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: Inflarx NV (NASDAQ: IFRX)
Today’s penny stock pick is the Germany-based clinical-stage biopharmaceutical company, Inflarx NV (NASDAQ: IFRX).
Inflarx NV discovers and develops inhibitors using C5a technology primarily in Germany and the United States. The company’s C5a is an inflammatory mediator that is involved in the progression of a variety of autoimmune and other inflammatory diseases.
Its lead product candidate is vilobelimab, a novel intravenously delivered first-in-class anti-C5a monoclonal antibody, which completed the Phase III clinical trial for the treatment of hidradenitis suppurativa, a rare and chronic debilitating systemic inflammatory skin disease; for the treatment of anti-neutrophil cytoplasm antibody associated vasculitis, a rare and life-threatening autoimmune disease that is in Phase II trial; to treat pyoderma gangraenosum, a chronic inflammatory skin disorder that is in Phase IIa exploratory study; and for the treatment of PD-1/PD-L1 inhibitor resistant/refractory locally advanced or metastatic cutaneous squamous cell carcinoma that is in Phase II clinical development stage.
The company also develops INF904, an oral, small molecule drug candidate for the undisclosed chronic inflammatory and autoimmune diseases; and IFX002 that is in pre-clinical development stage for the treatment of chronic inflammation and autoimmune diseases. It has co-development agreement with Beijing Defengrei Biotechnology Co. Ltd.; and clinical trial collaboration and supply agreement with Merck & Co. Inc.
Website: https://www.inflarx.de
Latest 10-k report: https://sec.report/Document/0001654954-22-003707/
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for IFRX in the last 3 months, the stock has an average price target of $2.00, which is nearly 4% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company announced plans to submit a request for Emergency Use Authorization (EUA) for vilobelimab, following encouraging interactions with the US Food and Drug Administration (FDA) at a recently held Type B meeting. Vilobelimab is a monoclonal antibody treatment for patients critically ill with Covid-19.
- HC Wainwright analyst reiterated the Buy rating with a price target of $7. The analyst anticipates a launch in 2024 for vilobelimab for COVID-19 patients with sales of $14 million that year and $135 million in 2028.
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.
IFRX – 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 an orange color dotted line. This is a possible bullish indication.
IFRX – 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 IFRX is above the price of $2.10.
Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $3.90.
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 43% to 86%.
For a risk of $0.60, our first target reward is $0.90, and the second target reward is $1.80. 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. IFRX incurred net losses of €45.6 million, €34.0 million, and €53.3 million for the years ended December 31, 2021, 2020, and 2019, respectively. The company’s accumulated deficit as of December 31, 2021, was €214.0 million.
IFRX – Consolidated Statements of Operations and Comprehensive Loss
- The company is heavily dependent on the success of vilobelimab, its lead product candidate. Vilobelimab is a novel therapeutic antibody and its potential therapeutic benefit is unproven, and C5a or C5aR inhibition to treat complement-mediated autoimmune and inflammatory diseases has only been partly validated.
- Despite being a loss-making company, the executives are being paid significant compensation.
IFRX – 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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