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: Ontrak, Inc. (NASDAQ: OTRK)
Today’s penny stock pick is the AI-powered and telehealth-enabled healthcare company, Ontrak, Inc. (NASDAQ: OTRK).
Ontrak, Inc. operates as an artificial intelligence powered, telehealth-enabled, and virtualized healthcare company that provides in-person services to health plans and other third-party payors in the United States. Its technology-enabled platform predicts people whose chronic disease will improve with behavior change, recommends effective care pathways that people are willing to follow, and engages and guides them to and through the care they need.
The company’s technology-enabled OnTrak program provides healthcare solutions to members with behavioral conditions that cause or exacerbate chronic medical conditions, such as diabetes, hypertension, coronary artery disease, chronic obstructive pulmonary disease, and congestive heart failure.
The OnTrak integrates evidence-based psychosocial and medical interventions delivered in-person or via telehealth along with care coaching and in-market community care coordinators, who address the social and environmental determinants of health.
Website: https://www.ontrak-inc.com
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for OTRK in the last 3 months, the stock has an average price target of $2.50, which is nearly 123% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company released positive mental health data for its Wholehealth+ program members. Reportedly, Ontrak’s research showed its Wholehealth+ platform provided significant improvement in some mental health patients’ anxiety and depression symptoms.
- OTRK recently signed an amendment with one of its long-standing customers, Optima Health, that will focus its cutting-edge Wholehealth+ care program on Optima Health’s highest acuity and cost-prohibitive members within its commercial line of business.
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 with historic high volume. Once the stock breaks out of the falling wedge pattern, it could move higher.
OTRK – 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 MAs: The stock is currently above its 50-day SMA as well as 200-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 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
OTRK – Weekly Chart
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for OTRK is above the price of $1.15.
Target Prices: Our first target is $2.40. If it closes above that level, the second target price is $3.50.
Stop Loss: To limit risk, place a stop loss at $0.50. Note that the stop loss is on a closing basis.
Our target potential upside is 109% to 204%.
For a risk of $0.65, our first target reward is $1.25, and the second target reward is $2.35. 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. OTRK’s average monthly cash burn rate was approximately $2.2 million for the year ended December 31, 2021.
OTRK – Consolidated Statements of Operations
- The company was formerly known as Catasys, Inc. and changed its name to Ontrak, Inc. in July 2020.
- The company has ongoing legal proceedings.
- On March 3, 2021, a purported securities class action was filed in the United States District Court for the Central District of California, entitled Farhar v. Ontrak, Inc., Case No. 2:21-cv-01987.
- On August 6, 2021, a purported stockholder derivative complaint was filed in the United States District Court for the Central District of California, entitled Aptor v. Peizer, Case No. 2:21-cv-06371, alleging breach of fiduciary duty on behalf of the Company against Terren S. Peizer, Brandon H. LaVerne, Richard A. Berman, Michael Sherman, Diane Seloff, Robert Rebak, Gustavo Giraldo and Katherine Quinn, and contribution against Terren S. Peizer and Brandon H. LaVerne.
- On February 28, 2022, a purported securities class action was filed in the Superior Court of California for Los Angeles County, entitled Braun v. Ontrak, Inc., et al., Case No. 22STCV07174.
- Hedge Funds Decreased Holdings by 33.4K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
OTRK – 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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