We recently started a series called “Penny Stock of the Day”. These ideas are geared towards 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: Clovis Oncology Inc. (NASDAQ: CLVS)
Today’s penny stock pick is the biopharmaceutical company, Clovis Oncology Inc. (NASDAQ: CLVS).
Clovis Oncology Inc. focuses on acquiring, developing, and commercializing anti-cancer agents in the United States, Europe, and internationally. In the U.S., the company offers Rubraca (rucaparib), an oral small molecule inhibitor of poly ADP-ribose polymerase for recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer, as well as for metastatic castration-resistant prostate cancer.
In Europe, the company offers Rubraca for recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer. It is also developing lucitanib, an investigational angiogenesis inhibitor, which inhibits vascular endothelial growth factor receptors 1 through 3 (VEGFR 1-3), platelet-derived growth factor receptors alpha and beta (PDGFRa/Ã), and fibroblast growth factor receptors 1 through 3 (FGFR 1-3); and FAP-2286, an investigational peptide-targeted radionuclide therapy and imaging agent targeting fibroblast activation protein.
In addition, the company sells its Rubraca through a limited number of specialty distributor and specialty pharmacy providers, who subsequently sells Rubraca to patients and health care providers. Clovis Oncology, Inc. has license agreements with Pfizer Inc., AstraZeneca UK Limited, Advenchen Laboratories LLC, and 3B Pharmaceuticals GmbH, a clinical collaboration with Bristol Myers Squibb Company; and a partnership with Foundation Medicine, Inc.
Website: www.clovisoncology.com
Latest 10-k report: https://sec.report/Document/0001558370-22-001810
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for CLVS in the last 3 months, the stock has an average price target of $3.17, which is nearly 27% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The analyst at H.C. Wainwright reiterated buy rating and set a price target of $5 for the stock.
Analysts | Source: TipRanks.com
- The company announced positive topline data from the monotherapy arm of Phase 3 ATHENA-MONO trial of Rubraca (Rucaparib) as first-line maintenance treatment in ovarian cancer. The data revealed that on median data, patients receiving Rubraca lived 20.2 months without any progression in the disease as opposed to 9.2 months for the placebo.
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.
CLVS – 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 an orange color dotted line. This is a possible bullish indication.
CLVS – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, and is also moving higher from oversold levels, 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 CLVS is above the price of $2.70.
Target Prices: Our first target is $4.20. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $1.90. Note that the stop loss is on a closing basis.
Our target potential upside is 56% to 122%.
For a risk of $0.80, our first target reward is $1.50, and the second target reward is $3.30. 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 years ended December 31, 2021, 2020, and 2019, the company had net losses of $264.5 million, $369.2 million, and $400.4 million, respectively. As of December 31, 2021, CLVS had an accumulated deficit of $2,877.3 million.
CLVS – Net Loss
- Corporate Insiders Sold Shares Worth $94.8K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company has ongoing legal proceedings.
- In March 2017, two putative shareholders of the Company, Macalinao and McKenry, filed shareholder derivative complaints against certain directors and officers of the Company in the Court of Chancery of the State of Delaware, under the caption In re Clovis Oncology, Inc. Derivative Litigation, Case No. 2017-0222.
- Two European patents in the rucaparib camsylate salt/polymorph patent family (European Patent 2534153 and its divisional European Patent 3150610) were opposed.
- Hedge Funds Decreased Holdings by 79.8K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
CLVS – Executive Compensation
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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