Today, I’d like to start with the Novavax (NASDAQ:NVAX) stock synopsis, then back into the details of the opportunity. In early October there was a stalemate in NVAX stock. Unfortunately for the bulls, the outcome went the other way. The stock fell 35% before it bottomed into support at $80. Now, it is not hurting by any means — it’s still up over 3,000% this year, eclipsing most others. Clearly it has its fans, and they demand respect.
That is where we pick up the story today. It remains in a range between that and $150 per share. The bulls have also successfully built a platform at $100. Now they have tightened the range so they can try once more at taking out $150.
The reward from there could be another $40 and the possibility of a new high.
These price levels are important and will play a role in the next big move. Using similar logic, I noted risk on Oct. 13, just before the debacle started. I had also shared upside potential about a month earlier. The machines are in charge they become self-fulfilling prophecies.
How to Trade NVAX Stock Into Christmas
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From here, the NVAX stock trading strategy is clear. For the near term, traders should buy the dips into $100 or on a really bad day into $80. The idea is to catch a swing higher inside the current range.
The alternative to buying weakness is chasing rallies like the breakout from $150 resistance. This is completely different than investing for the long term in the success of Novavax. Today, the point is to trade the action while management develops the consumer business. They are making progress but it’s the FDA’s opinion that matters.
Now we back into the whole market prism that we have this week. There is extreme nervousness on Wall Street even as relief hit the medical community. Yesterday, Pfizer (NYSE:PFE) delivered its first doses of the Covid-19 vaccine, and more will follow. Even though we know that the vaccine is not an overnight solution, it feels good to finally have it. This will go a long way to help ease the psyche on main street and eventually on Wall Street. There are a slew of other companies following PFE, like Moderna (NASDAQ:MRNA) and Novavax.
It is important to note that today our focus on NVAX stock is from a trading perspective. The fundamentals of their vaccine and its effect on the company P&L are secondary at this point. A lot of the price action is too volatile to make sense of it from the traditional metric perspective. They have never had a vaccine come to market, so the stock price hoopla is based on pure forward hope. For humanity’s sake, I am pulling for the company to deliver a great product this time. The more vaccines on the market, the better odds of squashing Covid-19 for good.
Going Back to Normal May Not Be that Easy Yet
The vaccine’s effects on the economy of will probably take months. The new normal will be different than the old one, but thanks to great vaccines, maybe not by much. With that scenario, the bulls should remain in control of stocks for months to come.
Within that prism, NVAX stock continues to show promise. It has an opportunity near $150 per share and has support within $20 below. Therefore, the bulls should feel better about attacking the neckline above for a breakout. If that happens, they could trigger a momentum trade to finally bring new all-time highs. Conversely, bearish stints are only temporary because of support below.
The Wall Street Bulls Can Help
This stock market is incredibly bullish in spite of terrible economic conditions. If the equities bulls continue to buy the markets up, then Novavax stock rides those coattails higher. In addition, it has its fair share of fans, and they are avid. I am almost certain that they will buy stock on dips as long as the hope of a vaccine lingers.
We cannot discount the possibility of disappointment, because it has happened before. In fact the stock price is three digits now only because of a 20 to 1 reverse split in May. Pandemics are rare so onus is on management to take advantage of this one. They need to bring a good thing out of a terrible event. So far Wall Street is giving them the benefit of the doubt. In all honesty I am somewhat of a skeptic but not to the point of shorting it.
Until the final verdict comes out, I favor trading it more than going all in betting on their success. I would go as far as calling it a speculative bet so I caution against averaging down on weakness. Doing so in a stock that doesn’t yet have a booming business could lead to financial debacles. The investment in Pfizer for example is different because they have a diverse line of products.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.
