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: Regulus Therapeutics Inc. (NASDAQ: RGLS)
Today’s penny stock pick is the clinical stage biopharmaceutical company, Regulus Therapeutics Inc. (NASDAQ: RGLS).
Regulus Therapeutics Inc. engages in the discovery and development of drugs that targets microRNAs to treat a range of diseases in the United States. Its product candidates include RG-012, an anti-miR targeting miR-21 that is in Phase II clinical trial for the treatment of Alport syndrome, a life-threatening kidney disease; and RGLS8429, an anti-miR targeting miR-17, which is in Phase 1b clinical study for the treatment of autosomal dominant polycystic kidney disease. The company is also developing a pipeline of preclinical drug products for target organ-selective delivery strategies.
Website: https://www.regulusrx.com
Latest 10-k report: https://sec.report/Document/0001628280-22-005771
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for RGLS in the last 3 months, the stock has an average price target of $20.00, which is nearly 931% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company announced topline data from its Phase 1 Single-Ascending Dose (SAD) trial for kidney disease candidate RGLS8429. The data indicated that RGLS8429 was well-tolerated with no serious adverse events.
- RGLS initiated its Phase 1b Multiple Ascending Dose (MAD) trial of RGLS8429. Topline data from the first cohort of patients is expected in 1H 2023.
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 high volume. Once the stock breaks out of the falling wedge pattern, it could move higher.
RGLS – 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 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#5 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.
#6 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 is a possible bullish indication.
RGLS – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart and is also moving higher from oversold levels, indicating possible bullishness.
#8 MACD above Signal Line: In the weekly chart, 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 RGLS is above the price of $2.00.
Target Prices: Our first target is $3.00. If it closes above that level, the second target price is $4.50.
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 50% to 125%.
For a risk of $0.60, our first target reward is $1.00, and the second target reward is $2.50. 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. RGLS reported net losses of $27.8 million and $15.7 million for the years ended December 31, 2021, and 2020, respectively. As of December 31, 2021, the company had an accumulated deficit of $454.9 million.
RGLS – Consolidated Statements of Operations and Comprehensive Loss
- As of December 31, 2021, the company had approximately $60.4 million of cash and cash equivalents and $6.0 million of outstanding debt obligations. The company will need to raise additional capital to develop its product candidates and implement its operating plans. This could cause equity dilution.
- On August 9, 2021, RGLS received a letter from The Nasdaq Stock Market advising the company that the bid price of its common stock had closed below the $1.00 per share minimum price required for continued listing on The Nasdaq Capital Market.
- The company has never generated any revenue from product sales
- Despite being a loss-making company, the executives are being paid significant compensation.
RGLS- 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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