The pandemic disrupted everyone’s lives on the planet. But 2020 was also a game changer for hundreds of tickers on Wall Street. Bionano Genomics (NASDAQ:BNGO) stock is one of them. The novel coronavirus completely altered its stock price course.
Going into last Christmas the stock was 50 cents per share. Then suddenly it spiked 1,200%. Things went more bonkers from there. Be it the perception of its involvement in fighting the virus, or chat room rhetoric. Something was causing the stock to rally without commensurate tangible reasons.
I will give you my summary then elaborate on my logic.
BNGO stock has seen too much action without fundamental justification. It makes a better speculative bet than an investment.
The discussion today will take a technical point of view. But first let’s get the fundamentals out of the way. Spoiler alert, I’m not a fan!
I avoid messing with companies whose stock is skyrocketing while the fundamentals are dragging. This profit-and-loss statement has nothing currently interesting. There is no catalyst from growth or positive trend. Metric that matters is going the wrong way.
BNGO Stock Price Is Pure Hopium
This means that the optimism in BNGO stock lies purely in hopes of future successes. Evidence of that is that the price-to-sales metric is 170. Those who buy the stock today are giving the company credit for 170 years worth of sales. That is a lot of faith in its future executions. They do have a legitimate business and they serve the scientific community. But things haven’t improved in the last few months to warrant the increase in stock price.
While researching the company online, I struggled to find important milestones. The super-spike happened in February and it matches up with the GameStop (NYSE:GME) shenanigans. The stock rallied 2,600% in total from the December base. Sadly for the bulls, it gave about half of it back already.
Here it is just under $8 per share and consolidating sideways for the last few weeks. The range is tightening while the bears are able to impose their will with lower highs. Conversely, the bulls have stabilized in a stance at $7 per share. This battle is getting tighter and will resolve itself in the next couple of weeks. A move is coming so flip your coins and place your bets.
If the bulls lose the recent support, they risk another 30% drop from there. On the other hand, if they break through $9 then they can have a relief pop. I would use rallies to exit losing positions because it won’t be smooth sailing. There will be resistances on many levels, especially around $10 per share. Conversely, the support below is likely weak.
A Better Gamble Than Investment
Investing in BNGO stock is more gambling than capital appreciation prospect. Therefore, I would qualify this as a trade not an investment. For the next few months, the price will move more on chat room chatter than management successes. I’ve spent some time in various online rooms and the conversations are mind-boggling. I had a blast, but after a few minutes, it’s clear that the individuals are new to investing. Moreover, it feels more like a poker room than a place to research opportunities.
In the long run, this behavior will dwindle because the newbies will get wiser. Life has a way of giving us the test first and then the lesson. They will find out that actions have consequences, especially if the indices correct. We haven’t had a bear market in a long while, so they haven’t seen selling yet. I’m not talking about a day or two of red ticks. We haven’t had persistent capitulation days in years.
For the sake of all investors, I wish this doesn’t happen now. But what we can do is avoid getting sucked into the memes. I don’t mind trading BNGO stock. In fact, I laid out a trading strategy on the chart. Buy-the-dip if the bulls fail to hold $7 somewhere closer to $5. Or chase-the-rip if they prevail above $9. Whatever I do should have very tight stop. It is important to leave nothing to chance when dealing with wild tickers like this.
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.