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: Bioatla Inc. (NASDAQ: BCAB)
Today’s penny stock pick is the clinical stage biopharmaceutical company, Bioatla Inc. (NASDAQ: BCAB).
Bioatla Inc. develops specific and selective antibody-based therapeutics for the treatment of solid tumor cancer. Its lead product candidate is BA3011, a conditionally active biologic (CAB) antibody-drug conjugate (ADC) for soft tissue and bone sarcoma tumors, non-small cell lung cancer (NSCLC), and ovarian cancer. It also develops BA3021, a CAB ADC for multiple solid tumor types, including NSCLC, melanoma, and ovarian cancer; and BA3071, which is a CAB anti-cytotoxic T-lymphocyte-associated antigen 4 antibody for renal cell carcinoma, NSCLC, small cell lung cancer, hepatocellular carcinoma, melanoma, bladder cancer, gastric cancer, and cervical cancer.
Latest 10-k report: https://sec.report/Document/0000950170-22-002303
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for BCAB in the last 3 months, the stock has an average price target of $18.67, which is nearly 342% upside from current levels.
Potential Catalysts / Reasons for the Hype:
- Upcoming multiple clinical updates within the year.
- Corporate Insiders Bought Shares Worth $150.6K in the Last 3 Months.
- The company’s recent clinical collaboration with Bristol Myers Squibb.
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 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.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#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, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for BCAB is above the price of $4.30.
Target Prices: Our first target is $5.40. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $3.70. Note that the stop loss is on a closing basis.
Our target potential upside is 26% to 40%.
For a risk of $0.60, our first target reward is $1.10, 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:
- The company has a history of net losses. BCAB’s net losses were $95.4 million, $35.9 million, and $29.8 million for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, the company had an accumulated deficit of $186.3 million.
- Hedge Funds Decreased Holdings by 661.2K Shares Last Quarter.
- Despite being a loss-making company, the executives are being paid significant compensation.
- The company’s operations are concentrated in two locations – San Diego, California, and China. Uncertainties regarding the interpretation and enforcement of Chinese laws, rules and regulations, a trade war, deterioration of international relations, or political unrest in China could materially adversely affect the company’s business, financial condition, and results of operations.
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.Silicon Valley Analyst: $5 Backdoor Apple Play [sponsor]
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