This Is Why Penny Stocks Won’t Lose Their Luster
If you’ve ever second-guessed penny stocks, you’re not alone. There are plenty of traders in the stock market today that will avoid these cheap stocks entirely. However, for those who’ve avoided this equity class, they’ve missed out on some of the biggest movers of the year. Most recently, we’ve seen the sweeping explosion in attention surrounding Genius Brands (GNUS Stock Report), for instance.
While I won’t get too far into GNUS stock, I will point to it as a clear example of why day traders continue to look for penny stocks to buy. That former penny stock was trading at $0.33 on May 6, one month later, GNUS reached a high of $11.73. Maybe an $11 move isn’t impressive for a stock trading above $300 but for a $0.33 stock, that’s a game-changer in my opinion. For those of you following at home, that’s a 3,454.5% move in a month.
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While this may be an eye-opener for some, others are quite used to seeing big breakouts. Are all penny stocks like this? Of course not but you’d be hard-pressed to go a day without at least 1 penny stock jumping 20% or more between opening and closing bells.
What Are Penny Stocks?
At this point, you’re likely looking to understand where to begin. Starting with the definition of a penny stock, the Securities and Exchange Commission made this one simple. According to the Commission, penny stocks are shares of companies trading below $5 per share.
While some people may define penny stocks as ones trading for literal pennies, we like the former definition for one simple reason. It allows us to write on a lot of small-cap and micro-cap stocks. This having been said, one of the latest penny stocks to break out comes out of the biotech sector.
Penny Stock Enochian BioSciences (NASDAQ: ENOB) Runs 405% Overnight
This leads me to the focus of this article: Enochian BioSciences (ENOB Stock Report). Anomalies like this have happened plenty of times over the last 6 months. For ENOB stock, this was a relatively unassuming name in the market. For the most part, shares traded between $3.50 and $4 during the second quarter.
The average daily share volume was around 52,000 shares a day, which puts the dollar volume around $200,000 per day. By most accounts, that’s a very low-activity penny stock compared to the hundreds of others that trade millions of dollars a day.
Now, why is that important? Trading volume or “liquidity” will determine how easy it is to enter and exit a trade. Simply put, the higher the liquidity, the better your chances are of getting a good price to buy penny stocks and a good price to sell them too. Lower liquidity doesn’t typically attract the flocks of day traders like another stock such as GNUS, for instance.
However, that all changed on June 8th. Enochian BioSciences, the company that trades less than 60,000 per day, saw more than 1.4 million shares traded before the market opened. Furthermore, the stock jumped from a close on June 5 of $4.12 to premarket highs of $19.46. I know we had the weekend in between, but for all intents and purposes, ENOB stock saw a jump of more than 400% overnight.
Why Did ENOB Stock Skyrocket?
Most biotech penny stocks have rallied this year thanks to coronavirus. However, Enochian BioSciences is mainly focused on a different kind of immune treatment. The biopharma company develops, manufactures, and commercializes gene-modifying cell therapy. It can be applied to a number of indications by mainly HIV/AIDS, HBV, as well as oncology.
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On June 8th the company came out with blockbuster news. Enochian completed an Initial Targeted Engagement for Regulatory Advice meeting with the U.S. FDA Center for Biologics Evaluation and Research (CBER) Office of Tissues and Advanced Therapies (OTAT).
INTERACT is the first available FDA interaction and is a key step in the process towards a potential Investigational New Drug to study First-in-Human products potentially leading to marketing authorization via Biologics License Application.
The meeting included management and scientists from Enochian BioSciences together with CBER OTAT staff. It focused on the pathway forward for ENOB-HV-01. The company’s ENOB-HV-01 is an approach to autologous stem cell transplantation, with the potential to cure HIV according to the company. The treatment increases engraftment of gene-modified cells that are resistant to HIV infection.
“We considered the meeting to be very successful, with strong alignment between Enochian’s approach to developing ENOB-HV-01 and the comments of the FDA reviewers,” said Dr. Mark Dybul, Executive Vice-Chair of Enochian BioSciences. Further to this, Chair of Enochian’s Scientific Advisory Board, Dr. W. David Hardy, said, “I believe the FDA reviewer feedback was very much aligned with our development plan. After more than 30 years as an HIV clinician and researcher, it is a great privilege to be involved with an enterprise with the potential to cure HIV, offering hope to millions of people.”
Weigh Risk/Reward With Penny Stocks
A jump like this is obviously an eye-opener but what does it mean for traders? No matter how new or experienced you are with penny stocks, there are a few obvious risks that could be at play here. First, ENOB is up considerably right now. Even at a low of around $14, shares are still up about 240%. Considering that the companies 5-year high is $9.50, this is also uncharted territory. Furthermore, that highest trading volume day during that time period was last December when ENOB stock traded just over 1.1 million shares.
The company’s 2020 Annual Meeting will be held on Wednesday, June 24, 2020. The topics to vote on aren’t anything unthinkable. Enochian is looking to nominate 8 directors as well as ratify its accounting firm. In May, the company gave 3 scientific presnations on studies related to its potential HIV and HBV cures at the Annual Meeting of the American Society of Cell and Gene Therapy.
Previous Results In Vivo: “Validation” According To Enochian
But what does this mean for the future of the company? That is something you’ll have to decide as you do more research. According to Enochian, an in vivo study demonstrated a 164% increase in engraftment of genetically modified cells. Furthermore, its in vivo studies “validate previously reported in vitro results” showing an average killing of up to 97% of HBV-infected cells. In response to this, Carol L. Brosgart, a member of the Enochian Board of Directors, weighed in.
“As we do not have a cure for HIV or HBV, this new research is compelling. Currently, we have good oral, safe and effective therapies that patients with HIV or chronic HBV must take daily, for life. This is challenging for many individuals. Non-compliance can lead to HIV and HBV viral resistance or to acute liver flares in patients with chronic liver disease. Patients and physicians all look to a future that could offer a cure,” Brosgart said.
She’s also an MD or Clinical Professor of Medicine, Epidemiology, and Biostatistics at the University of California, San Francisco. Given the June 8th update as well as this previous information, is ENOB going to be on your list of (former) penny stocks to watch, or is this jump too hard to navigate? Also, will it be able to maintain these historic levels or are shares set to slide back to penny stock territory? Leave a comment below.