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: Better Therapeutics Inc. (NASDAQ: BTTX)
Today’s penny stock pick is the prescription digital therapeutics (PDT) company, Better Therapeutics Inc. (NASDAQ: BTTX).
Better Therapeutics Inc. engages in developing software-based prescription digital therapeutics (PDT) platform candidates for treating diabetes, heart disease, and other cardiometabolic conditions in the United States. Its lead product candidate in development is BT-001, an investigational PDT platform that uses digitally delivered Nutritional Cognitive Behavioral Therapy to treat type 2 diabetes. The company’s products under development also include BT-002, a PDT that help patients with hypertension improve their blood pressure; and BT-003, a PDT that help patients with hyperlipidemia enhance cholesterol levels.
Latest 10-k report: https://sec.report/Document/0000950170-22-004754
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for BTTX in the last 3 months, the stock has an average price target of $16.50, which is nearly 653% upside from current levels.
Potential Catalysts / Reasons for the Hype:
- The company’s first study of its nutritional cognitive-behavioral study for fatty liver disease showed very promising primary endpoint data.
- Corporate Insiders Bought Shares Worth $132.5K in the Last 3 Months.
- Upcoming Q1 2022 financial report to be released on May 13th.
- The bipartisan, bicameral Access to Prescription Digital Therapeutics Act of 2022 was introduced in Congress. If passed, this legislation would create a new benefit category within Medicare to cover and reimburse PDTs.
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 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. This is a possible bullish indication.
#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, 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 BTTX is above the price of $2.40.
Target Prices: Our first target is $4.00. If it closes above that level, the second target price is $5.30.
Stop Loss: To limit risk, place a stop loss at $1.60. Note that the stop loss is on a closing basis.
Our target potential upside is 67% to 121%.
For a risk of $0.80, our first target reward is $1.60, and the second target reward is $2.90. 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. BTTX’s net loss was $40.3 million for the year ended December 31, 2021. As of December 31, 2021, the company had an accumulated deficit of $71.7 million.
- The company has not yet generated revenue from product sales.
- The company requires substantial funding to continue the clinical and preclinical development of its product candidates. BTTX is expected to finance its future cash needs through public or private equity offerings, debt financings, collaborations, licensing arrangements, or other sources. Raising additional capital may cause dilution to stockholders, restrict the company’s operations or require BTTX to 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.