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: Chimerix Inc. (NASDAQ: CMRX)
Today’s penny stock pick is the antiviral drug development company, Chimerix Inc. (NASDAQ: CMRX).
Chimerix Inc. develops medicines to enhance the lives of patients living with serious diseases. The company’s approved product is TEMBEXA (brincidofovir), a lipid conjugate through inhibition of viral DNA synthesis that is developed as a medical countermeasure for smallpox.
Its clinical stage development programs include ONC201 a program for treating tumors which harbor the H3 K27M mutation in recurrent diffuse midline glioma patients; ONC206, an imipridone, Dopamine Receptor D2 (DRD2) antagonist, and caseinolytic protease P (ClpP) agonist that demonstrated enhanced non-competitive DRD2 antagonism relative to ONC201, which is in Phase I clinical trials to treat solid tumors; ONC212, an imipridone agonist of the orphan G protein-coupled receptors (GPCR) tumor suppressor GPR132, as well as ClpP for solid tumors and hematological malignancies, including pancreatic cancer and leukemias; and dociparstat sodium (DSTAT), which inhibits the activities of key proteins implicated in the resistance of acute myeloid leukemia blasts and leukemic stem cells to chemotherapy.
The company has license agreements with Biomedical Advanced Research and Development Authority for the development of brincidofovir for use in the treatment of smallpox; Cantex Pharmaceuticals, Inc. to develop and commercialize a glycosaminoglycan compound; and SymBio Pharmaceuticals to develop, manufacture, and commercialize BCV for various human indications.
Website: www.chimerix.com
Latest 10-k report: https://sec.report/Document/0001117480-22-000008
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for CMRX in the last 3 months, the stock has an average price target of $8.00, which is nearly 240% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reported that it will sell exclusive rights to its smallpox treatment, including Tembexa, to Emergent BioSolutions Inc. for up to $337.5 million plus royalties.
- Multiple analysts initiated or reiterated a ‘Buy’ rating for the stock recently.
Analysts | Source: TipRanks.com
- Corporate Insiders Bought Shares Worth $80.2K in the Last 3 Months.
Insiders | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel: The daily chart shows that the stock is trading within a downtrend channel, which is shown as purple color lines. The stock is currently moving higher after taking support at the lower rail of the downtrend channel. This is a possible bullish indication.
CMRX – Daily Chart
#2 Bullish RSI: The RSI is currently moving higher from oversold levels, indicating possible bullishness.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, and is also moving higher from oversold levels, indicating possible bullishness.
#4 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.
CMRX – Weekly Chart
#5 Oversold RSI: The RSI is currently near oversold levels, indicating that a reversal may be imminent.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for CMRX is above the price of $2.50.
Target Prices: Our first target is $3.70. If it closes above that level, the second target price is $4.80.
Stop Loss: To limit risk, place a stop loss at $1.70. Note that the stop loss is on a closing basis.
Our target potential upside is 48% to 92%.
For a risk of $0.80, our first target reward is $1.20, and the second target reward is $2.30. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses, including net losses of $173.2 million, $43.5 million, and $112.6 million for the twelve months ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, CMRX had an accumulated deficit of approximately $885.6 million.
CMRX – Consolidated Statements of Operations and Comprehensive Loss
- To date, the company has only obtained regulatory approval for TEMBEXA, and none of its product candidates have been commercialized.
- Despite being a loss-making company, the executives are being paid significant compensation.
CMRX – 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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