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: Cabaletta Bio, Inc. (NASDAQ: CABA)
Today’s penny stock pick is the clinical-stage biotechnology company, Cabaletta Bio, Inc. (NASDAQ: CABA).
Cabaletta Bio, Inc. focuses on the discovery and development of engineered T cell therapies for patients with autoimmune diseases. Its lead product candidate is resecabtagene autoleucel, a 4-1BB co-stimulatory domain-containing fully human CD19-CAR T, which is in Phase 1/2 clinical trials for the treatment of dermatomyositis, anti-synthetase syndrome, immune-mediated necrotizing myopathy, juvenile myositis, lupus nephritis, non-renal systemic lupus erythematosus, relapsing and progressive multiple sclerosis, mucocutaneous and mucosal pemphigus vulgaris (PV), systemic sclerosis, and generalized myasthenia gravis.
The company also develops DSG3-CAART, a CAAR T cell therapy that is in Phase 1 clinical trial for the treatment of mucosal PV; and MuSK-CAART, an investigational cell therapy in Phase 1 trial for treating patients with anti-muscle-specific kinase (MuSK) antibody positive myasthenia gravis. It has collaborations with the University of Pennsylvania and the Children’s Hospital of Philadelphia; Nanjing IASO Biotherapeutics Co., Ltd; Oxford Biomedica; Autolus Holdings (UK) Limited; and WuXi Advanced Therapies, Inc. The company was formerly known as Tycho Therapeutics, Inc. and changed its name to Cabaletta Bio, Inc. in August 2018.
Website: https://www.cabalettabio.com/
Latest 10-K report: https://www.cabalettabio.com/investors/sec-filings/all-sec-filings/content/0000950170-25-047201/0000950170-25-047201.pdf
Analyst Consensus: As per TipRanks Analytics, based on 9 Wall Street analysts offering 12-month price targets for CABA in the last 3 months, the stock has an average price target of $12.00, which is nearly 398% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reported favorable profile with 90% of patients experiencing no or mild (grade 1) cytokine release syndrome (CRS) and no immune effector cell-associated neurotoxicity syndrome (ICANS) across 10+ patients in RESET trials. Deepening responses were noted in myositis (skin/lung improvements), SLE (remission in 3/4 patients), and SSc (renal responses). Expanded trials (44 sites) and FDA Fast Track designations is expected to accelerate development.
- Cabaletta has expanded its CDMO agreement with Lonza, a leading Contract Development and Manufacturing Organization (CDMO), to supply rese-cel clinical product under current Good Manufacturing Practices as soon as the second half of 2025. The company also has Collaborations with U Penn, CHOP, IASO Biotherapeutics, Oxford Biomedica, Autolus, and WuXi bolster tech and production.
- Hedge Funds Increased Holdings by 1.2M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has currently formed a symmetrical triangle pattern, which is marked as purple lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
CABA – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
CABA – Weekly Chart
#6 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 CABA is above the price of $2.60.
Target Prices: Our first target is $3.50. If it closes above that level, the second target price is $4.20.
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 35% to 61%.
For a risk of $0.50, our first target reward is $0.90, and the second target reward is $1.60. 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, 2024, CABA had an accumulated deficit of $349.1 million.
CABA – Consolidated Statements of Operations
- CABA faces significant competition from many different players, including large and specialty pharmaceutical and biotechnology companies, academic research organizations and governmental agencies.
- The biotech sector faces headwinds like VC slowdowns, inflation, and regulatory scrutiny.
- The company may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. This may cause dilution to existing stockholders, restrict operations or require CABA to relinquish rights to its technologies or product candidates.
- Despite being a loss-making company, the executives are being paid significant compensation.
CABA – 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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Source: Trades of the Day
