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: ALX Oncology Holdings Inc. (NASDAQ: ALXO)
Today’s penny stock pick is the clinical-stage immuno-oncology company, ALX Oncology Holdings Inc. (NASDAQ: ALXO).
ALX Oncology Holdings Inc. focuses on developing therapies for cancer patients in the United States. Its lead product candidate is evorpacept, a CD47 blocking therapeutic biologic in development as a combination therapy with other anti-cancer agents for treatment of various oncology indications, including myelodysplastic syndromes, acute myeloid leukemia, head and neck squamous cell carcinoma, gastric/gastroesophageal junction, and breast cancer.
The company’s pre-clinical program focuses on the development of ALTA-002, a SIRPa TRAAC that offers ways to engage the innate and adaptive immune response to cancer. ALX Oncology Holdings Inc. has collaboration agreements with Merck for a Phase 2 trial evaluating evorpacept in combination with pembrolizumab with and without chemotherapy in patients with head and neck cancer; Zymeworks on a Phase 1 trial for the treatment of HER2-expressing breast cancer and other solid tumors; Tallac Therapeutics, Inc. for the development of a potent immune activator targeted to myeloid cells in the tumor to promote innate and adaptive anti-cancer immune responses; and the Quantum Leap Healthcare Collaborative to sponsor and manage a Phase 1 trial to evaluate evorpacept in combination with fam-trastuzumab deruxtecan-nxki for the treatment of patients with unresectable or metastatic HER2-positive and HER2-low breast cancer.
It also has license agreements with Board of Trustees of the Leland Stanford Junior University, Selexis SA, and Crystal Bioscience, Inc.
Website: https://www.alxoncology.com
Latest 10-k report: https://ir.alxoncology.com/sec-filings/sec-filing/10-k/0000950170-23-007013
Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for ALXO in the last 3 months, the stock has an average price target of $13.80, which is nearly 187% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company has announced an upcoming event that will showcase its groundbreaking advancements in the treatment of advanced HER2-positive gastric cancer. On October 3rd, 2023, at 8:00 AM EDT, the company will be hosting an investor call and webcast to unveil the interim Phase 2 ASPEN-06 clinical trial results of their innovative drug, evorpacept.
- ALXO recently entered into a collaborative agreement with Sanofi, a prominent pharmaceutical company. This partnership aims to conduct a Phase 1/2 study that will comprehensively evaluate the safety, efficacy, pharmacokinetics, and biomarker data of a combination therapy.
- The company is also actively engaged in multiple Phase 2 trials, each aimed at advancing the field of cancer therapy.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out 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.
ALXO – Daily Chart
#2 Bullish RSI: The RSI is nearing 50 and moving higher, indicating possible bullishness.
#3 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.
#4 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 looks like a good area for the stock to move higher.
ALXO – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ALXO is above the price of $5.00.
Target Prices: Our first target is $6.10. If it closes above that level, the second target price is $6.80.
Stop Loss: To limit risk, place a stop loss at $4.40. Note that the stop loss is on a closing basis.
Our target potential upside is 22% to 36%.
For a risk of $0.60, our first target reward is $1.10, 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. ALXO’s net losses were $123.5 million, $83.5 million, and $45.7 million for the years ended December 31, 2022, 2021, and 2020, respectively.
ALXO – Consolidated Statements of Operations
- Insiders have less than 1% stake in the company’s ownership, indicating their potential lack of confidence in the company.
Ownership | Source: TipRanks.com
- The company has a limited operating history, has no products approved for commercial sale, and has not generated any revenue from product sales, licenses, or collaborations.
- Corporate Insiders placed Informative Sells of Shares Worth $83.2K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
ALXO – Executive Compensation
- In the past, the company and its independent registered public accounting firm had identified two material weaknesses in its internal control over financial reporting. Any failure to maintain effective internal control over financial reporting could have a material adverse effect on ALXO’s business, financial condition, and results of operations, and the trading price of its common stock.
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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