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: Clearside Biomedical Inc. (NASDAQ: CLSD)
Today’s penny stock pick is the biopharmaceutical company, Clearside Biomedical Inc. (NASDAQ: CLSD).
Clearside Biomedical Inc. engages in developing and delivering treatments that restore and preserve vision for people with serious eye diseases. Its product includes CLS-AX, an axitinib for suprachoroidal injection which is in Phase 1/2a clinical trial. It also develops XIPERE, a triamcinolone acetonide suprachoroidal injectable suspension for the treatment of macular edema associated with uveitis, diabetic macular edema, and macular edema associated with retinal vein occlusion.
Latest 10-k report: https://sec.report/Document/0000950170-22-003468
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for CLSD in the last 3 months, the stock has an average price target of $11.50, which is nearly 362% upside from current levels.
Potential Catalysts / Reasons for the Hype:
- The analysts from H.C. Wainwright, Wedbush, and JMP Securities reiterated buy rating for the stock and set price targets with triple-digit upside.
- Corporate Insiders Bought Shares Worth $3.4K in the Last 3 Months.
- Rumors of a possible acquisition.
On analyzing the company’s stock charts, there seem to be multiple 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.
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is 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 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
#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 RSI: In the weekly chart, the RSI is moving higher from oversold levels. 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 CLSD is above the price of $2.60.
Target Prices: Our first target is $4.00. If it closes above that level, the second target price is $5.70.
Stop Loss: To limit risk, place a stop loss at $1.80. Note that the stop loss is on a closing basis.
Our target potential upside is 54% to 119%.
For a risk of $0.80, our first target reward is $1.40, and the second target reward is $3.10. 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. CLSD incurred a net income of $0.4 million in 2021 and net losses of $18.2 million and $30.8 million for the years ended December 31, 2020, and 2019, respectively.
- Hedge Funds Decreased Holdings by 30.7K Shares Last Quarter.
- Despite being a company with a history of net losses, the executives are being paid significant compensation.
- The company requires substantial additional funding to meet its financial obligations and to pursue its business objectives. Raising additional capital may cause dilution to CLSD’s stockholders, restrict its operations or relinquish rights to its technologies or product candidates.
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!
— 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.