prescription medicine, methotrexate, which is indicated for the treatment of arthritis and psoriasis in adults.
  • The company raised its guidance due to strong sales of its existing portfolio of products. ASRT now expects net product sales >$108M, higher than the previous guidance of >$103M.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Ascending Triangle Pattern Breakout: The daily chart shows that the stock had recently broken out of an ascending triangle pattern, which is marked as purple color lines. An Ascending Triangle pattern is a bullish pattern. A breakout from an ascending triangle pattern typically indicates bullishness. The base of the triangle generally acts as a good support level after the breakout. This is a possible bullish sign.

ASRT – Daily Chart

#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX line are currently above the -DI line, and the ADX line has currently moved higher from below the +DI and -DI lines.

#3 Price above MAs: The stock is currently above both 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.

#4 Bullish RSI: The RSI is currently above 50 and moving higher, indicating bullishness.

#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.

#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out of a downtrend, which is marked in pink color. It is also trading above a support area, which is marked as an orange color dotted line. All these are possible bullish signs.

ASRT – Weekly Chart

#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.

#8 Bullish MACD: The weekly chart shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is a possible bullish setup.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for ASRT is above the price of $1.70.

Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $4.50.

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 76% to 165%.

For a risk of $0.80, our first target reward is $1.30, and the second target reward is $2.80. 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:

  1. ASRT has been a loss-making company.

    ASRT – Net Loss

  2. The company has a history of name changes. It was formerly known as Assertio Therapeutics, Inc. and changed its name to Assertio Holdings, Inc. in May 2020. Before that, it was known as Depomed, Inc.
  3. Despite being a loss-making company, the executives are being paid significant compensation.

    ASRT – Executive Compensation

  4. Assertio Holdings’s average diluted shares outstanding for the quarter that ended in Sep. 2021 was 45.1 Mil.
  5. To date, the company had acquired NUCYNTA, NUCYNTA ER, CAMBIA, Zipsor, as well as, INDOCIN Products, and SPRIX. Strategic transactions that fail to achieve the anticipated results and synergies could adversely impact the company’s business.
  6. On April 22, 2020, ASRT received notification from the Listing Qualifications Department of The Nasdaq Stock Market indicating that the company’s common stock was subject to potential delisting from the Nasdaq Global Select Market because, for a period of 30 consecutive business days, the bid price of its common stock had closed below the minimum $1.00 per share requirement for continued inclusion under Nasdaq Marketplace Rule 5450(a)(1).

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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