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: Gamida Cell Ltd (NASDAQ: GMDA)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Gamida Cell Ltd (NASDAQ: GMDA).
Gamida Cell Ltd develops cell therapies to cure blood cancers and serious blood diseases. The company’s lead product candidate is omidubicel, a cell therapy that is in Phase III studies in patients with high-risk hematologic malignancies, as well as in Phase I/II clinical trials in patients with severe aplastic anemia. It is also developing GDA-201, a natural killer cell-based cancer immunotherapy, which is in Phase I/II studies for the treatment of relapsed or refractory non-Hodgkin lymphoma and multiple myeloma.
Website: www.gamida-cell.com
Latest 10-k report: https://sec.report/Document/0001213900-21-014284/
Analyst Consensus: As per TipRanks Analytics, 7 Wall Street analysts are offering 12-month price targets for GMDA in the last 3 months. The average price target for GMDA is $14.50, which is a 411% Upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Vernon Bernardino, an analyst at H.C. Wainwright reiterated coverage on Gamida Cell with a Buy rating and set a price target of $22.
Analyst Forecasts | Source: TipRanks.com
- Rumors of the lifting of FDA hold on GDA-201.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: The daily chart shows that the stock has been 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 currently looks poised for a break out from the falling wedge pattern.
GMDA – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI and the ADX lines are above the -DI line, and the ADX line has started to move 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 RSI: The chart shows that the RSI is above 50 and moving higher. This is a positive indication.
#5 Reversal Sign: The weekly chart shows that the stock is forming a bullish engulfing candlestick pattern. This is marked as a pink color ellipse. This usually indicates an upcoming reversal.
GMDA – Weekly Chart
#6 Oversold RSI: The weekly chart shows that the RSI is moving higher from oversold levels. This typically points to an upcoming trend reversal.
#7 Bullish Stoch: In the weekly chart as well, the %K line of the stochastic is above the %D line. It is also moving higher from oversold levels. All these are positive indications.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for GMDA is if it closes above the price of above $3.65.
Target Prices: Our target prices are $5.10 and $7.00.
Stop Loss: To limit risk, place a stop loss at $2.80. Note that the stop loss is on a closing basis.
Our target potential upside is 40% to 92%.
For a risk of $0.85, our first target reward is $1.45, and the second target reward is $3.35. 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:
- The company has incurred net losses each year since its inception in 1998, including net losses of $72.7 million, $34.4 million, and $52.9 million for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, GMDA had an accumulated deficit of $276.3 million.
GMDA – Net Loss
- There has been a serial departure of directors of GMDA. Three independent directors on the board had left over the past year, and the company’s CSO left in July. Another director left Gamida to Enlivex.
- Despite being a loss-making company, the executives are being paid significant compensation.
GMDA – Executive Compensation
- The company had recently filed an IND application for GDA-201; FDA has now placed the application on Clinical Hold pending modifications to donor eligibility procedures and sterility assay qualification.
- Hedge Funds Decreased Holdings by 3.9M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
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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