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: Vistagen Therapeutics Inc. (NASDAQ: VTGN)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Vistagen Therapeutics Inc. (NASDAQ: VTGN).
Vistagen Therapeutics Inc. engages in developing and commercializing various medicines with the potential to care for anxiety, depression, and other disorders of the central nervous system (CNS). The company’s CNS pipeline includes PH94B, a rapid-onset neuroactive nasal spray, which is in preparation for Phase III development for the acute treatment of anxiety in adults with social anxiety disorder.
Its PH94B product also has potential to treat a range of anxiety disorders, including adjustment disorder with anxiety, postpartum anxiety, post-traumatic stress disorder, preprocedural anxiety, panic, and others.
The company’s CNS pipeline also comprises PH10, a rapid-onset neuroactive nasal spray, which is in preparation for Phase 2B clinical development as a stand-alone treatment for major depressive disorder (MDD); and AV-101, an oral N-methyl-D-aspartate receptor antagonist, which is in development in combination with probenecid as a potential treatment of levodopa-induced dyskinesia, MDD, neuropathic pain, and suicidal ideation.
It has contract research and development agreement with Cato Research Ltd.; license and option agreements with Pherin Pharmaceuticals, Inc.; license and collaboration agreement with EverInsight Therapeutics Inc.; and license and sublicense agreement with BlueRock Therapeutics, LP.
Website: www.vistagen.com
Latest 10-k report: https://sec.report/Document/0001654954-21-007380/
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for VTGN in the last 3 months, the stock has an average price target of $7.00, which is nearly 305% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- An analyst from Maxim Group initiated a ‘buy’ position on the stock with a $5 target price.
Analysts| Source: TipRanks.com
- VistaGen Therapeutics and AffaMed Therapeutics announced they have completed regulatory preparations to initiate PALISADE Global, a Phase 3 clinical trial to evaluate the efficacy, safety, and tolerability of VistaGen’s PH94B (referred to by AffaMed as AM005) for the acute treatment of anxiety in adults with social anxiety disorder, in the U.S. and China.
- The FDA has granted Fast Track designation for the development of PH94B as a potential treatment for SAD.
- Successful Phase 2a clinical study of PH10, its investigational first-in-class, rapid-onset synthetic neurosteroid nasal spray, for treatment of major depressive disorder (MDD).
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.
VTGN – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The weekly chart shows that the stock had taken support at the 23.6% Fibonacci support level of the upmove before starting to move higher. This is a possible bullish sign. The stock is also trading above its 200-day SMA, indicating that the bulls are still in control.
VTGN – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 MACD above Signal Line: In the weekly chart as well, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates 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 VTGN is above the price of $1.80.
Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $4.00.
Stop Loss: To limit risk, place a stop loss at $1.10. Note that the stop loss is on a closing basis.
Our target potential upside is 67% to 122%.
For a risk of $0.70, our first target reward is $1.20, and the second target reward is $2.20. 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. VTGN had reported net losses of approximately $17.9 million and $20.8 million during the fiscal years ended March 31, 2021, and 2020, respectively. On March 31, 2021, the company had an accumulated deficit of approximately $242.8 million.
VTGN – Consolidated Statements of Operations and Comprehensive Loss
- The company executives are being paid significant compensation, even though VTGN has been a loss-making company.
VTGN – Executive Compensation
- VTGN is a development stage biopharmaceutical company with no recurring revenues from product sales or approved products, and limited experience in developing new therapeutic product candidates. The company depends heavily on the success of its three CNS product candidates PH94B, PH10, and AV-101.
- There is significant competition from the likes of Axsome, Alkermes, Relmada, and Sage. There are also additional potential competitors including academic and private commercial clinics providing intravenous ketamine therapy on an off-label basis and Janssen’s intranasally-administered esketamine.
- VTGN requires additional financing to execute its long-term business plan. Raising additional capital can cause substantial dilution to the company’s stockholders, may restrict its operations or necessitate the company to relinquish rights and may require VTGN to seek stockholder approval to authorize additional shares of its common stock.
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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