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: Hookipa Pharma Inc. (NASDAQ: HOOK)
Today’s penny stock pick is the clinical stage biopharmaceutical company, Hookipa Pharma Inc. (NASDAQ: HOOK).
Hookipa Pharma Inc. develops immunotherapeutics targeting infectious diseases and cancers based on its proprietary arenavirus platform. The company’s lead infectious disease product candidate is HB-101, which is in a randomized double-blinded Phase II clinical trial in patients awaiting kidney transplantation from cytomegalovirus-positive donors. Its lead oncology product candidates are HB-201 and HB-202 that are in Phase I/II clinical trial for the treatment of human papillomavirus 16-positive cancers. The company has a collaboration with Gilead Sciences, Inc. to develop infectious disease product candidates intended to support functional cures for chronic Hepatitis B virus and human immunodeficiency virus infections.
Website: www.hookipapharma.com
Latest 10-k report: https://sec.report/Document/0001558370-21-003176/
Analyst Consensus: As per TipRanks Analytics, based on 6 Wall Street analysts offering 12-month price targets for HOOK in the last 3 months, the stock has an average price target of $16.00, which is nearly 339% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company entered into an amended and restated collaboration and license agreement with Gilead to advance the development of a novel arenaviral immunotherapy as a component of a potential functional curative regimen for human immunodeficiency virus (HIV).
- C. Wainwright analyst reiterated “Buy” rating and set an $8 price target for the stock.
Analysts | Source: TipRanks.com
- The stock currently has a 12% short interest.
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.
HOOK – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and the ADX line are above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.
#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 Downtrend Broken: The weekly chart shows that the stock has broken out of the prevailing downtrend with historic high volume and is currently moving higher. This is a possible bullish indication.
HOOK – 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 Oversold RSI: The weekly chart shows that the RSI is near oversold levels and is moving higher. This indicates bullishness.
#8 MACD above Signal Line: In the weekly chart as well, 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 HOOK is above the price of $2.10.
Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss below $1.60. Note that the stop loss is on a closing basis.
Our target potential upside is 43% to 138%.
For a risk of $0.50, our first target reward is $0.90, and the second target reward is $2.90. This is a nearly 1:2 and 1:6 risk-reward trade.
In other words, this trade offers 2x to 6x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses. HOOK has incurred losses in each period since its inception in 2011. For the years ended December 31, 2019, and 2020, HOOK reported a net loss of $43.0 million, and $44.1 million, respectively. As of December 31, 2020, HOOK had an accumulated deficit of $147.1 million.
HOOK – Net Loss
- The company has obtained funding from an agency of the Austrian government that contains certain covenants that may restrict HOOK’s operations.
- Despite being a loss-making company, the executives are being paid significant compensation.
HOOK – Executive Compensation
- HOOK has limited experience as a company conducting clinical trials or managing a manufacturing facility for its product candidates. Consequently, the ongoing clinical trial may not be completed on time and the planned clinical trials may not begin or be completed on time.
- HOOK currently has no marketing and sales organization and no experience in marketing products. The company is also dependent on third parties for conducting clinical trials, and manufacturing its clinical product supplies. The company may need to rely on third parties for at least a portion of the manufacturing process of its product candidates, if approved.
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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