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: ViewRay, Inc. (NASDAQ: VRAY)
Today’s penny stock pick is the radiation therapy systems manufacturer, ViewRay, Inc. (NASDAQ: VRAY).
ViewRay, Inc. offers MRIdian, a magnetic resonance image guided radiation therapy system to image and treat cancer patients. Its MRIdian integrates MRI technology, radiation delivery, and proprietary software to see the soft tissues, shape the dose to accommodate for changes in anatomy, and strike the target using real-time targeting throughout the treatment. The company serves university research and teaching hospitals, community hospitals, private practices, government institutions, and freestanding cancer centers. ViewRay, Inc. markets its MRIdian through a direct sales force and distribution network.
Website: www.viewray.com
Latest 10-k report: https://sec.report/Document/0001564590-21-011089/
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for VRAY in the last 3 months, the stock has an average price target of $8.00, which is nearly 109% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Analysts at BTIG and Piper Sandler recently reiterated a “Buy” rating and a $9 price target for VRAY. Stifel analyst Rick Wise had also initiated coverage of ViewRay with a “Buy” rating and a price target of $7.
Analysts | Source: TipRanks.com
- Corporate Insiders Bought Shares Worth $600.0K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company is scheduled to announce its earnings results after the market closes on Thursday, February 24th.
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 purple color lines. It has typically taken support at the bottom of the wedge before bouncing back. Once the stock breaks out of the falling wedge pattern, it could move higher.
VRAY – Daily Chart
#2 Oversold RSI: The RSI is currently nearing oversold levels, indicating that a reversal may be imminent.
#3 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.
#4 Flag Pattern: The weekly chart shows that the stock was in a strong uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in pink color in the chart. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case.
VRAY – Weekly Chart
#5 Oversold RSI: The weekly chart shows that the RSI is nearing oversold levels, implying that the stock may move higher soon.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for VRAY is above the breakout level of the falling wedge pattern, at around $4.80.
Target Prices: Our first target is $5.70. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $4.20. Note that the stop loss is on a closing basis.
Our target potential upside is 19% to 46%.
For a risk of $0.60, our first target reward is $0.90, and the second target reward is $2.20. 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. VRAY had net losses of $107.9 million, $120.2 million, and $76.4 million for the years ended December 31, 2020, 2019, and 2018, respectively.
VRAY – Consolidated Statements of Operations and Comprehensive Loss
- Hedge Funds Decreased Holdings by 1.7M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid millions in compensation.
VRAY – Executive Compensation
- The company has ongoing legal proceedings.
- On September 10, 2019, a complaint about patent infringement was filed by Varian Medical Systems, Inc., in U.S. District Court for the Northern District of California against the Company.
- On September 13, 2019, a class action complaint about the violation of federal securities laws was filed in U.S. District Court for the Northern District of Ohio against the Company, its chief executive officer, chief scientific officer, and former chief financial officer. The complaint alleges that the Company violated federal securities laws by issuing materially false and misleading statements that failed to disclose adverse facts concerning its business, operations, and financial results, and seeks damages, interest, and other relief.
- On July 22, 2020, a stockholder derivative lawsuit was filed against ViewRay (as a nominal defendant) and certain of its current and former officers and directors in the U.S. District Court for the Northern District of Ohio. This action alleges, purportedly on behalf of ViewRay, that the officers and directors violated Section 14(a) of the Securities Exchange Act of 1934, breached their fiduciary duties, wasted corporate assets, and were unjustly enriched.
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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