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: Affimed NV (NASDAQ: AFMD)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Affimed NV (NASDAQ: AFMD).
Affimed NV focuses on discovering and developing cancer immunotherapies in the United States, Germany, and rest of Europe. Its lead product candidate is AFM13, which has completed Phase II clinical study for peripheral T-cell lymphoma; in Phase IIa clinical trial for CD30-positive lymphoma; and in Phase I clinical trial for hodgkin lymphoma.
The company is also developing AFM24, a tetravalent, bispecific epidermal growth factor receptor, and CD16A-binding innate cell engager, which is in Phase IIa clinical trial for the treatment of advanced cancers; AFM28, an innate cell engager (ICE), which is in preclinical development to treat acute myeloid leukemia; and AFM32, an ICE candidate that is in preclinical development for the treatment of solid tumors.
Affimed N.V. has collaboration agreements with The University of Texas MD Anderson Cancer Center; Genentech, Inc.; Roivant Sciences Ltd.; and Artiva Biotherapeutics Inc., as well as research funding agreements with The Leukemia & Lymphoma Society.
Website: https://www.affimed.com
Latest 10-k report: https://sec.report/Document/0001104659-22-040613/
Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for AFMD in the last 3 months, the stock has an average price target of $6.75, which is nearly 176% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Data updates were recently made available from two Phase 1/2a clinical trials designed to test the company’s bispecific antibody AFM24 in patients with solid tumors. According to the company, the updated data from the Phase 1 part of the ongoing monotherapy phase 1/2a study has indicated a “well-managed safety profile” for AFM24 as of August 2022 data cut in 35 patients.
- The patent request for an invention that provides increased binding affinity and cytotoxic potency with no inducement of NK-NK cell lysis was granted on 26 October 2022.
- Hedge Funds Increased Holdings by 451.6K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
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.
AFMD – 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 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, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
AFMD – Weekly Chart
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for AFMD is above the price of $2.50.
Target Prices: Our first target is $3.80. If it closes above that level, the second target price is $4.50.
Stop Loss: To limit risk, place a stop loss at $1.90. Note that the stop loss is on a closing basis.
Our target potential upside is 52% to 80%.
For a risk of $0.60, our first target reward is $1.30, and the second target reward is $2.00. 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. As of December 31, 2021, AFMD’s accumulated deficit was €333.4 million.
AFMD – Consolidated statements of comprehensive loss
- The company was formerly known as Affimed Therapeutics B.V. and changed its name to Affimed N.V. in October 2014.
- The company is expecting to finance its cash needs through a combination of equity offerings, debt financings, grants and licenses, and development agreements in connection with any collaborations. Raising additional capital may dilute the shareholders, restrict AFMD’s operations or require the relinquishing of rights to intellectual property or future revenue streams.
- Despite being a loss-making company, the executives are being paid significant compensation.
AFMD – 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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