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: Outlook Therapeutics, Inc. (NASDAQ: OTLK)
Today’s penny stock pick is the late clinical-stage biopharmaceutical company, Outlook Therapeutics, Inc. (NASDAQ: OTLK)
Outlook Therapeutics, Inc. focuses on developing and commercializing monoclonal antibodies for various ophthalmic indications. Its lead product candidate is ONS-5010, an ophthalmic formulation of bevacizumab product candidate that is in Phase-III clinical trial for the treatment of wet age-related macular degeneration and other retina diseases. Outlook Therapeutics, Inc. has collaboration and license agreements with IPCA Laboratories Limited; Laboratorios Liomont, S.A. de C.V.; BioLexis Pte. Ltd.; and Zhejiang Huahai Pharmaceutical Co., Ltd.
Latest 10-k report: https://sec.report/Document/0001558370-21-017007
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for OTLK in the last 3 months, the stock has an average price target of $6.00, which is nearly 392% upside from current levels.
Potential Catalysts / Reasons for the Hype:
- Chardan Capital analyst Daniil Gataulin initiated coverage on Outlook Therapeutics with a Buy rating and a Price Target of $10.
- Outlook Therapeutics® and AmerisourceBergen Announced Strategic Commercialization Agreement for ONS-5010 for the Treatment of Wet AMD.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock is currently trading within a symmetrical triangle pattern, which is marked as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
#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 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 as well, indicating possible bullishness.
#8 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 OLTK is above the price of $1.25.
Target Prices: Our first target is $1.70. If it closes above that level, the second target price is $2.50.
Stop Loss: To limit risk, place a stop loss below $1.00. Note that the stop loss is on a closing basis.
Our target potential upside is 36% to 100%.
For a risk of $0.25, our first target reward is $0.45, and the second target reward is $1.25. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses, including net losses of $53.2 million and $35.2 million for the years ended September 30, 2021, and 2020, respectively.
- The company was formerly known as Oncobiologics, Inc. and changed its name to Outlook Therapeutics, Inc. in November 2018.
- The company has ongoing legal proceedings. On July 20, 2020, Laboratorios Liomont S.A. de C.V., or Liomont, filed a complaint against OTLK in the U.S. District Court of the Southern District of New York alleging certain breach of contract claims under June 25, 2014, strategic development, license, and supply agreement relating to the biosimilar development program for ONS-3010 and ONS-1045.
- Despite being a loss-making company, the executives are being paid significant 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!
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.Buy and Hold These 3 Dividend Stocks Forever [sponsor]
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