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: Sangamo Therapeutics, Inc. (NASDAQ: SGMO)
Today’s penny stock pick is the clinical-stage genomic medicine company, Sangamo Therapeutics, Inc. (NASDAQ: SGMO).
Sangamo Therapeutics, Inc. focuses on translating science into medicines that transform the lives of patients and families afflicted with serious diseases in the United States.
The company’s clinical-stage product candidates are ST-920, a gene therapy product candidate, which is in Phase 1/2 clinical study for the treatment of Fabry disease; TX200, a chimeric antigen receptor engineered regulatory T cell (CAR-Treg) therapy product candidate that is in Phase 1/2 clinical study for the prevention of immune-mediated rejection in HLA-A2 mismatched kidney transplantation; SB-525, a gene therapy product candidate, which is in Phase 3 clinical trial for the treatment of moderately severe to severe hemophilia A; BIVV003, a zinc finger nuclease gene-edited cell therapy product candidate that is in Phase 1/2 PRECIZN-1 clinical study for the treatment of sickle cell disease.
Its preclinical development products focus on CAR-Treg cell therapies for autoimmune disorders and genome engineering for neurological diseases. Sangamo Therapeutics, Inc. has collaborative and strategic partnerships with Biogen MA, Inc.; Kite Pharma, Inc.; Pfizer Inc.; Sanofi S.A.; Novartis Institutes for BioMedical Research, Inc.; Shire International GmbH; Dow AgroSciences LLC; Sigma-Aldrich Corporation; Genentech, Inc.; Open Monoclonal Technology, Inc.; and California Institute for Regenerative Medicine.
Website: https://www.sangamo.com
Latest 10-k report: https://investor.sangamo.com/static-files/2199da9d-7159-4df8-bd49-d1233012af15
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analyst offering 12-month price targets for SGMO in the last 3 months, the stock has an average price target of $3.33, which is nearly 495% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company announced a successful late-stage trial for its drug targeting a rare genetic bleeding disorder. This particular drug will be developed in collaboration with Pfizer, adding a layer of clout to the R&D behind the prospective treatment.
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 a high volume. Once the stock breaks out of the falling wedge pattern, it could move higher.
SGMO – 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 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 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.
SGMO – 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 SGMO is above the price of $0.61.
Target Prices: Our first target is $1.00. If it closes above that level, the second target price is $1.40.
Stop Loss: To limit risk, place a stop loss at $0.38. Note that the stop loss is on a closing basis.
Our target potential upside is 64% to 130%.
For a risk of $0.23, our first target reward is $0.39, and the second target reward is $0.79. 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. SGMO reported net losses of $257.8 million and $192.3 million for the years ended December 31, 2023, and 2022, respectively.
SGMO – Consolidated Statements of Operations
- SGMO is a biotechnology company with a reprioritized preclinical focus and no approved products or product revenues. If the company fails to obtain positive results from its preclinical studies and subsequent clinical trial and regulatory approvals for its product candidates, the anticipated revenues from the company’s product candidates and prospects for profitability would be adversely affected, which would likely cause the market price of the company’s common stock to decline significantly.
- Hedge Funds Decreased Holdings by 45.5K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
SGMO – 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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