Will it or won’t it work? It’s a popular question right now on Wall Street and for good reason. And while doubts abound on the various interventions in play or in plan, the same can’t be said for coronavirus-play Co-Diagnostics (NASDAQ:CODX). However, does that make shares of CODX stock a buy? Let’s see what’s happening off and on the price chart to provide a stronger determination on shares. Let me explain.
Following another nauseating and historic tumble last week for the broader market, the Federal Reserve is trying to inject confidence into Wall Street with increased tough talk and actions. Before the opening bell on Monday, regulators pledged to buy assets “in the amount needed” to ensure effective monetary policy and to support the healthy functioning of financial markets.
The open checkbook policy raises the bar on last week’s $700 billion limit on asset purchases and had some investors briefly breathing easier. But lawmakers also failed to pass a trillion-dollar rescue package despite COVID-19’s impact continuing to escalate. And with the S&P 500 index falling to new lows Monday after a short-lived pre-market relief rally attempt, the question of whether the latest and bold monetary action is enough, is obviously still up for debate.
Notwithstanding the market’s own uncertainty and overall ill behavior, Co-Diagnostics is working. In fact, the company is cleaning up amid the coronavirus as a leader in sorely-needed test kits for the disease. The product is the real-deal and the molecular diagnostics outfit is ramping up production.
The outbreak, as InvestorPlace’s Luke Lango recently pointed out, has been a certain boon for Co-Diagnostics sales. Still, when it comes to investing in CODX stock, the Rx for investors is a simple one tied squarely or more aptly, to a triangle on the price chart.
CODX Stock Daily Price Chart
Source: Charts by TradingView
A strong uptick in business for Co-Diagnostics in the near-term can’t be overstated. But don’t make the mistake of extrapolating and salivating over the company’s longer-term prospects. Think of a business which only sells sno-cones in New York’s Central Park during the winter and suddenly enjoys one massive spike in sales due to a surprise and freakishly hot day with customers lining up. Similarly, the financial wherewithal and sustainability of CODX stock needs to be questioned. And in our opinion this determination for Co-Diagnostics can be found on its price chart.
Technically, a triangle has formed in Co-Diagnostics as the coronavirus outbreak has taken over the financial markets. The consolidation pattern lends itself to a larger continuation move once either support or resistance is broken. And bearishly, in Monday’s session, shares have broken “fitted” angular support. Coupled with stochastics on the verge of a bearish crossover despite its oversold positioning, CODX’s day of reckoning may be here.
The final straw for bulls would be if shares break below $7.75. At that point the current challenge of the 62% retracement level and a more extreme support line tied to the March low will have failed.
If investors are long or are considering buying shares of Co-Diagnostics, I’d definitely pull the plug at that point. Bottom-line, this isn’t Apple (NASDAQ:AAPL) or a Home Depot (NYSE:HD) and CODX stock investors shouldn’t fall into the trap of thinking a cheaper share price yields more value.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.