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: Homology Medicines Inc. (NASDAQ: FIXX)
Today’s penny stock pick is the genetic medicines company, Homology Medicines Inc. (NASDAQ: FIXX).
Homology Medicines Inc. focuses on transforming the lives of patients suffering from rare genetic diseases. Its proprietary platform is designed to utilize its human hematopoietic stem cell derived adeno-associated virus vectors (AAVHSCs) to deliver genetic medicines in vivo either through a gene therapy or nuclease-free gene editing across a range of genetic disorders.
The company’s various set of AAVHSCs allows company to target, through a single injection, a range of disease-relevant tissues, including the liver, central nervous system, peripheral nervous system, bone marrow, muscle, and eye. Its lead product candidate is HMI-102, which is in Phase I/II pheNIX clinical trial, a gene therapy for the treatment of phenylketonuria (PKU) in adults. The company also develops HMI-103 for the treatment of PKU in pediatric patients; HMI-202 to treat metachromatic leukodystrophy; and HMI-203 for the treatment of mucopolysaccharidosis type II.
Website: www.homologymedicines.com
Latest 10-k report: https://sec.report/Document/0001564590-21-012490/
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for FIXX in the last 3 months, the stock has an average price target of $27.50, which is nearly 639% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- C. Wainwright analyst Patrick Trucchio recently set a $30 price target for the stock.
Analyst Forecasts | Source: TipRanks.com
- Hedge Funds Increased Holdings by 13.1K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Oxford Biomedica Plc announced that it would form a viral vector manufacturing business with Homology Medicines Inc. The companies have agreed to establish a high-performing, full scope Adeno-Associated Virus (AAV) Manufacturing and Innovation Business in the U.S.
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 has been 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 from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
FIXX – 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 Reversal in Weekly Chart: The stock appears to have reached Price Bottom in the weekly chart. Price Bottoms are relative low prices depending on the time frame referenced. This is typically a sign of an upcoming bullish move.
FIXX – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is also moving higher from oversold levels, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for FIXX is above the price of $4.30.
Target Prices: Our first target is $6.00. If it closes above that level, the second target price is $8.00.
Stop Loss: To limit risk, place a stop loss at $3.30. Note that the stop loss is on a closing basis.
Our target potential upside is 40% to 86%.
For a risk of $1.00, our first target reward is $1.70, and the second target reward is $3.70. 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 a history of net losses. FIXX had net losses of approximately $128.7 million and $103.9 million for the years ended December 31, 2020, and 2019, respectively. As of December 31, 2020, the company had an accumulated deficit of approximately $328.4 million.
FIXX – Consolidated Statements of Operations Data
- The company is heavily dependent on the success of HMI-102, FIXX’s most advanced product candidate, and if HMI-102 does not receive regulatory approval or is not successfully commercialized, the business may be harmed.
- Despite being a loss-making company, the executives are being paid significant compensation.
FIXX – Executive Compensation
- Rosen Law Firm had announced an investigation of potential securities claims on behalf of shareholders of Homology Medicines, Inc. resulting from allegations that Homology may have issued materially misleading business information to the investing public.
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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