One of them is a large, juicy biotech gapper.

Specifically, a  biotech stock trading higher on a fresh catalyst.

By now, many of you probably know that I love to trade penny stocks.

However, as my Biotech Breakouts members know very well, I hold a special place in my heart for small-cap biotech stocks.

Unlike other stocks, I view biotech stocks as having an element of predictability to them.

That’s because biotech stocks often have upcoming catalysts.

These upcoming catalysts allow me to prepare for various outcomes and scenarios ahead of time and pull the trigger if one plays out.

That’s precisely what happened last week, and my members were informed of my thoughts and game plan each step of the way!

Let me explain:

Last Thursday, LGVN came out with some strong phase 1 data and quickly became a Biotech Beauty after it closed the day up 105.36%.

In the beginning, I mentioned there are a few things that get me excited about the trading day.

Want to know another?

I love sharing my thoughts and game plans with my members.

As I do daily, I shared my watchlist with my members and let them know that LGVN would be on my radar for a potential entry after they reported strong data.

I shared my trade plan and shortly after acted on that plan and made a successful trade in the stock.

My average entry price was $13.75, and my average exit price so far has been $15.70. 

I continue to hold a small position long for a $17 target, from $13.75.

I also pointed out that the key here is what the data is for (Alzheimer’s and Dementia) and that it might be significant, and the market could react accordingly.

By putting the bigger picture together, by understanding the significance of the news and the history of LGVN’s performance (looking back in time on the daily chart), I was able to trade this stock successfully and share my thoughts and game plan along with the way with my members.

We’re one week into the new trading year, and I am already seeing signs that this might be another year filled with opportunities and room for growth. 

We’ve picked off right where we left off, in 2021.

Knowledge is power, gang, and today I want to share some important information that might be useful to you.

There are times when a stock appears to have immense selling or buying pressure or significant overnight gaps which are hard to understand.

In some cases, these moves might be the result of SEC filings.

You see, gang, publicly-traded companies in the U.S. need to report and file with the SEC.

The EDGAR database provides access to the fillings and allows the public to research a publicly-traded company’s financials and operations. 

Now I know that this can all be overwhelming, so I want to break it down for you! This is why I want to tell you three essential types of filing that I believe are important to understand.

Why does it matter?

As you know, I love trading biotech stocks and penny stocks.

It’s no secret that many small-cap biotech stocks need capital to finance their operations and drugs in the pipeline, whether it is a phase 1 or 2 prospects.

It is beneficial, in that regard, to understand what filings exist that alert me to whether or not a stock I am focusing on has dilution, which could impact the stock’s ability to trade higher.

Therefore, It is essential to understand what type of filings relate to an offering or possible dilution.

Important company communication, such as press releases, are also filed with the SEC, and it is essential to note what filing relates to that.

Gang, I also find it useful to be able to identify a company’s earnings report and make sense of it. It might help a trader or investor make essential decisions.

Form 8-K

A company will file an 8-K because they need to report specific material, corporate events. 

For example, a company might file an 8-K because they need to communicate an unregistered sale of equity, or perhaps the company entered into a material definitive agreement.

For example, here are 8-K filings filed by PTPI with the SEC on the 27th of December, 2021.

Form 10-K and 10-Q

The 10-K is an annual report that domestic public companies must file with the SEC. The 10-K form provides a detailed overview of the company’s business and financial condition and will include audited financial statements.

The 10-Q, on the other hand, is similar to the 10-K. However, it is filed every quarter. The 10-Q includes an ongoing view of the company’s financial position during the year.

Here is an example, using PTPI again, of where to find a 10-Q and what it looks like on the SEC site. 

Simply scroll down the page until you see 10-Q under the “Form type” column.

Form S-3

I’m sure many of you might have heard of the S-1 filing used by companies who plan to go public. It is used to register the company’s securities with the SEC.

However, what if a company is already public and wants to register securities to sell to raise capital?

That’s where the S-3 comes in.

The S-3 filing is used when a company wants to raise capital after the IPO (initial public offering) has already occurred.

For example, here is an S-3 filed by OPTT on the 19th of November 2021. 

As you can see with that example, the S-3 Form will lay out all of the essential information about the offering and include the security type and how the proceeds will be used.

In this example, I can see that this offering relates to selling stockholders and that the company itself will not receive any of the proceeds from the sale of shares by the selling stockholders.

The Bottom Line

Gang, there are many different types of filings and even different versions of some types of forms. However, these three forms provide a decent foundation and starting point. 

If you enjoy doing research and due diligence, you can always build on this from here.

I do not make any single trade based on filings. However, the information I gather from filings might impact a trade decision or trade management.

As I said, knowledge is power, and I like to be armed with as much knowledge and skill as possible.

Knowing how to navigate the fillings is one way I do that.

So excited that missing the opportunity is just NOT an option.

However, one condition still needs to be met for this setup to be confirmed.

With that being said, before I get into the fun stuff, I think there is an important lesson to be learned.

Trading is fun, and I love to be active and in and out of stocks. However, I don’t trade just for the sake of trading. I always come prepared with a plan, solid risk management, and clear targets. 

Take the above example, gang, where I have identified a great opportunity. I am not in the trade yet because I still need further signs and confirmation before entering, even though I love the setup and opportunity.

Patience and discipline are everything in this game. 

Remember, plan the trade and trade the plan. Never let the emotions take hold of you.

Alright! Now time for the fun stuff, gang.

Meten Holding Group (METX)

What is METX?

METX, according to Yahoo, provides English language training (ELT) services in the People’s Republic of China. It operates through four segments: General Adult English Training, Overseas Training Services, Online English Training, and Junior English Training. The company delivers English language and future skills training for Chinese students and professionals.

