Analysts Think This High Risk / High Reward Stock Has 50%-Plus Upside From Here

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: MannKind Corporation (NASDAQ: MNKD)

Today’s penny stock pick is the biopharmaceutical company, MannKind Corporation (NASDAQ: MNKD).

MannKind Corporation focuses on the development and commercialization of inhaled therapeutic products for endocrine and orphan lung diseases in the United States. It offers Afrezza, an inhaled insulin used to improve glycemic control in adults with diabetes.

It also promotes Thyquidity to adult and pediatric endocrinologists, and other healthcare providers for the treatment of hypothyroidism. The company has a license and collaboration agreement with United Therapeutics Corporation. It also has an agreement with NRx Pharmaceuticals to develop a dry powder formulation of ZYESAMI (aviptadil), a synthetic form of human vasoactive intestinal peptide to help protect cells against inflammatory conditions.

Website:  www.mannkindcorp.com

Latest 10-k report:  https://sec.report/Document/0001564590-22-006702

Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for the last 3 months, the stock has an average price target of $6.38, which is nearly 53% upside from current levels.

Potential Catalysts / Reasons for the Hype:

• The FDA announced the approval of lung disease therapy Tyvaso DPI, developed by United Therapeutics (NASDAQ: UTHR) in partnership with MannKind.
• Corporate Insiders Bought Shares Worth $683.4K in the Last 3 Months.
  

  Insiders | Source: TipRanks.com

• Hedge Funds Increased Holdings by 56.4K Shares Last Quarter.
  

  Hedge Funds | Source: TipRanks.com

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Double Bottom Pattern: As you can see from the daily chart below, the stock has been forming a double bottom pattern. This pattern is marked in purple color. A double bottom pattern is a bullish reversal pattern, and a breakout from it indicates that the stock could move upwards. The stock currently looks poised for a breakout from the double bottom pattern.

#2 Price above MAs: The stock is currently above its 50-day SMA as well as 200-day SMA, indicating that the bulls have currently gained control.

#3 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.

#4 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.

#5 Symmetrical Triangle Pattern Breakout: The weekly chart shows that the stock has broken out of the symmetrical triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the chart as pink color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move.

#6 Bullish Stoch:  The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.

#7 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 MNKD is above the price of $4.40.

Target Prices: Our first target is $5.40. If it closes above that level, the second target price is $6.10.

Stop Loss: To limit risk, place a stop loss at $3.80. Note that the stop loss is on a closing basis.

Our target potential upside is 23% to 37%.

For a risk of $0.60, our first target reward is $1.00, and the second target reward is $1.70. 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:

1. The company has a history of net losses. The net loss for the year ended December 31, 2021, was $80.9 million, compared to a $57.2 million net loss in the prior year.
   

   MNKD – Consolidated Statements of Operations

2. Despite being a loss-making company, the executives are being paid significant compensation.
   

   MNKD – Executive Compensation

3. Two motions were submitted to the district court at Tel Aviv, Economic Department for the certification of a class action against MannKind and certain of its officers and directors. In general, the complaints allege that MannKind and certain of its officers and directors violated Israeli and U.S. securities laws by making materially false and misleading statements regarding the prospects for Afrezza, thereby artificially inflating the price of its common stock.

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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