Ocugen Stock Relief Pop Is Great, But It Needs More

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My least favorite time to write an article about a stock is just after a spike. I planned to discuss Ocugen (NASDAQ:OCGN) stock a week ago and yesterday it rallied 43%. Whatever upside I had for it played out in the span of one trading session.

stocks to sell A Medical healthcare technologist holding COVID-19 swab collection kit, wearing white PPE protective suit mask gloves, test tube for taking OP NP patient specimen sample,PCR DNA testing protocol process
Source: Cryptographer / Shutterstock.com

Therefore, today’s point would be to strategize for the next setup. I am not one to chase a runaway rally, even at the risk of missing out.

Before we discuss the specifics of OCGN stock, we should spend a few minutes laying the land. The indices are still making all-time highs in the face of headwinds. What’s helping the bulls are the trillions of dollars raining down from the White House and the Federal Reserve. However, valuations are close to extremes in many sectors.

Don’t get me wrong, I still believe that shorting the markets outright is very dangerous. This is especially true because we are going into an earnings week for the largest companies on the planet. Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB) are on deck and they are massive. The top 10 account for 27% of the S&P and 52% of the Nasdaq.

I am confident that they will report excellent numbers and most will beat the estimates. What is a mystery is how will the investors react to them. Often it is the expectations that matter more than the quality of results. Traders punished Netflix (NASDAQ:NFLX) even as it grew earnings and sales 139% and 24% respectively. It is safe to say that things may get dicey.

The short story here is that there is extrinsic risk to OCGN stock from the overall markets.

OCGN Stock Needs Actual Sales to Fuel More Upside

Ocugen (OCGN) Stock Chart Showing Potential Resistance Zone
Source: Charts by TradingView

Since the company does not have a revenue stream yet, all of its stock price is from hope. Those who buy the it today are betting on future successes. This week they got headlines that reinforce those odds, hence the spikes. It turns out they could be a lot closer to having a novel coronavirus vaccine. The next step is for the application for emergency use authorization from the FDA.

Wall Street doesn’t need much to party, so it is hard to short its positive news. But the rally takes the OCGN stock back into strong prior failure levels. Since early March, the bulls have failed to break away from $10 per share. The one time they did resulted in a sharp reversal in just one day.

This stock is not for the faint of heart. Those who have strong investment conviction need to just hold it for the long-term results. Trying to time its market is arduous and requires skill and luck. However the technicals can lend some help. From the charts, I can comfortably state that near $10 it is not an obvious point of entry. I would rather chase it after the breakout from it on a momentum trade. Notice the nuance of my use of “trade” versus the earlier “investment” comments.

Just like there is resistance above, the charts also suggest that OCGN has support below. Buying it into $5 per share makes sense if and when it reverts to that. I know it seems like it’s miles away now. But remember that it was there just two days ago.

It’s a Whole New Ball Game

We are going through an extraordinary transformation on Wall Street. The retail investors are flexing their muscles thanks to the flow of information. Individuals investors make up only about 20% of all trading. But they are acting like a collective, and that makes them matter more than ever before. Case in point what happened to GameStop (NYSE:GME) stock. Thanks to the collaborative efforts on Reddit, they were able to beat institutional money who shorted the stock. Large investment companies failed as a result.

To summarize my position on OCGN stock today, one must first decide on goals. If it’s an investment, then I cannot argue with someone wanting to chase it. The bullish thesis is still unfolding and no one can dismiss it yet. But from a trading perspective, I would rather wait out for a few more ticks and into early next week.

I learned over the years that I would much rather miss on upside potential than be the last person in. Investors should separate fact from opinion. In this case we have a fact of good news. Against it we also have a fact of prior failures at these levels. The rest is opinion, and it’s OK to vary from person to person. That is what makes a market because we need a buyer any seller for anything to happen.

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.

Nicolas Chahine is the managing director of SellSpreads.com.


Article printed from InvestorPlace Media, https://investorplace.com/2021/04/ocgn-stock-ocugen-stock-relief-pop-is-great-but-it-needs-more/.

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