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: Genprex Inc. (NASDAQ: GNPX)
Today’s penny stock pick is the clinical-stage gene therapy company, Genprex Inc. (NASDAQ: GNPX).
Genprex Inc. focuses on developing therapies for patients with cancer and diabetes. Its technologies are designed to administer disease-fighting genes to provide new therapies for patient populations with cancer and diabetes who currently have limited treatment options.
Its lead product candidate is REQORSA (GPX-001), which is in preclinical stage for the treatment of non-small cell lung cancer (NSCLC). It is also developing GPX-002, a preclinical stage gene therapy for diabetes. The company also offers ONCOPREX, a nanoparticle delivery system.
Website: www.genprex.com
Latest 10-k report: https://sec.report/Document/0001437749-21-007317/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for GNPX in the last 3 months, the stock has an average price target of $3.50.
Source: TipRanks.com
Analyst Forecasts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company received U.S. Food and Drug Administration Fast Track Designation (FTD) for REQORSA Immunogene Therapy in combination with Merck & Co Inc’s MRK Keytruda for the treatment of non-small cell lung cancer.
- Rumors of heavy insider buying.
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 months. 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 huge volume. Once a stock breaks out of the falling wedge pattern, it typically moves higher.
GNPX – 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 MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line, indicating possible bullishness.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
GNPX – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and has also moved higher from oversold levels, indicating possible bullishness.
#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 GNPX is above the price of $3.60.
Target Prices: Our first target is $4.80. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss below $2.90. Note that the stop loss is on a closing basis.
Our target potential upside is 33% to 67%.
For a risk of $0.70, our first target reward is $1.20, and the second target reward is $2.40. 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:
- The company has a history of net losses. From its inception on April 1, 2009, to December 31, 2020, GNPX has incurred an accumulated deficit of approximately $58.4 million. The company had incurred net losses of approximately $17.9 million and approximately $10.7 million for the years ended December 31, 2020, and 2019, respectively.
GNPX – Net Loss
- Despite being a loss-making company, the executives are being paid significant compensation.
GNPX – Executive Compensation
- Genprex was founded by a team that led Introgen. Introgen was a biotech company from Austin, Texas that was alleged of repeatedly misleading investors about the data generated in clinical trials of its cancer gene therapy Advexin, ultimately leading to its bankruptcy as they could not get the FDA approval they needed. In 2009, Introgen dissolved as a bankrupt biotech failure.
- Rodney Varner, Chairman and CEO of Genprex was Introgen’s general counsel and corporate secretary
- Jack Roth, Chairman of Genprex’s Scientific and Medical Advisory Board was previously Chairman of Introgen’s Scientific Advisory Board
- There are only 12 full time employees for the company.
- Genprex’s product candidate is based on IP that was abandoned in Introgen’s bankruptcy because it “provide[d] no value to the debtors and [was] of no interest to the potential purchasers”. The foundation of Oncoprex, a gene therapy designed to interrupt cancer cell signaling in order to kill the cells is a gene called TUSC2. Introgen originally had the licensing rights to TUSC2.
- According to the latest annual report, the company’s General and administrative expense for the year ended December 31, 2020, was $10,635,881. Meanwhile, Research and development expense was $7,302,923 for the year ended December 31, 2020. A clinical stage company spending more on general and administrative expenses than on actual R&D seems to be a red flag.
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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