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: Gritstone bio, Inc. (NASDAQ: GRTS)
Today’s penny stock pick is the clinical-stage biotechnology company, Gritstone bio, Inc. (NASDAQ: GRTS).
Gritstone bio, Inc. engages in developing vaccine-based immunotherapy candidates against cancer and infectious diseases. Its primary product candidate is GRANITE, a neoantigen-based immunotherapy, which is in Phase 2/3 clinical trials for the treatment of solid tumors, including microsatellite stable colorectal cancers.
The company is also developing SLATE, an off-the-shelf immunotherapy candidate, which is in Phase 2 clinical trials for the treatment of metastatic solid tumors. In addition, it develops CORAL, a SARS-CoV-2 vaccine platform designed to deliver spike and additional SARS-CoV-2 T cell epitopes for protection and broader immunity against SARS-CoV-2 variants; and a therapeutic vaccine candidate designed to treat and cure human immunodeficiency virus (HIV) infection.
Gritstone bio, Inc. has a strategic collaboration with bluebird bio, Inc.; a collaboration agreement with Gilead Sciences, Inc.; and a license agreement with Genevant Sciences GmbH.
Website: https://gritstonebio.com
Latest 10-k report: https://ir.gritstonebio.com/static-files/cfce6194-6f33-49bb-b1ed-d6dd8bf4c063
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for GRTS in the last 3 months, the stock has an average price target of $10.50, which is nearly 329% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company received a contract from the Biomedical Advanced Research and Development Authority (BARDA) to conduct a Phase 2b comparative study evaluating its self-amplifying mRNA (samRNA) vaccine candidate containing Spike plus other viral targets to protect against COVID-19. The agreement, which is valued at up to $433 million, was awarded as part of ‘Project NextGen,’ an initiative by the U.S. Department of Health and Human Services (HHS) to advance a pipeline of new, innovative vaccines and therapeutics providing broader and more durable protection for COVID-19.
- GRTS is planning to showcase the Phase 1 studies of their groundbreaking COVID-19 vaccine candidate at the highly anticipated IDWeek 2023 conference, which is scheduled to run from October 11 to October 15, 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. Once the stock breaks out of the falling wedge pattern, it could move higher.
GRTS – 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 as well as 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 purple color dotted line. This looks like a good area for the stock to move higher.
GRTS – 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 GRTS is above the price of $2.55.
Target Prices: Our first target is $3.30. If it closes above that level, the second target price is $4.00.
Stop Loss: To limit risk, place a stop loss at $2.10. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 57%.
For a risk of $0.45, our first target reward is $0.75, and the second target reward is $1.45. 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. The Company reported net losses of $119.7 million, $75.1 million, and $105.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.
GRTS – Consolidated Statements of Operations
- The company was formerly known as Gritstone Oncology, Inc. and changed its name to Gritstone bio, Inc. in May 2021.
- Hedge Funds Decreased Holdings by 50.8K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has zero insider ownership indicating a potential lack of confidence in the company’s business by insiders.
Ownership | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
GRTS – Executive Compensation
- The biotechnology company has a limited operating history and no products approved for commercial sale, making it difficult to assess its future viability. The company’s immunotherapy approach is based on novel ideas and technologies that are unproven and may not result in marketable products, which exposes GRTS to unforeseen risks and make it difficult to predict the time and cost of product development and potential for regulatory approval.
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.