Good evening chupacabras! Let’s GO!
I’m looking forward to another exciting week in Lightning Alerts. There’s a lot of hot stocks on this week’s watchlist so if the market cooperates, it’s Santa Rally time!
Monster Breakouts Resting In Fibonacci Retracements
AMAM, SMMT, and PHVS are strong Fibonacci retracement setups headed into this week. All carry a medium risk of an offering, though Pharvaris cash need is low meaning they are less likely to do an offering, compared to AMAM and SMMT. Summit has held up the best so let’s take a closer look. Trading Fibonacci retracement on recent breakout stocks that are resting is a lot of fun, but carries a big risk if you get caught in an offering. So pay attention to the cash need, historical, offering ability, and overall risk.
Fibonacci retracement is a method of technical analysis for determining support and resistance levels. It is named after the Fibonacci sequence of numbers, whose ratios provide price levels to which markets tend to retrace a portion of a move, before a trend continues in the original direction.
AMAM has 13.6 months of cash left based on quarterly cash burn of -$20.1M and estimated current cash of $91.3M. Their offering ability is high meaning a shelf offering or S-1 offering could create a large price drop. That said, historically they do not dilute a lot. Fibonacci fired Friday from the $1.90’s to low $3’s. I alerted this one in Lightning Alerts Thursday into Friday and was glad to see the plan work. If it can hold $2.40-$2.30 early in the week it might run for $3 again. Look for a base trade around $2.40 and range from $3-$4. Stop loss is a close under $2.30’s but overall it’s still in play until it closes below $2’s. Keep in mind Lightning Alerts put this one out at $.56 the same day it ran to $4’s. Then again $2 to $3’s Thursday into Friday. I don’t just alert these breakouts once, I stay on them until they give us a reason to move on and so far, this one hasn’t. $4 is a big sticking point on this stock, if that level were to fall it’s $8-$10 next. Trading less than their $3.02 per share cash right now, it’d seem to me $4 will be tested again at some point in the near future.
SMMT is a trade we’ve followed daily since the initial breakout, which Lightning Alerts once again was on top of the moment it ripped. Probably my favorite of the group because of how strong it has been, consolidating at a very high level all last week. However, I’m concerned about dilution, but first let’s look at technicals. Clearly $4 is the resistance here and $3 is the support. For me it’s in play above $2.50 but for this trade plan I want to see $3.30’s hold up and price action above $4 to signal it’s headed for $5. Their cash need is medium with 20.8 months of cash left based on quarterly cash burn of -$15.59M and estimated current cash of $108.1M. What’s interesting is individual insiders own the lion’s share with 84% ownership of the company. Shares surged as a result of a monster licensing agreement for a cancer program with Akeso in a deal for up to $5B. Historical dilution is high and their offering ability is high, leaving the overall risk medium according to Dilution Tracker. My take is if they don’t give shorts the offering they are looking for, this goes to $5-$6 soon, which the price action is strongly suggesting. Overall range is to $8 and as the stock showed us recently, it can move up a buck at a time pretty quickly.
PHVS has a low cash need and a low history of dilution despite a high offering ability through a shelf or S-1. The stock is up a ton lately but with 38.4 months of cash left based on quarterly cash burn of -$14.34M and estimated current cash of $183.6M I find it hard to believe they’ll kill this momentum with dilution, but anything is possible. I alerted this stock initially at $3.50’s before it ran to $11’s the same day. Then again late last week in the upper $7’s looking for that retest of $10-$12. So long as $7 holds, the Fibonacci retracement continuation pattern could fire long, into another breakout above $12, any day now. Volume has been light lately, which is good and bad. On one hand it’s not breaking down, however, it’ll need that volume if it’s going to squeeze back to the recent high.
Light Volume Low Floats Making Big % Moves
EXN, YQ, and TC put in big moves Friday but on light volume. What’s important is they did this against a big stock market headwind which tells us sellers may have moved on. I hate trading stocks without a lot of volume, however, the percent gains they had on Friday are too big to ignore because they could be a sign of volume to come.
EXN cash need is high with only 4.7 months of cash left based on a quarterly cash burn of -$0.85M and estimated current cash of $1.3M. Offering ability is low which makes overall risk medium. I’m watching it above $.50 for a move to $.80-$1. Stop loss is a close below $.50. I especially like this trade if gold keeps advancing, which right now looks likely.
YQ is a China reopening play in the education and training services industry. Cash per share is $3.67 meaning they have a war chest of $116.7M and are only burning -$3.3M quarterly. No risk of an offering here as far as I’m concerned. Now that $1.50 resistance has broken I’m looking for that to act as the base and see if this can bust through $2 which opens the door to $3.
TC crashed from $6.97 to $1.38 in November after the company did a $15M offering at $2.75. This is a pretty good example of why I care about dilution and try hard to avoid offerings. I really enjoy penny stocks but offerings are by far one of the biggest risks when trading them. Notice how they walked the stock up on light volume across 2-months, only to dump it in just 2-days? If a stock is up a lot recently, I want you to learn how to be defensive. It’s impossible to avoid all offerings but these guys were running out of cash at the same time as the stock ran from $2 to $10 in October and November with high offering ability. Warning signs were there. Now that it’s crashed, the fish hook is starting. No doubt some short interest grew on the way down, though it still seems relatively small, the volume is light so it’ll help if the stock advances. The trade plan is to watch for a second green candle early this week on rising volume. If that shows up, the range is $1.50 to $3 on a bounce. This nano-cap has a small float so if volume shows up, it can move fast.
Big % Moves With High Relative Volume
IVC, PHGE, and YTRA all had big volume spikes Friday accompanied by monster moves higher. Not a huge fan of IVC and PHGE but the price action is what matters so let’s have a look.
IVC only has 6-months of cash left, missed revenue estimates recently, and has been notified by NYSE about its stock price deficiency. Bottom line, it’s not looking good for these guys. With a new CEO in place (November) and a base at $.40-$.50 looking strong, I like this above $.50 to see if they can get it to $1+ soon. The overall declining trend line was broken Friday so that’s what’s key here, if that acts as a base trade, $.80-$1.20 is out there on a trend reversal.
PHGE has 14.4 months of cash left based on quarterly cash burn of -$7.31M and estimated current cash of $35.0M. Overall risk of dilution is medium, according to Dilution Tracker. Recently they boasted their cash runway, so I doubt they’ll drop an offering anytime soon. Okay so the volume was light Friday, but noticeable higher for the stock of late. I’ll watch this very closely at $.20 because if that volume builds, $.40-$.60 could be coming. Last time it had any meaningful volume was back in July, so if this Friday action doesn’t build momentum, we’ll move on quickly from this one.
YTRA is a stock I’ve followed for quite some time and I feel strongly it’s setting up for a breakout at $3. This one was trading above $3.50 prior to the pandemic and has the potential to run to $4+ in 2023. Notably the company is seeing record revenue days surpassing pre-COVID. Downside, cash need is high with only 4.8 months of cash left based on quarterly cash burn of -$3.47M and estimated current cash of $5.5M. Additionally the company has a high offering ability through a shelf of S-1, so if YTRA blows through $3 into a fresh breakout, I’ll be cautious with any overnight holds. Another idea I have here is wait for the offering and move in for a Hidden Gem long-term trade but we can cross that bridge when they dilute.
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