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: Heron Therapeutics, Inc. (NASDAQ: HRTX)
Today’s penny stock pick is the biotechnology company, Heron Therapeutics, Inc. (NASDAQ: HRTX).
Heron Therapeutics, Inc. engages in developing treatments to address unmet patient needs. The company’s product candidates utilize its proprietary Biochronomer, a drug delivery technology, which delivers therapeutic levels of a range of short-acting pharmacological agents over a period from days to weeks with a single administration.
It offers SUSTOL (granisetron), an extended-release injection for the prevention of acute and delayed nausea and vomiting associated with moderately emetogenic chemotherapy, or anthracycline and cyclophosphamide combination chemotherapy regimens; and CINVANTI, an intravenous formulation of aprepitant, a substance P/neurokinin-1 receptor antagonist for the prevention of acute and delayed nausea and vomiting associated with highly emetogenic cancer chemotherapy, as well as nausea and vomiting associated with moderately emetogenic cancer chemotherapy.
The company is also developing ZYNRELEF, a dual-acting local anesthetic that delivers a fixed-dose combination of the local anesthetic bupivacaine and a low dose of the nonsteroidal anti-inflammatory drug meloxicam; HTX-019, an investigational agent for the prevention of postoperative nausea and vomiting; and HTX-034 for postoperative pain management, as well as is in Phase Ib/II clinical study in patients undergoing bunionectomy.
Website: https://www.herontx.com
Latest 10-k report: https://herontherapeutics.gcs-web.com/static-files/f76ba36a-226b-40b2-b2c8-dc04199936c2
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for HRTX in the last 3 months, the stock has an average price target of $5.17, which is nearly 277% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently announced financial results for the three and nine months ended September 30, 2023, and highlighted recent corporate updates.
- Heron is increasing full-year 2023 Net Product Sales guidance for the oncology care franchise to a range of $104 million to $106 million from a prior range of $99 million to $103 million.
- HRTX is anticipating full-year 2023 Net Product Sales to be in the range of $123 million to $125 million and full-year 2024 Net Product Sales to be in the range of $138 million to $158 million.
- The company’s CEO and Director, Craig Collard, recently paid US$0.92 per share to buy US$138k worth of the stock, increasing his holding by 411%.
- Corporate Insiders placed Informative Buys of Shares Worth $285.1K 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 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.
HRTX – 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 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 looks like a good area for the stock to move higher.
HRTX – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 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 HRTX is above the price of $1.40.
Target Prices: Our first target is $2.40. If it closes above that level, the second target price is $2.90.
Stop Loss: To limit risk, place a stop loss at $0.90. Note that the stop loss is on a closing basis.
Our target potential upside is 71% to 109%.
For a risk of $0.50, our first target reward is $1.00, and the second target reward is $1.50. 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. As of December 31, 2022, HRTX had an accumulated deficit of $1.8 billion.
HRTX – Consolidated Statements of Operations
- The company was formerly known as A.P. Pharma, Inc. and changed its name to Heron Therapeutics, Inc. in January 2014.
- Despite being a loss-making company, the executives are being paid significant compensation.
HRTX – Executive Compensation
- The company has ongoing legal proceedings. On June 14, 2022, the Company received a paragraph IV notice of certification from Fresenius Kabi advising that Fresenius Kabi had submitted an ANDA to the FDA seeking approval to manufacture, use, or sell a generic version of CINVANTI in the U.S. prior to the expiration of U.S. Patent. The Notice Letter alleges that the CINVANTI Patents are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in Fresenius Kabi’s ANDA.
- Hedge Funds Decreased Holdings by 479.0K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
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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Source: Trades of the Day