In hindsight, CRISPR Therapeutics (NASDAQ:CRSP) represented a once-in-a-blue-moon opportunity during the March doldrums of last year. For a brief moment, CRSP stock slipped below $40 as the world turned its eyes on the rapidly escalating novel coronavirus pandemic. However, shares didn’t stay deflated for long as they continued to march steadily higher despite the surrounding chaos.
Of course, you really had to have nerves of steel to take a bite out of CRSP stock. As a gene-editing specialist leveraging the CRISPR-Cas9 system – which gives bioengineers the ability to “modify, delete or correct” specific sequences of our DNA – no one disputes CRISPR Therapeutics’ radical innovations and its potential to address serious human needs.
However, throughout most of last year, the biggest human need was addressing Covid-19. Therefore, wagering on CRSP stock meant that you forecasted an unprecedented governmental response to develop and distribute vaccines, all while keeping the economy from tilting over.
The Positive Post-Pandemic Narrative of CRSP Stock
With coronavirus cases appearing to have subsided to a much more reasonable level, it’s possible that the fundamentals could clear the way for CRSP stock to have a strong outing in 2021 and beyond.
First, with fewer Covid-19 cases to worry about, people will gradually return to hospitals and clinics to seek treatment for long-term conditions. That bodes well for the company’s pipeline, which includes solutions for immune-oncology and regenerative medicines, among other categories.
Second, CRISPR’s technology has myriad applications which the company could potentially explore. For instance, gene editing offers a controversial outlet regarding the concept of “designer” babies. To be sure, the ethical implications are incredibly nuanced, but we can safely say that the technology is moving us in that direction.
Less controversial is the CRISPR-Cas9 system’s facilitation of biofuel production. Leading up to the start of the new decade, scientists explored the idea of modifying biofuel compounds to promote desired traits “such as enhancing the biofuel tolerance, inhibitor tolerance and thermotolerance as well as modifying the cellulases and hemicelluloses enzymes.”
So, with all that CRISPR has to offer, why is its shares stumbling like a drunkard?
Technical Worries Abound for CRISPR
Although some of the headline talking points for CRSP stock appear enticing, drilling deeper into the details, you can’t help but feel uneasy about the biotech firm. Mainly, countering fundamentals pose headwinds for CRISPR Therapeutics.
On one hand, declining Covid-19 cases offer a bullish argument for CRSP stock, in that society will focus less on the SARS-Cov-2 virus and more on the usual stuff that sickens and kills us.
However, we must remember that the coronavirus isn’t just a health crisis, but also an economic one. While the labor market is improving, millions have lost their jobs and have not yet gotten back on their feet. And millions more could still lose their jobs in the months ahead – we just don’t know.
But that will likely cause a strain on our healthcare infrastructure as fewer people have access to health insurance. That will also translate to fewer jobs in the sector, which can have a ripple effect on expensive, experimental treatments.
As for designer babies, the Wall Street Journal reported that many developed countries are reporting a baby bust. So even here, the upside potential for CRSP stock has headwinds.
Regarding biofuels, it’s great that the science of “manufacturing” quality fuels is available. But until the process is economically viable, this might not be an angle worth pursuing.
Therefore, I can’t say that I’m terribly surprised that the technical outlook for CRSP stock is poor. And make no mistake about it – this is a bearish chart.
Between early December to late January, CRSP stock printed an ascending broadening wedge – generally indicative of chaotic trading and usually represents a bearish harbinger. While CRSP has already dropped significantly from the lower echelon of the wedge pattern, it may decline even lower.
Throughout most of 2018, shares charted a long-term bearish head-and-shoulders pattern. If the same peak-to-trough movement occurs this time around, we could be looking at a CRSP price of around $66.
Not for the Risk Averse
I want to be clear that I’m not suggesting that $66 is my price target for CRSP stock. I don’t know where shares will end up. But this isn’t the first time shares have printed a bearish technical pattern and made good on it.
Therefore, I’m staying on the sidelines for this one. But even if you’re bullish on CRSP, you might want to wait a bit for a better price. When in the midst of a severe decline, it’s hard for shares to come to a complete stop.
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.