Before you blast me with what I’m about to say next, I’m not pointing fingers, just to be clear. However, the pharmaceutical and biotech industries demonstrated cynical capitalism at its finest. When the novel coronavirus first hit us, the crisis threatened to disrupt everything. Naturally, everyone that could transitioned to addressing SARS-CoV-2. You can add BioNano Genomics (NASDAQ:BNGO) and BNGO to this list.
To be honest, many of these biotech pivots had my eyes rolling. It just seemed to me that any medical solution for any medical condition – fungus, cancer, hair loss, you name it – was suddenly a viable platform for attacking the virus that causes Covid-19. You’ll forgive my skepticism as many of these so-called synergies didn’t appear logical or more importantly, viable.
However, there are certain investments where, even if the underlying motivation is more cynicism than science, the pivot makes sense. Fundamentally, this may be the case for BNGO stock. The underlying company has an exciting business unit called Saphyr System, which specializes in optical genome mapping that can identify structural variants of microorganisms.
Thus, outside the Covid-19 narrative, BNGO stock is a relevant play on the burgeoning field of cytogenetics – a branch of genetics “that studies the structure, function, and evolution of chromosomes.” Given the rise in cases involving genetic disorders, biotech firms like BioNano survived or thrived from speculation that cytogenetics will spark next-generation medical solutions.
While we may be a bit removed from addressing genetic ailments, BioNano received huge interest recently because its Saphyr System produced encouraging research results regarding the nuanced workings of the SARS-CoV-2 virus. As BioNano stated last month in its press release, Saphyr “may provide key insights into the pathogenesis of COVID-19 and outcomes in patients who become severely ill.”
The Allure and Danger of BNGO Stock
Prior to the Super Bowl, many worried that various parties celebrating the big game may lead to superspreader events. Because there’s a lag between infections and the reporting of them, we may not know for several days whether this materializes. If so, there’s another cynical element to consider if you’re bullish on BNGO stock.
To be fair, though, Covid-19 cases have sharply deteriorated over the last few weeks. According to the latest read from the Centers for Disease Control and Prevention, daily infections dipped into five-digit territory on Feb. 7, with the trend reassuringly negative. If this continues, BNGO stock might appear to lose some of its newfound relevancy.
But it’s important to note that BioNano wasn’t necessarily banking on the pandemic. Instead, the coronavirus was a backdrop to prove that Saphyr could actually deliver practical solutions and that the system was just a pretty lab queen.
Basically, Saphyr is the Tom Brady of the cytogenetics sector, while Covid-19 is the Tampa Bay Buccaneers. By moving to a new team and winning a championship, Brady proved he’s no longer a system quarterback. It’s the same concept with Saphyr.
But is BNGO stock the Tom Brady of investments? Here’s where the story takes a twist. According to my InvestorPlace colleague Chris Tyler, a technical setup – a “symmetrical triangle pattern,” as he put it – suggests a possible upside move. He has some specific caveats that you should read about before initiating a position.
I’m partial to his argument about triangular patterns – I believe most technical analysts call it a pennant formation – because I used it myself for identifying a bullish rally in DraftKings (NASDAQ:DKNG).
However, you should also note that in the year-to-date when BNGO stock gained almost 64%, volume has been conspicuously declining. Typically, technical analysts regard a rising price, falling volume combo to be bearish.
Which Interpretation Do You Trust?
When it comes to technical analysis, I’d say I know a fair amount, although I always learn more from experts in the field. Chris Tyler is one such expert. Just from an education and credibility standpoint, if you had to trust somebody’s technical interpretation, I’d go with Tyler.
Don’t worry about making me feel bad because I’d choose Tyler over me any day.
However, there is a part of me that says, hold on now! What’s interesting about my DKNG bull call was that volume confirmed the pennant formation. With BNGO, volume is only partially confirming it – as in prior to January 2021. In this year, volume is moving against the direction of BNGO.
So, where does that leave us? I’d say that if you don’t want the regret of missing out on BioNano, go ahead and put a modest amount of speculation money toward BNGO stock. But do keep the powder keg dry because this technical setup may be flawed.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.