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: Geron Corporation (NASDAQ: GERN)
Today’s penny stock pick is the biotechnology company, Geron Corporation (NASDAQ: GERN).
Geron Corporation focuses on the development and commercialization of therapeutics for myeloid hematologic malignancies. It develops imetelstat, a telomerase inhibitor that is in Phase 3 clinical trials, which inhibits the uncontrolled proliferation of malignant stem and progenitor cells in hematologic myeloid malignancies for the treatment of low or intermediate-1 risk myelodysplastic syndromes and intermediate-2 or high-risk myelofibrosis.
Website: www.geron.com
Latest 10-k report: https://sec.report/Document/0001564590-22-009627/
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for GERN in the last 3 months, the stock has an average price target of $4.67, which is nearly 299% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Analysts from Needham, H.C. Wainwright, and Robert W. Baird reiterated a buy rating and set price targets with triple-digit upside for GERN.
Analysts | Source: TipRanks.com
- Rumors about the upcoming approval of Imetelstat in the UK and about the company’s plans for other trails within the year.
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.
GERN – Daily Chart
#2 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#6 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.
GERN – 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 GERN is above the price of $1.25.
Target Prices: Our first target is $2.00. If it closes above that level, the second target price is $3.30.
Stop Loss: To limit risk, place a stop loss at $0.80. Note that the stop loss is on a closing basis.
Our target potential upside is 60% to 165%.
For a risk of $0.45, our first target reward is $0.75, and the second target reward is $2.05. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses.
GERN – Net Loss
- Between January 23, 2020 and March 5, 2020, three putative securities class action lawsuits were filed against GERN and certain of its officers. The consolidated class action complaint alleges, among other things, that the company violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by failing to disclose facts related to the alleged failure of IMbark to meet the two primary endpoints of the trial, spleen response rate and Total Symptom Score, and that the stock price dropped when such information was disclosed.
- The company executives are being paid significant compensation despite it being a loss-making company.
GERN – Executive Compensation
- Between April 23, 2020 and June 8, 2021, seven shareholder derivative actions were filed, naming as defendants certain of GERN’s current officers and certain current and former members of its board.
- GERN’s future success depends solely on imetelstat, its only product candidate. It is still uncertain whether GERN will be able to continue to develop imetelstat or advance imetelstat to subsequent clinical trials or receive regulatory approval for imetelstat on a timely basis, or at all.
- The sale of a substantial number of shares may dilute the stock price. As of December 31, 2021, GERN had 675,000,000 shares of common stock authorized for issuance and 323,731,591 shares of common stock outstanding. In addition, the company had reserved 133,292,810 shares of its common stock for future issuance pursuant to its stock option and equity incentive plans and outstanding warrants as of December 31, 2021.
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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