Analyst Thinks This High Risk / High Reward Stock Has 50%-Plus Upside From Here

We recently started a series called “Penny Stock of the Day”. These ideas are geared for 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: Opko Health Inc. (NASDAQ: OPK)

Today’s penny stock pick is the medical test and medication company focused on diagnostics and pharmaceuticals, Opko Health Inc. (NASDAQ: OPK).

Opko Health Inc. is a diversified biotechnology company that operates pharmaceutical and diagnostic development programs. Opko’s diagnostics business includes a core genetic testing operation. It has a development and commercial supply pharmaceutical company, as well as a global supply-chain operation and holding company in Ireland. Opko also owns a specialty active pharmaceutical ingredients manufacturer in Israel. The company’s bio-reference testing business consists of routine testing and esoteric testing. Routine tests measure various health parameters, such as the functions of the heart, kidney, liver, thyroid, and other organs.

Website:  www.opko.com

Latest 10-k report:  https://sec.report/Document/0000944809-21-000015/

Analyst Consensus: Based on 3 Wall Street analysts offering 12-month price targets for OPK in the last 3 months, the stock has an average price target of $6.00 and an average rating of ‘Strong Buy’. The average price target represents a 52.28% upside from the stock’s last close.

Potential Catalysts / Reasons for the Hype:

• The news of the company’s partnership with LeaderMed Health Group Limited, a pharmaceutical development company with operations based in Asia.
• The anticipation that Somatrogon would be approved.
• The company reporting the first profitable year.
• OPK covid-19 test kits beating covid testing guidance.
• A strong pipeline of products that are about to come into play like Rayaldee for COVID. OPK is currently in a Phase 2 trial with RAYALDEE for its potential to treat mild-to-moderate Covid-19 and the topline data are expected later this year.
• Positive insider sentiments. As per TipRanks, Corporate Insiders had bought shares worth $715.3K in the Last 3 Months.
  

  Insider Transactions | Source: TipRanks.com

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Symmetrical Breakout: The daily chart shows that the stock has broken out of a symmetrical triangle pattern, which is shown as purple color lines. This is a possible bullish indication.

#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line has currently moved higher from below the +DI and -DI lines.

#3 Price above MA: The stock is currently above the 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) has currently crossed above the MACD signal line (orange color). This indicates a possible bullish setup.

#5 Bullish Stoch: The %K line is above the %D line of the stochastic, indicating possible bullishness.

#6 Double Bottom Pattern: The weekly chart shows that the stock is currently forming a double bottom pattern, which is shown in orange color. A double bottom pattern is a strong bullish pattern and a breakout from it would indicate that the stock could surge higher. The stock is also trading above a support area, marked as a pink color dotted line.

#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.

#8 Bullish MACD: The weekly chart also shows that the MACD line (blue color) is currently above the MACD signal line (orange color). This is 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 OPK is above the price of $4.00.

Target Prices: Our first target is $5.00. If it closes above that level, the second target price is $6.00.

Stop Loss: To limit risk, place a stop loss at $3.40. Note that the stop loss is on a closing basis.

Our target potential upside is 25% to 50%.

For a risk of $0.60, our first target reward is $1.00, and the second target reward is $2.00. 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:

1. OPK has a history of losses. As of December 31, 2020, the company has federal, state, and foreign net operating loss carryforwards of approximately $538.7 million, $729.8 million, and $78.6 million, respectively.
   

   OPK – Consolidated Statement of Operation

2. The current price spike and volume at the close appears to be related to triple witch options expiration, and not due to an influx of new investors. (On the third Friday of every third month, multiple derivatives products expire, giving rise to greater than normal trading volumes. It’s commonly called “triple witching” day)
3. The company executives are drawing significant compensation, which has also increased year-over-year.
   

   OPK – Executive Compensation

4. The company’s CEO Philip Frost was found guilty of “pump-and-dump” charges and had to settle with the Securities and Exchange Commission by paying $5.5 million.

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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