Wednesday’s TSX breakouts: This stock features unanimous ‘buy’ calls and an expected average return of 71%

On Tuesday, North American equity markets closed relatively unchanged.

In the U.S., the Dow Jones Industrial Average fell 0.26 per cent, the S&P 500 Index declined 0.20 per cent, and Nasdaq composite gave up 0.18 per cent.

In Canada, the S&P/TSX composite index posted a gain of 3 points, or 0.02 per cent to close at 14,685. There were 104 securities in the Index that advanced, 133 securities declined, and three stocks closed the day unchanged.

On Tuesday, there were three notable stock movers, shares of Richie Bros. Auctioneers Inc. (RBA-T), Potash Corp. of Saskatchewan Inc. (POT-T), and Agrium Inc. (AGU-T) realized one-day gains of 24 per cent, 11 per cent, and 7 per cent, respectfully. Ritchie Bros. announced the acquisition of IronPlanet as well as a strategic alliance agreement with Caterpillar Inc., becoming Caterpillar's preferred global partner for Ritchie Bros.' auctions. Meanwhile, Potash confirmed it is in discussions with Agrium with a potential merger of the two companies.

The S&P/TSX composite index is up 0.70 per cent month to date, up 4.41 per cent quarter to date, and has a gain of 12.87 per cent year to date.

With the final trading session of the month, equity markets may remain subdued today as investors await the release of the U.S. August non-farm payrolls data. This key data point is due out on Sept. 2, and it may set the stage for stock market performance for the month of September.

Looking back over the past 26 years to 1990, the S&P/TSX composite index has delivered negative price returns 50 per cent of the time during the month of September, and the average price return over the past 26 years is negative for the month. During the past five years, the TSX index has declined three of the times. During the month of September, the index fell 3.98 per cent in 2015, declined 4.26 per cent in 2014, advanced 1.05 per cent in 2013, gained 3.08 per cent in 2012 and fell 8.97 per cent in 2011. As you can see from these figures, September can be a volatile and unpredictable month for the stock market.

Turning to today's Breakouts Report, there are 28 securities on the positive breakouts list (stocks with positive price momentum) and the number of stocks on the negative breakouts list (stocks with negative price momentum) has jumped to 32. Of note is the recent strength in financial stocks with the appearance of many major banks on the positive breakouts list. Meanwhile, there is a rising number of gold stocks and real estate investment trusts that have come under pressure, appearing on the negative breakouts list, as the outlook for improving economic conditions rises and the potential for rising interest rates increases.

I try to appeal to a wide variety of investors. Discussed today is a stock that requires investors have a high risk tolerance. That being said, four analysts whom cover the stock see significant near-term upside potential with the average one-year price target suggesting the share price may jump 71 per cent over the next 12 months. The security highlighted today is Cynapsus Therapeutics Inc. (CTH-T). The stock is just 2 per cent away from resurfacing on the positive breakouts list.

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Cynapus is a pharmaceutical company involved in the development of a potential therapy aimed at treating motor fluctuations, called "OFF" episodes, that are associated with Parkinson's Disease. The company's product candidate, APL-130266, is a sublingual (a thin film strip applied under the tongue) formulation of apomorphine. The thin film strip treatment is aimed at quickly restoring motor functions. The U.S. Food and Drug Administration (FDA) has approved the use of apomorphine in treating "OFF" episodes through injections. Phase 3 clinical testing is currently underway. The company has global commercialization rights to APL-130277.

On Aug. 29, the company announced it received Fast Track Designation from the U.S. Food and Drug Administration (FDA) for APL-130277. As indicated in the news release, "Companies that receive Fast Track Designation are provided the opportunity for more frequent interactions with FDA during clinical development and are potentially eligible for accelerated approval and/or priority review, if relevant criteria are met. Additionally, companies that receive Fast Track Designation may be allowed to submit completed sections of their new drug application (NDA) for the drug on a rolling basis, resulting in the potential for an expedited FDA review process."

With respect to the timeline with the advancement for its potential therapy, Anthony Giovinazzo, the president and chief executive officer stated, "We look forward to continuing to work with the FDA to advance APL-130277 through the regulatory process to bring relief to patients suffering with OFF episodes as expeditiously as possible. Our Phase 3 clinical program is nearing completion and we plan to submit a new drug application (NDA) to the FDA in the first half of 2017."

The Michael J. Fox Foundation funded the Phase 1 study, and is funding a sub-study within the Phase 3 trial.

The stock is listed on both the Nasdaq composite under the ticker CYNA, and on the Toronto Stock Exchange under the ticker CTH.

Dividend policy

The company does not pay its shareholders a dividend.

Analysts' recommendations

According to Bloomberg, there are four analysts whom cover this stock, amongst them is the analyst from BMO Capital Markets. All four analysts have 'buy' recommendations. Target prices in U.S. dollars are as follows: two at $24, $30, and $50.

The consensus revenue estimate is $17-million (U.S.) in 2017, and forecast to rise to $41-million in 2018 and $90-million in 2019.

Chart watch

While the stock price has increased nearly 14 per cent year-to-date, the move higher has not been smooth and steady but rather choppy and dramatic.

Shares of Cynapsus Therapeutics can be very volatile, especially given its low daily trading volume. The historical two-month average daily trading volume is less than 3,000 shares on the Toronto Stock Exchange, and approximately 70,000 shares on the Nasdaq.

The share price recently broke above a major resistance level of around $23 (Canadian). There is initial upside resistance around $25, and after that around $30.

There is downside support around $22, near its 50-day moving average (at $21.87), and further support in the $19 to $20 range, where its 200-day moving average lies (at $19.27).

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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Below is a list of securities principally from the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.