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: CytomX Therapeutics, Inc. (NASDAQ: CTMX)
Today’s penny stock pick is the oncology-focused biopharmaceutical company, CytomX Therapeutics, Inc. (NASDAQ: CTMX).
CytomX Therapeutics, Inc. focuses on developing novel conditionally activated biologics localized to the tumor microenvironment. The company utilizes conditional activation platform technology for oncology biologics research and development comprising the validation of targets for antibody-drug conjugates (ADCs), opening therapeutic window for novel T-cell engagers (TCEs) targeting solid tumors, and increasing the therapeutic index for immune modulators, such as cytokines; and PROBODY platform in preclinical research in areas outside of oncology.
It also develops CX-904, a T-cell-engaging bispecific antibody targeting the epidermal growth factor receptor (EGFR) on tumor cells and the CD3 receptor on T cells; CX-2051, a conditionally activated ADC for optimizing the therapeutic index for EpCAM-expressing epithelial cancers, including colorectal cancer; and CX-801, an interferon alpha-2b PROBODY cytokine.
In addition, the company’s development pipeline comprises CX-2029, a conditional activated ADC targeting CD71; and BMS-986288, a PROBODY version of non-fucosylated ipilimumab. It has strategic collaborations with Amgen, Astellas, Bristol Myers Squibb, Regeneron, and Moderna; and clinical trial collaboration and supply agreement with Merck for the evaluation of CX-801 in combination with anti-PD-1 therapy, KEYTRUDA (pembrolizumab).
Website: https://www.cytomx.com/
Latest 10-k report: https://ir.cytomx.com/static-files/a7e28508-fd14-46c3-baee-77db04536ec2
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for CTMX in the last 3 months, the stock has an average price target of $3.00, which is nearly 41% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company announced positive interim Phase 1 data for its cancer drug CX-2051, showing a 28% confirmed response rate in advanced colorectal cancer patients. This is a major clinical milestone in a challenging field.
- The company priced a $100 million underwritten stock offering to bolster its cash reserves, supporting further R&D and strengthening its financial runway.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as purple lines. The stock is currently moving higher with a high volume. This is a possible bullish indication.
CTMX – 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 and 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 dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
CTMX – 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 CTMX is above the price of $2.15.
Target Prices: Our first target is $3.80. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss at $1.20. Note that the stop loss is on a closing basis.
Our target potential upside is 77% to 132%.
For a risk of $0.95, our first target reward is $1.65, and the second target reward is $2.85. 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.
CTMX – Consolidated Statements of Operations
- On March 4, 2020, Vytacera Bio, LLC filed a patent infringement lawsuit against the Company in the U.S. District Court for the District of Delaware. The lawsuit alleged that the Company’s use, offers to sell, and/or sales of the PROBODY® technology platform for basic research applications constituted infringement.
- Hedge Funds Decreased Holdings by 393.8K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has a limited operating history and has not generated any revenue from product sales.
- Corporate Insiders placed Informative Sells of Shares Worth $47.2K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
CTMX – 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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