This is a caution for all investors. It’s always important to complete due diligence before you press that BUY button. If it looks too good to be true, it probably is!

• VirnetX (VHC) hit a new 52-week high in intraday trading on July 21.
• It shows strong technical momentum and has a 100% “Buy” signal via Barchart.
• Shares have gained more than 280% over the past year and 150% in the year to date.
• Despite impressive price action, fundamentals are weak. VirnetX has zero revenue, negative earnings, and a small market cap that raises caution. 

Today’s Featured Stock:

Valued at $85 million, VirnetX (VHC) is engaged in developing products for real-time communications such as instant messaging and voice over internet protocol (VoIP), commercializing its patent portfolio and providing contract research, prototyping, systems integration, and technical services.

What I’m Watching:

I found today’s Chart of the Day by using Barchart’s powerful screening functions. I sorted for stocks with the highest technical buy signals, superior current momentum in both strength and direction, and a Trend Seeker “buy” signal. I then used Barchart’s Flipcharts feature to review the charts for consistent price appreciation. VHC checks those boxes. Since the Trend Seeker signaled a buy on June 26, the stock has gained 105.95%.

VHC Price vs. Daily Moving Averages:

Barchart Technical Indicators for VirnetX:

Editor’s Note: The technical indicators below are updated live during the session every 20 minutes and can therefore change each day as the market fluctuates. The indicator numbers shown below therefore may not match what you see live on the Barchart.com website when you read this report. These technical indicators form the Barchart Opinion on a particular stock.

VirnetX shares hit a new 52-week high on July 21, touching $21.53 in morning trading.

• VHC has a 100% technical “Buy” signal.
• The stock recently traded at $20.08, above its 50-day moving average of $10.87.
• VirnetX has a Weighted Alpha of +65.68.
• The stock has gained nearly 282.91% over the past year.
• VHC has its Trend Seeker “Buy” signal intact.
• VirnetX is trading above its 20, 50 and 100-day moving averages.
• The stock made 18 new highs and gained 163.95% in the last month.
• Relative Strength Index is at 75.74%.
• The technical support level is $19.34.

Don’t Ignore the Fundamentals:

• $85 million market capitalization.
• The company did not report any revenue in the first quarter.
• Earnings are negative.

Analyst and Investor Sentiment on VirnetX:

I don’t buy stocks because everyone else is buying, but I do realize that if major firms and investors are dumping a stock, it’s hard to make money swimming against the tide.

Major Wall Street analysts won't cover this stock.

• No analysts that are tracked by Barchart cover VirnetX.
• Value Line gives the company its above-average rating.
• CFRA’s MarketScope rates the stock a “Sell.”
• Morningstar thinks the stock is 41% overvalued.
• 12,130 investors monitor the stock on Seeking Alpha, which doesn't rate this stock.
• Investor forums are filled with negative comments about VirnetX. This suggests that the company has a weak retail following or perhaps has burned retail investor support.
• Short interest in VirnetX has increased significantly, potentially indicating a decrease in investor confidence. As of the latest data from MarketBeat, VirnetX has a short interest of 270,700 shares, which represents 7.71% of the float. This indicates a more-than-80% increase from the prior month.

The Bottom Line:

VirnetX currently has momentum and is hitting new highs. However, most analysts won’t cover this stock. 

I caution that VHC is volatile and speculative. This stock is not an investment but is a highly risky speculation. Use strict risk management and stop-loss strategies.

Today’s Chart of the Day was written by Jim Van Meerten. Read previous editions of the daily newsletter here.

Additional disclosure: The Barchart of the Day highlights stocks that are experiencing exceptional current price appreciation. They are not intended to be buy recommendations as these stocks are extremely volatile and speculative. Should you decide to add one of these stocks to your investment portfolio it is highly suggested you follow a predetermined diversification and moving stop loss discipline that is consistent with your personal investment risk tolerance.