iBio (NASDAQ:IBIO) stock may have rallied 30% on Aug 24, but it’s been a very rough ride as of late. IBIO stock is down 67% from its high in just over a month. There is really nothing attractive about that type of price performance.
However, Monday’s action may change that observation a bit. Granted, when a stock is down that much, there is really not any one day’s worth of action that can completely change the narrative.
For iBio though, it’s about as close to a one-day turnaround that we’ll find.
Let’s have a look to see if this move is for real.
Trading IBIO Stock
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There are pros and cons with the recent price action in iBio.
On the plus side, we had a “look below” and reversal off the $1.88 level. This mark has proved to be notable in the past, first acting as resistance in March, May and June before becoming support in July. For bulls, they will want to see IBIO stock maintain above this mark.
Further, the stock is setting up in a falling wedge pattern, albeit an extreme one. Falling wedges aren’t guaranteed bullish setups, but if they resolve to the upside the move can be robust.
Despite a 30% one-day gain, there are cons too. The first is that shares were up 58% at one point in the day. So, to gain “just” 30% feels weak given the day’s price action. Second, the 10-day moving average acted as resistance, while IBIO stock was unable to clear wedge resistance.
For bulls to garner any meaningful momentum, these two levels need to be reclaimed. If the stock can do so, it puts the 50-day moving average as a clear upside target near $3.
Investors who do not like volatility should probably avoid IBIO stock. This one is a wild mover, with big ups and downs. That said, after a huge move to the downside, this one is threatening to move higher once again.
Conservative traders who want to take a stab can consider a long position with a stop-loss just below the prior low, which is at $1.70. Below that mark and the 200-day moving average is likely in play.
Breaking Down iBio
The fear with IBIO stock is the quality of the rally. Is it really because investors believe in its treatment solutions for the novel coronavirus, or is it simply a squeeze higher because other Covid-19 plays were rallying?
Some feel as though it was the latter that sparked iBio higher — which also helps explain why the stock faded so hard from the session highs.
On Aug. 23, the FDA gave the go-ahead for emergency use of convalescent plasma for treating the novel coronavirus. In the words of William White, “This opens up the way for plasma companies to use plasma from people previously infected by the virus to treat those currently being affected by it.”
Using plasma could help those that are already infected with Covid-19, but there’s a catch: That won’t stop a vaccine from coming along. Short of iBio upending Johnson & Johnson (NYSE:JNJ), Gilead Sciences (NASDAQ:GILD) or some other deep-pocketed biotech player for the treatment, iBio’s upside may be limited.
On the plus side, iBio stock could be positively impacted by this FDA announcement.
The company does have exposure to plasma, although the FDA’s emergency use authorization isn’t exactly the same thing as saying, “we will be using iBio exclusively for plasma treatment.” As such, investors must realize this is a high-risk play and may consider waiting for further price confirmation.
At least wait to see if iBio stock can close above downtrend resistance and the 10-day moving average. Then at the very least the stock has momentum on its side.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
