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: Medavail Holdings Inc. (NASDAQ: MDVL)
Today’s penny stock pick is the technology-enabled pharmacy company, Medavail Holdings Inc. (NASDAQ: MDVL).
Medavail Holdings Inc. engages in the development and commercialization of a self-service pharmacy, mobile application, kiosk, and drive-thru solution. It operates through the Retail Pharmacy Services and Pharmacy Technology segments. The Retail Pharmacy Services segment comprises the MedAvail Pharmacy Inc. and does business under the trade name SpotRx Pharmacy. The Pharmacy Technology segment represents MedAvail Technologies Inc. which sells the system including MedCenter prescription dispensing kiosk, software, integration, and maintenance services.
Website: https://medavail.com/
Latest 10-k report: https://sec.report/Document/0001402479-22-000029/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for MDVL in the last 3 months, the stock has an average price target of $2.00, which is nearly 2% upside from current levels.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Corporate Insiders Bought Shares Worth $15.0M in the Last 3 Months.
Insiders | Source: TipRanks.com
- The regulatory filing showed that two private equity and venture firms have acquired significant stakes in the company.
- Redmile Group acquired a large number of shares in the company. One of those transactions was 14,117,646 shares at an average price of $1.0625 each.
- Ally Bridge Group-WTT Global Life Science Capital Partners purchased 21.176 million shares of MedAvail Holdings for an average price of $1.06 per share, representing 27.1% of common stock.
- The company announced the appointment of industry leaders Steven Hess to Executive Vice President, General Manager of SpotRx, and Bob McClune to Senior Vice President of Data and Analytics.
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.
MDVL – 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 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#5 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.
#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. The stock is also moving higher with historic high volume. This is a possible bullish indication.
MDVL – 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 MDVL is above the price of $2.30.
Target Prices: Our first target is $3.20. If it closes above that level, the second target price is $5.00.
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 39% to 117%.
For a risk of $0.50, our first target reward is $0.90, and the second target reward is $2.70. 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. For the years ended December 31, 2021, and 2020, MDVL had net losses of $43.8 million, and $26.8 million, respectively.
MDVL – Consolidated Statements of Operations and Comprehensive Loss
- The company has ongoing legal proceedings. On September 23, 2020, a complaint regarding the transactions contemplated within the Merger Agreement between MYOS and MedAvail was filed in the Supreme Court of the State of New York, County of New York, captioned Faasse v. MYOS RENS Technology Inc., et. al. The complaint alleges that the directors of MYOS breached their fiduciary duties by entering into the Merger Agreement, and MYOS and MedAvail disseminated an incomplete and misleading Form S-4 Registration Statement. The New York Complaint also alleges MedAvail aided and abetted such breach of fiduciary duties.
- Despite being a loss-making company, the executives are being paid significant compensation.
MDVL – 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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