This High Risk / High Reward Stock Looks Poised for a Breakout

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: Vivos Therapeutics Inc. (NASDAQ: VVOS)

Today’s penny stock pick is the medical technology company, Vivos Therapeutics Inc. (NASDAQ: VVOS).

Vivos Therapeutics Inc. engages in the development and commercialization of treatment alternatives for patients with sleep disordered breathing, such as mild-to-moderate obstructive sleep apnea (OSA). Its treatment, the Vivos System, is a non-invasive, non-surgical, non-pharmaceutical, multi-disciplinary treatment modality for the treatment of mild to moderate OSA. Vivos Therapeutics also offers VivoScore, a comprehensive home sleep apnea test. The company markets and sells its Vivos System to licensed professionals, primarily general dentists in the United States and Canada.

Website:  https://vivoslife.com

Latest 10-k report:  https://sec.report/Document/0001493152-21-006806/

Analyst Consensus: Not covered by analysts.

Potential Catalysts / Reasons for the Hype:

  • Vivos Therapeutics announced that its Sleep Apnea Tests had seen significant increases in several key metrics from SleepImage Home. Vivos reported 18 times increase in the total number of HSTs given across the network of Vivos trained dentists.
  • The company unveiled new revenue model with SleepImage, under which Vivos will lease out the SleepImage ring recorders to Vivos-trained dentists at a fixed price that includes a full month’s worth of diagnostic sleep test reports. The company has renegotiatef its commercial agreement with SleepImage to lower costs dramatically.

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 months. These are marked as orange color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock currently looks poised for a breakout from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.

VVOS – Daily Chart

#2 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.

#3 Bullish Stoch:  The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.

#4 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.

#5 RSI – Price Bullish Divergence: The weekly chart shows that there is a bullish divergence between RSI and price. While the price formed a lower low, the RSI formed to a higher low. This is marked as purple dotted lines in the chart. A bullish divergence is usually the sign of a possible upmove in the near-term.

VVOS – Weekly Chart

#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.

#7 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), and ADX has started to rise from below both (+DI) and (-DI).

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for VVOS is above the price of $2.80.

Target Prices: Our first target is $3.90. If it closes above that level, the second target price is $5.00.

Stop Loss: To limit risk, place a stop loss at $2.10. Note that the stop loss is on a closing basis.

Our target potential upside is 39% to 79%.

For a risk of $0.70, our first target reward is $1.10, and the second target reward is $2.20. 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. Since its inception, VVOS has not been profitable and has incurred significant losses and cash flow deficits. For the fiscal years ended December 31, 2020, and 2019, the company reported net losses of $12,056,877 and $10,754,319 respectively, and negative cash flow from operating activities of $5,680,294 and $5,340,480, respectively. As of December 31, 2020, the company had an aggregate accumulated deficit of $35,334,728.

    VVOS – Results of Operations

  2. Hedge Funds Decreased Holdings by 348.0K Shares Last Quarter.

    Hedge Funds | Source: TipRanks.com

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

    VVOS – Executive Compensation

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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