Key Stats

Over a year, the stock is down 85.28% and has traded in a clear downtrend. However, it now finds itself consolidating on a higher time frame.

Market Cap: 94.34M

Float: 315M

Short Interest: 2.91%

The stock, according to Finviz, has an average target price of $3 set by analysts covering the name.

The Setup

The stock has been in a long downtrend and recently formed a sideways consolidation pattern, which I love.

I also like how the MACD is showing a positive divergence, meaning it’s been moving up while the stock is going sideways.

The consolidation pattern provides a unique opportunity to catch a potential reversal and momentum and offer a substantial risk: reward opportunity.

My Plan

I am keeping a close eye on the stock for a consolidation breakout.

A move over $0.27, ideally with a significant increase in volume to back it up, might be the signal and confirmation I need to get long.

If the stock can break out of the consolidation and hold above, I might get long and target the mid $0.30s as an exit. 

This has been a year for the books, with small caps, penny stocks, and the overall market. The resilience and strength of the market in 2021 will be remembered for years to come.

The year has also been filled with opportunities across the board. 

So I am focused on bringing my A-game next year because, in my opinion, the opportunity is here to stay!

As the year comes to a close, I wanted to leave you with an end-of-year gift, Gang.

I am going to, in detail, explain how I traded and capitalized on a setup in a penny stock.

It wasn’t just any regular setup. Instead, it was a stock with breaking news that resulted in a significant breakout.

Therapeutic Solutions International (TSOI)

According to Yahoo, TSOI focuses on immune modulation to treat various specific diseases. The company develops a range of immune-modulatory agents to target cancers, improve maternal and fetal health, and fight periodontal disease, as well as for daily health.

As you can see, on the daily chart and higher time-frame, the stock has consistently been in a downtrend since reaching a high of $0.1345 in August.

More recently, the stock spent four days consolidating after it made a low of $0.0185.

It appeared that the stock needed a catalyst to break the downtrend and reignite volume in the name, and that’s precisely what happened two days ago.

Recent News: Dec 28, 2021, TSOI awarded a landmark patent for cancer and COVID-19 treatment.

Here’s a look at a two-day chart showing the previous two days.

The impact of the news was significant.

As a result of the breaking news, the stock broke out of the downtrend and consolidation and more than doubled in value in one day.

The volume and news in the stock quickly grabbed my attention.

The opportunity was there, and the volume and range existed. Now, all that I needed was a plan and opportunity to enter.

After the stock broke out midday and experienced a sharp increase in volume, I was looking for the action to hold up.

At 2 pm, the stock again saw volume increase as the stock broke out of an intraday consolidation breakout pattern.

This made me believe that this stock could have continuation and momentum to the upside.

I was now looking for an entry opportunity.

I noticed that the stock was holding above the morning high and sustaining the volume increase into the close, and therefore entered the long on a slight pullback.

After letting my members know about the setup and idea in the chatroom, I got long TSOI at $0.039, around 2.22 pm. 

I sold the position at $0.0434, around 2.49 pm.

I took advantage of the range and volume in the stock by entering on a pullback (first highlighted area) and selling on a move higher towards the resistance of the consolidation (second highlighted area).

However, as the end of the day approached, I was looking for another entry as I believed the stock could have overnight continuation and trade higher the following day.

Therefore, I got long once again at $0.043, near the close, looking for a move towards $0.05. I had confidence in the idea as the stock remained strong throughout the afternoon, and the volume held up.

The following day, I sold ⅔ of my position at $0.04855, from $0.043. As I was looking to sell the remainder near $0.05. The stock reversed and pulled back, and therefore I sold the remainder of the position at $0.042.

Just four more days left of trading for the year.

One thing is for sure: the market is not in holiday mode, and therefore neither am I!

I am still seeing, daily, stocks breaking out, and experiencing continuation and momentum.

And not just individual stocks, but also the overall market.

Yesterday the SPY closed the day at a new high of $477.26, finishing the day up 1.42% and 27.65% year to date.

Not only is this good news for the bulls, but it is also good news for small-cap and penny stock traders as the bullishness and strength in the overall market might lead to an increase in opportunities in small-cap stocks.

Yesterday there was undoubtedly opportunity in small-cap and penny stock land.

One stock that I mentioned to my members live in the chatroom and on my Mid Day Watchlist was USEI.

US Energy Initiatives Corporation (USEI)

USEI, according to Yahoo, markets topical ointments, cannabis oils, tinctures, and vapor pens and accessories. The company was formerly known as Hybrid Fuel Systems, Inc. and changed its name to U.S. Energy Initiatives Corporation Inc. in June 2006.

Yesterday the company released an interview on its Metaverse plans.

As a result of the news, the stock closed the day up 53.33% and traded an unusual amount of volume, far greater than the average volume.

As you might know, the Metaverse is a hot topic right now, and therefore it came as no surprise to me that the stock might experience momentum and a sharp increase in volume due to the news.

When posting my Mid-Day Watchlist and outlining my plan and thoughts for USEI, the stock was trading at $0.002 and up 33% on the day. 

I was looking for the stock to provide an entry in that area, and I was targeting $0.0024 – $0.0025, the previous high from mid-October.

Sometimes, the stock goes without you, and that’s what happened here. I never got my entry. 

However, the stock did trade to my target and closed near the high of the day.

I liked the $0.002 area for an entry as the stock broke above the previous day’s high and formed a consolidation above the previous resistance.

As we approached the close, the stock broke above the resistance and closed near the highs. This was a textbook consolidation leading to a breakout pattern.

Going forward, I will be looking to see if the stock can hold these current levels and form a higher low or a consolidation.

If the stock can hold near yesterday’s high or above it, and turn it into a level of support, then the next potential target area and resistance will be $0.003.