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: Catalyst Biosciences Inc. (NASDAQ: CBIO)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Catalyst Biosciences Inc. (NASDAQ: CBIO).
Catalyst Biosciences Inc. focuses on developing protease product candidates in the fields of hemostasis and complement regulation. The company’s protease engineering platform creates improved or novel molecules to treat diseases that result from dysregulation of the complement system. It develops CB 2782-PEG, a component 3 (C3) degrader for the treatment of dry age-related macular degeneration (dAMD); and CB 4332 for patients with deficiencies in complement factor I (CFI), including dAMD.
The company also develops ProTUNE C3b/C4b degrader and ImmunoTUNE C3a/C5a degrader platforms designed to target other disorders of the complement or inflammatory pathways. It has a strategic research collaboration with Mosaic Biosciences, Inc.; and license and collaboration agreement with Biogen International GmbH.
Website: www.catalystbiosciences.com
Latest 10-k report: https://sec.report/Document/0001564590-22-012877/, https://sec.report/Document/0001193125-22-136435 (Amended)
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for CBIO in the last 3 months, the stock has an average price target of $3.00, which is nearly 124% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Analyst at Piper Sandler reiterated a ‘Buy’ rating and set a $3 price target for the stock.
Analysts | Source: TipRanks.com
- Vertex Pharmaceuticals (VRTX) signed an asset purchase and sale agreement with CBIO to acquire a group of product candidates (protease medicines portfolio) for $60 million in cash.
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.
CBIO – 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 oink color dotted line. This is a possible bullish indication.
CBIO – 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, 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 CBIO is above the price of $1.40.
Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $4.50.
Stop Loss: To limit risk, place a stop loss at $0.60. Note that the stop loss is on a closing basis.
Our target potential upside is 114% to 221%.
For a risk of $0.80, our first target reward is $1.60, and the second target reward is $3.10. 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, including net losses of $87.9 million, and $56.2 million for the years ended December 31, 2021, and 2020, respectively. As of December 31, 2021, CBIO had an accumulated deficit of $402.7 million.
CBIO – Consolidated Statements of Operations
- Despite being a loss-making company, the executives are being paid significant compensation.
CBIO – Executive Compensation
- The company identified a material weakness in its internal control over financial reporting in consolidated financial statements for the year ended December 31, 2021. If CBIO is unable to remediate this material weakness, or if it identifies additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, the company may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and share price.
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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