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: Compugen Ltd. (NASDAQ: CGEN)
Today’s penny stock pick is the clinical-stage therapeutic discovery and development company, Compugen Ltd. (NASDAQ: CGEN).
Compugen Ltd. researches, develops, and commercializes therapeutic and product candidates in Israel, the United States, and Europe.
The company’s immuno-oncology pipeline consists of COM701, an anti-PVRIG antibody that is in Phase I clinical study used for the treatment of solid tumors; COM902, a therapeutic antibody targeting TIGIT, which is in Phase I clinical study in patients with advanced malignancies as a monotherapy; Bapotulimab, a therapeutic antibody targeting ILDR2 that is in Phase I clinical study in patients with solid tumors; and AZD2936, a novel anti-TIGIT/PD-1 bispecific antibody, which is in Phase I/II clinical study in patients with advanced or metastatic non-small cell lung cancer.
Its therapeutic pipeline also includes early-stage immuno-oncology programs focused primarily on myeloid targets. The company has collaboration agreement with Bayer Pharma AG for the research, development, and commercialization of antibody-based therapeutics against the company’s immune checkpoint regulators; Bristol-Myers Squibb to evaluate the safety and tolerability of COM701 in combination with Bristol-Myers Squibb’s PD-1 immune checkpoint inhibitor Opdivo in patients with advanced solid tumors; and Johns Hopkins School of Medicine to evaluate novel T cell and myeloid checkpoint targets.
It has license agreement with AstraZeneca for the development of bi-specific and multi-specific immuno-oncology antibody products; and research collaboration with Johns Hopkins University for myeloid.
Website: https://cgen.com
Latest 10-k report: https://sec.report/Document/0001178913-22-000846/, https://sec.report/Document/0001178913-22-000863/ (Amended)
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for CGEN in the last 3 months, the stock has an average price target of $9.75, which is nearly 356% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Hedge Funds Increased Holdings by 1.0M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Multiple analysts have given a ‘Buy’ rating for the stock.
Analysts | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock is moving higher from the lower rail of the downtrend channel with high volume. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
CGEN – 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 RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible 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.
CGEN – 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 CGEN is above the price of $2.16.
Target Prices: Our first target is $3.40. If it closes above that level, the second target price is $4.80.
Stop Loss: To limit risk, place a stop loss at $1.50. Note that the stop loss is on a closing basis.
Our target potential upside is 57% to 122%.
For a risk of $0.66, our first target reward is $1.24, and the second target reward is $2.64. 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. As of December 31, 2021, CGEN had an accumulated deficit of approximately $422.1 million and had incurred net losses of approximately $34.2 million in 2021, approximately $29.7 million in 2020, and approximately $27.3 million in 2019.
CGEN – Consolidated Statements of Comprehensive Loss
- Despite being a loss-making company, the executives are being paid significant compensation. In 2021, the aggregate compensation paid or accrued to the company’s Directors and Senior Management was approximately $5.7 million.
CGEN – Executive Compensation
- The company may need to raise additional funds in the future to continue its operations. If any such funding is based on the sale of equity, the company’s existing shareholders would experience dilution of their shareholdings.
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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