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: BioDelivery Sciences International, Inc. (NASDAQ: BDSI)
Today’s penny stock pick is the pharmaceutical company, BioDelivery Sciences International, Inc. (NASDAQ: BDSI).
BioDelivery Sciences International, Inc. engages in the development and commercialization of pharmaceutical products for chronic conditions in the United States and internationally.
The company provides its products based on its patented BioErodible MucoAdhesive drug-delivery technology, a small erodible polymer film for application to the buccal mucosa, as well as other drug-delivery technologies.
It offers BELBUCA, a buprenorphine buccal film for the treatment of chronic pain; BUNAVAIL, a buprenorphine and naloxone buccal film to treat opioid dependence; and ONSOLIS, a fentanyl buccal soluble film for the management of breakthrough pain in cancer patients.
The company also offers Symproic, a peripherally acting mu-opioid receptor antagonist for the treatment of opioid-induced constipation in adult patients with chronic non-cancer pain, including patients with chronic pain related to prior cancer or its treatment who do not require frequent opioid dosage escalation.
Website: www.bdsi.com
Latest 10-k report: https://sec.report/Document/0001103021-21-000029/
Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for BDSI in the last 3 months, the stock has an average price target of $6.88, which is nearly 109% upside from current levels.
Source: TipRanks.com
Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- A court ruling upheld the validity of two of the patents linked to the company’s FDA-approved pain killer Belbuca.
- Corporate Insiders bought Shares Worth $1.7M in the Last 3 Months.
Insiders | Source: TipRanks.com
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 pink color lines. This is a possible bullish indication.
BDSI – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line and ADX line are above the -DI line, and the ADX line is currently above the +DI and -DI lines.
#3 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.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line, indicating possible bullishness.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a purple color dotted line. This is a possible bullish indication.
BDSI – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is also moving higher from oversold levels, indicating possible bullishness.
#7 Bullish RSI: The RSI is currently near 50 after moving higher from oversold levels, 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 BDSI is above the price of $3.45.
Target Prices: Our first target is $4.10. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss at $3.10. Note that the stop loss is on a closing basis.
Our target potential upside is 19% to 45%.
For a risk of $0.35, our first target reward is $0.65, and the second target reward is $1.35. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses and only recently turned profitable. BDSI’s accumulated deficit on December 31, 2020, was approximately $340.9 million.
BDSI – Statement of Operations
- Hedge Funds Decreased Holdings by 991.2K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Despite being a loss-making company, the company executives are being paid significant compensation.
BDSI – Executive Compensation
- BDSI has ongoing litigations with Aquestive Therapeutics, Inc. (formerly MonoSol Rx, “Aquestive”) and Indivior PLC (formerly RB Pharmaceuticals Limited)
- On March 15, 2018, the State of Arkansas, and certain counties and cities in that State, filed an action in the Circuit Court of Arkansas, Crittenden County against multiple manufacturers, distributors, retailers, and prescribers of opioid analgesics, including BDSI.
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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