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: Humanigen Inc. (NASDAQ: HGEN)
Today’s penny stock pick is the biotech company, Humanigen Inc. (NASDAQ: HGEN).
Humanigen Inc. develops a portfolio of anti-inflammatory immunology and immuno-oncology monoclonal antibodies in the United States. The company’s lead product candidate is Lenzilumab, a monoclonal antibody that targets and neutralizes human granulocyte-macrophage colony-stimulating factor, which has completed Phase III clinical trial for the treatment of cytokine storm associated with COVID-19; and Phase Ib/II clinical trial as a sequenced therapy in combination with CD19 targeted chimeric antigen receptor T-cell therapies to treat patients with relapsed or refractory B-cell lymphoma, as well as that is in Phase II clinical trial in patients with chronic myelomonocytic leukemia.
It also develops Ifabotuzumab, a humaneered monoclonal antibody that targets EphA3 receptor, which has completed the Phase I dose escalation portion of a Phase I/II clinical trial in multiple hematologic malignancies; and HGEN005, an anti-EMR1 monoclonal antibody, which has completed pre-clinical stage for the treatment of eosinophilic disorders.
Humanigen, Inc. has a clinical collaboration agreement with Kite Pharma, Inc. to conduct a multi-center Phase Ib/II study of Lenzilumab in patients with relapsed or refractory diffuse large B-cell lymphoma; and a cooperative research and development agreement with the Department of Defense to assist in the development of lenzilumab in advance of a potential emergency use authorization for COVID-19.
Website: www.humanigen.com
Latest 10-k report: https://sec.report/Document/0001214659-22-003416
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for HGEN in the last 3 months, the stock has an average price target of $21.75, which is nearly 448% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Corporate Insiders Bought Shares Worth $3.2M in the Last 3 Months.
Insiders | Source: TipRanks.com
- The analysts from Oppenheimer, H.C. Wainwright, Cantor Fitzgerald, and Roth Capital reiterated buy rating for the stock and set a price target with triple-digit upside.
Analysts | Source: TipRanks.com
- Rumors about fast-tracking of lenzilumab, the drug used for the treatment of cytokine storm linked to Covid-19.
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.
HGEN – Daily Chart
#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 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates 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.
HGEN – 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.
#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 HGEN is above the price of $4.10.
Target Prices: Our first target is $5.70. If it closes above that level, the second target price is $8.00.
Stop Loss: To limit risk, place a stop loss at $3.20. Note that the stop loss is on a closing basis.
Our target potential upside is 39% to 95%.
For a risk of $0.90, our first target reward is $1.60, and the second target reward is $3.90. 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. For the year ended December 31, 2021, HGEN incurred a net loss of $236.6 million and has an accumulated deficit of $611.1 million as of December 31, 2021.
HGEN – Consolidated Statements of Operations
- The company was formerly known as KaloBios Pharmaceuticals, Inc. and changed its name to Humanigen, Inc. in August 2017. KaloBios Pharmaceuticals Inc. had its fired Chief Executive Martin Shkreli after his arrest on charges of securities fraud and had filed for Chapter 11 bankruptcy in 2015.
- Despite being a loss-making company, the executives are being paid significant compensation.
HGEN – Executive Compensation
- The company has ongoing litigations.
- On December 17, 2021, Avid Bioservices, Inc. filed a Demand for Arbitration claiming more than $20.5 million in damages against the Company with the American Arbitration Association entitled, Avid Bioservices, Inc. v. Humanigen, Inc. The Demand contains three claims for (1) Breach of Contract concerning the Process Development and Manufacturing Master Services Agreement; (2) Anticipatory Breach of Contract concerning the Capacity Expansion and Contribution/Commitment letter; and (3) Trade Libel and Commercial Disparagement relating to their inability to perform.
- On June 15, 2020, a complaint was filed against the Company and Dr. Durrant in the Commercial Division of the Supreme Court of the State of New York captioned Alliance Texas Holdings, LLC et al. v. Humanigen, Inc., et al., Index No. 652490/2020. The plaintiffs allege that the Company breached a contractual obligation to deliver shares of common stock to the plaintiffs.
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.