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: Gossamer Bio, Inc. (NASDAQ: GOSS)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Gossamer Bio, Inc. (NASDAQ: GOSS).
Gossamer Bio, Inc. focuses on developing and commercializing seralutinib for the treatment of pulmonary arterial hypertension (PAH) in the United States. The company is developing GB002, an inhaled, small molecule, platelet-derived growth factor receptor, or PDGFR, colony-stimulatin factor 1 receptor and c-KIT inhibitor, which is in Phase 3 clinical trial for the treatment of PAH.
It has license agreements with Pulmokine, Inc. to develop and commercialize GB002 and related backup compounds. The company was formerly known as FSG, Bio, Inc. and changed its name to Gossamer Bio, Inc. in 2017.
Website: https://www.gossamerbio.com
Latest 10-k report: https://ir.gossamerbio.com/static-files/d204ee36-4933-443b-8a59-e44b688404fa
Analyst Consensus: As per TipRanks Analytics, based on 8 Wall Street analysts offering 12-month price targets for GOSS in the last 3 months, the stock has an average price target of $7.25, which is nearly 778% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Corporate Insiders placed Informative Buys of Shares Worth $281.8K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company had recently entered a global collaboration and license agreement with Italy-based Chiesi Farmaceutici S.p.A, to develop and commercialize seralutinib.
- GOSS’s competitor Aerovate Therapeutics recently announced that its AV-101 did not meet the primary endpoint in the company’s Phase 2b portion of its IMPAHCT study in patients with pulmonary arterial hypertension. AV-101 has a similar and related mechanism of action as Gossamer’s seralutinib, which is currently enrolling its Phase 3 PROSERA study after a positive result in the Phase 2 TORREY trial supported by longer term OLE data.
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.
GOSS – 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.
GOSS – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 GOSS is above the price of $0.85.
Target Prices: Our first target is $1.60. If it closes above that level, the second target price is $2.40.
Stop Loss: To limit risk, place a stop loss at $0.40. Note that the stop loss is on a closing basis.
Our target potential upside is 88% to 182%.
For a risk of $0.45, our first target reward is $0.75, and the second target reward is $1.55. 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. GOSS’s net losses were $179.8 million, and $229.4 million for the years ended December 31, 2023, and 2022, respectively. As of December 31, 2023, the company had an accumulated deficit of $1,212.0 million.
GOSS – Consolidated Statements of Operations
- The company will require substantial additional financing for the ongoing and planned clinical trials of seralutinib. GOSS may have to finance its cash needs through equity offerings, debt financings or other capital sources. Raising additional capital may cause dilution to stockholders, or restrict the company’s operations.
- Hedge Funds Decreased Holdings by 1.4M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has been involved in securities class action litigation. On April 3, 2020, the company and certain of its executive officers and directors, and the underwriters of IPO were named as defendants in a purported securities class action lawsuit. On September 30, 2022, the court entered a judgment approving the class action settlement in which the company has to pay approximately $2.4 million, in exchange for customary releases and settlement terms.
- Despite being a loss-making company, the executives are being paid significant compensation.
GOSS – 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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