Recent polls suggest that most Americans have come to terms with living with Covid-19 on an ongoing basis. This means that the headlines from this crisis affect stock prices less than last year. This is bad for Novavax (NASDAQ:NVAX) stock, but good for the health of our citizens.
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Therefore, it is not a surprise to see NVAX stock touch lows from the pandemic summer.
This is a very active stock, so its investors need a high tolerance for risk. Chasing it on emotions can cost you a fortune. Today we will use charts to help with finding footing.
The recent swoon does not mean the end of NVAX, and the fans are not wrong. They still have the US upside potential brewing. But for the time being, its popularity has lost a lot of luster.
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Adding more to this is the crisis in the Ukraine. On Monday, matters escalated after Russia sent in peace-keeping troops across the borders. When the world is busy worrying about World War III, everything else fades into the background.
NVAX Stock Fundamentals Are Stronger Now
Source: Charts by TradingView
The fundamentals for NVAX stock are not bearish. Even though they have not launched in the U.S. they have reported sales already. This company has been trying since 1989, and they finally have income from Main Street. Revenues for the trailing 12 months were more than $1.1 billion.
The company has come further than ever. It took a pandemic crisis and a panic need for vaccines, but they did it. Also governments when in panic mode eliminated unnecessary red tape to get things closer to market.
This is my indirect way of saying that the best case scenario for sales may have already passed. Going forward Novavax will need to show sustainability of income. I am not trying to belittle what they have done so far. The world is thankful for companies like it to have helped battle this killer virus. But my concern today is forecasting the future path of the NVAX stock.
There Is Support Below
The good news is that the stock is now on sounder footing. I was not a fan of chasing its runaway rallies from a year ago. We now have the exact opposite scenario, where NVAX stock is falling into prior to break out lines. When stocks do that, they find willing buyers lurking. Meaning the path from the highs to here was easy. Going much lower will likely require much more bad news.
Those who have not yet panicked out of it may have support relief below. Jan. 24 was a tough test for the entire market. Stocks were falling out of control and NVAX placed a bottom at $66 per share. As long as it stays above that, the bulls have footing on which they can build a recovery rally. I don’t anticipate it goes back to prior highs anytime soon. So, investors need to be realistic with their expectations. But there is the opportunity that lies in between both extremes.
If the indices stabilize this week, NVAX could use this current footing to rally back above $100 per share. This leaves plenty of room for relatively fast profit opportunities. Investors with longer time frames can also initiate partial new risk more confidently than above $200 levels. But first they must revisit the reasons why they liked the stock.
Leave Room for Doubt
Having support is not foolproof, so I would suggest only taking partial positions. This is not a stock for my portfolio because of the nature of the business. Biotech and pharma companies like this are susceptible to surprise headlines any day. This is like having a an earnings report every day of every week. Investor should come to terms with the type of stocks they own, and this one does not fit my profile.
Nevertheless the opportunity is real and tradable short term. For the next two weeks, if NVAX stock falls below $78, I would stop out of longs. Because, this could trigger an additional 8% drop from there. Conversely, if the bulls can take it above $85 per share they may extend it another 9%. There will be resistances all along the way starting at $88 per share.
Wall Street is now hostage to headlines. The largest ones are from the Russian and Ukrainian fronts. I doubt that the world wants a global war, so I am optimistic they avert one. Until then, the proper course of action is to remain vigilant with risk size and proportions.
If I am long NVAX stock, this is not the time to add to my risk. Those looking for new entries can nibble with partial positions. Going all in regardless of conviction is wrong. There are too many extrinsic factors that could get in the way and ruin the best laid plans.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.
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