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: Xeris Biopharma Holdings Inc. (NASDAQ: XERS)

Today’s penny stock pick is the biopharmaceutical company, Xeris Biopharma Holdings Inc. (NASDAQ: XERS).

Xeris Biopharma Holdings Inc. engages in developing and commercializing therapies for patient populations in endocrinology, neurology, and gastroenterology.

It markets Gvoke, a ready-to-use liquid glucagon for the treatment of severe hypoglycemia; and Keveyis, a therapy for primary periodic paralysis. The company also has a pipeline of development programs to extend the marketed products into new indications and uses and bring new products using its proprietary formulation technology platforms, XeriSol and XeriJect.

Website:  www.xerispharma.com

Latest 10-k report:  https://sec.report/Document/0001346302-21-000026/

Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for XERS in the last 3 months, the stock has an average price target of $5.70, which is nearly 94% upside from current levels.

Source: TipRanks.com

Analyst Forecasts | Source: TipRanks.com

Potential Catalysts / Reasons for the Hype:

  • The company completed the acquisition of Strongbridge for about $267 million.
  • The FDA approval for endogenous Cushing’s syndrome drug Recorlev.
  • Corporate Insiders Bought Shares Worth $718.5K in the Last 3 Months.

    Insiders | Source: TipRanks.com

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

Bullish Indications

#1 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as pink color lines. This is a possible bullish indication.

XERS – Daily Chart

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

#3 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.

#4 Bullish MACD: The daily chart shows that the MACD line is above the MACD signal line, indicating bullishness.

#5 Bullish Aroon: The Aroon Up is above 70 while Aroon Down is below 30 in the daily chart, indicating possible bullishness.

#6 Downtrend Broken: The weekly chart shows that the stock has broken out of the prevailing downtrend. The downtrend line is marked as a purple color line. This is a possible bullish indication.

XERS – Weekly Chart

#7 MACD above Signal Line: In the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates 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 XERS is above the price of $3.10.

Target Prices: Our first target is $5.00. If it closes above that level, the second target price is $6.40.

Stop Loss: To limit risk, place a stop loss at $1.95. Note that the stop loss is on a closing basis.

Our target potential upside is 61% to 106%.

For a risk of $1.15, our first target reward is $1.90, and the second target reward is $3.30. 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:

  1. The company has not been profitable since its inception, and, as of December 31, 2020, the company’s accumulated deficit was $337.4 million. For the years ended December 31, 2020, and 2019, XERS reported net losses of $91.1 million and $125.6 million, respectively.

    XERS – Net Loss

  2. Despite being a loss-making company, the executives are being paid significant compensation.

    XERS – Executive Compensation

  3. Friday’s stock volume was nearly 47 million. Despite so many shares trading hands, the gain was only nearly 20%. It is possible that some major investors could be controlling the price action, and the stock could drop soon.
  4. The company’s cash position is not strong and has nearly $90 million debt, some of which is convertible IIRC. The company may need to raise more capital, and potentially dilute shares to manage its product pipeline and sales.

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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