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: Ikena Oncology, Inc. (NASDAQ: IKNA)
Today’s penny stock pick is the oncology company, Ikena Oncology, Inc. (NASDAQ: IKNA).
Ikena Oncology, Inc. develops differentiated therapies for patients in need that target nodes of cancer growth, spread, and therapeutic resistance in the United States. Its lead program is IK-930, an internally discovered, oral, TEAD1-selective, small molecule inhibitor of the Hippo pathway. The company also develops IK-595, a molecular glue designed to trap MEK and RAF in an inactive complex.
Website: https://ikenaoncology.com
Latest 10-k report: https://ir.ikenaoncology.com/static-files/6367afaa-c3cd-493a-a474-c171b811263b
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for IKNA in the last 3 months, the stock has an average price target of $3.00, which is nearly 80% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company is executing a workforce reduction of approximately 50% in connection with its discontinuation of IK-930 development.
- IKNA reported that the first two cohorts in the Phase 1 study of IK-595 in patients with RAS and RAF mutant cancers have cleared with encouraging pharmacokinetics (PK) and pharmacodynamics (PD) profiles shown to date.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Breakout From Consolidation Area: The daily chart shows that the stock has currently broken out of a consolidation area with a high volume. This is marked as a purple color rectangle in the chart. This is a possible bullish sign.
IKNA – 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 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 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.
IKNA – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 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 IKNA is above the price of $1.70.
Target Prices: Our first target is $2.70. If it closes above that level, the second target price is $3.40.
Stop Loss: To limit risk, place a stop loss at $1.15. Note that the stop loss is on a closing basis.
Our target potential upside is 59% to 100%.
For a risk of $0.55, our first target reward is $1.00, and the second target reward is $1.70. 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. IKNA’s net losses were 68.2 million and $68.8 million for the twelve months ended December 31, 2023, and 2022, respectively. The company had an accumulated deficit of $282.4 million as of December 31, 2023.
IKNA – Consolidated Statements of Operations
- The company is a targeted oncology company with a limited operating history. Although established in 2016, the company has no products approved for commercial sale and has never generated any revenue from product sales.
- The development of pharmaceutical products is capital-intensive. IKNA is conducting clinical trials for multiple product candidates and will require additional capital to finance its operations. Raising additional capital may cause dilution to stockholders, restrict the company’s operations or require it to relinquish rights to its technologies or product candidates.
- The development and commercialization of new products in the biopharmaceutical and related industries are highly competitive.
- On May 29, 2024, Wedbush downgraded their outlook for Ikena Oncology from Outperform to Neutral.
- Despite being a loss-making company, the executives are being paid significant compensation.
IKNA – 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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