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: Citius Pharmaceuticals Inc. (NASDAQ: CTXR)
Today’s penny stock pick is the specialty pharmaceutical company, Citius Pharmaceuticals Inc. (NASDAQ: CTXR).
Citius Pharmaceuticals Inc. engages in the development and commercialization of critical care products focusing on anti-infective products in adjunct cancer care, prescription products, and mesenchymal stem cell therapy. The company is developing five proprietary products comprising Mino-Lok, an antibiotic lock solution to treat patients with catheter-related bloodstream infections by salvaging the infected catheter; Mino-Wrap, a liquifying gel-based wrap for reduction of tissue expander infections following breast reconstructive surgeries; Halo-Lido, a corticosteroid-lidocaine topical formulation that intends to provide anti-inflammatory and anesthetic relief to persons suffering from hemorrhoids; NoveCite, a mesenchymal stem cell therapy for the treatment of acute respiratory disease syndrome; and I/ONTAK, an engineered IL-2 diphtheria toxin fusion protein for the treatment of patients with persistent or recurrent cutaneous T-cell lymphoma.
Website: www.citiuspharma.com
Latest 10-k report: https://sec.report/Document/0001213900-21-065464/
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for CTXR in the last 3 months, the stock has an average price target of $6.67.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company started phase 2b trials of Halo-Lido. The U.S. Food and Drug Administration (FDA) has issued a Study May Proceed letter for Halo-Lido for the treatment of hemorrhoids.
- Maxim Group recently assigned a $4 price target for the stock.
Analysts | Source: TipRanks.com
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.
CTXR – Daily Chart
#2 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#3 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#5 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.
#6 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The weekly chart shows that the stock had taken support at the 23.6% Fibonacci support level of the upmove before starting to move higher. This is a possible bullish sign.
CTXR – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, 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 CTXR is above the price of $1.75.
Target Prices: Our first target is $2.70. If it closes above that level, the second target price is $3.70.
Stop Loss: To limit risk, place a stop loss below $1.20. Note that the stop loss is on a closing basis.
Our target potential upside is 54% to 111%.
For a risk of $0.55, our first target reward is $0.95, and the second target reward is $1.95. 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. CTXR incurred net losses of $23,054,434 and $17,548,085 for the years ended September 30, 2021, and 2020, respectively. On September 30, 2021, the company had an accumulated deficit of $96,047,821.
CTXR – Consolidated Statements of Operations
- CTXR’s executive compensation increased year-over-year, even though the company had reported significant losses.
CTXR – Executive Compensation
- The company had commenced Mino-Lok Therapy for the Treatment of CRBSI/CLABSI on February 13, 2018. The estimated end date for this trial is June 2022. A four-year delay for a clinical trial and low transparency surrounding the trial doesn’t inspire confidence.
- The bottomline is that CTXR has no basic income, no revenue, no products, and is currently relying entirely on investors for funding.
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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