As far as bad ideas go, my analysis on Zomedica (NYSEAMERICAN:ZOM) turned out to be very reasonable. No, it wasn’t a profitable one. And surely, TipRanks – which doesn’t account for things called nuanced assessments – will judge my take on ZOM stock as a failed one. But if you really took the time to dissect my parting words, you should recognize that failure is too draconian a term in this case.
While I acknowledged the bullish argument for ZOM stock – many of which my InvestorPlace colleagues have forwarded – I also stated that shares represented a risky venture. Indeed, I don’t think anyone who has written about Zomedica ignored the downside threats that speculators face. After all, ZOM was a penny stock in the truest sense of the phrase.
Therefore, on March 12, I stated that if you were dead set on buying ZOM stock, take whatever that magic figure is and spend 10% of it. With the other 90%, just wait for a better read on the situation. I’m glad I said that.
Initially, ZOM stock popped higher, making my 10/90 bullish split seem awfully conservative. But the following session was apparently the peak. Since then, shares have been on a downward slide. Had you gone 90/10 instead, you would have devastated the speculation side of your portfolio with a 51% loss.
Going my way, you still did absorb the 51% loss but you did it to a small portion of your portfolio, meaning that your powder keg should be very dry. If you believe in ZOM stock, guess what? You’ve got yourself a half-off discount. Congratulations!
But should you actually take the discount? While I can understand the temptation for the bulls, you may want to reconsider as the narrative may have completely shifted.
The Market Is Speaking Loud and Clear for ZOM Stock
For the past several weeks, local news in Riverside, California followed the story of a couple that bought their dream home in early 2020. Suddenly, the pandemic hit and the previous owner that was scheduled to move out abused the crisis for his own gain. Essentially, he squatted on the property while the new owners had to pay the mortgage on their $650,000 home.
Finally, after a 16-month ordeal, the previous owner mysteriously left, allowing the couple to move in. Now, they say, the experience and the agony has soured them on the home.
I can hear some of you saying, rich people’s problems. From my outside perspective, it seems crazy that getting what you want is not what you want. It sounds like a mental illness. But the reality is that where the couple was 16 months ago and where they are today is different, at least to them. This story parallels ZOM stock.
When shares were moving toward the $3 mark, it was clear that the market believed in Zomedica’s fundamentals, such as its diagnostic platform Truforma. As you know, millennials love their pets – perhaps more so than they love humans. I can’t blame them there. With Truforma, Zomedica can provide effective diagnostic solutions at a more reasonable rate than competing platforms.
This and other positive catalysts inspired many to take a shot with ZOM stock, but now that paradigm has changed.
When I last discussed Zomedica, its equity unit was priced above its 50-day moving average, which in turn was above the 200 Displaced Moving Average (DMA). These are some of the classic technical signs you look for to justify continued buying activity.
Today, the situation is far different and not in a good way. ZOM stock trades below its 50 DMA and is sandwiched between the 50 DMA above and the 200 DMA below. Chances are, the bears smell blood in the water and the price will continue to decline.
Wait for Stabilization
Of course, if you truly believe in Zomedica, you can get aggressive and attempt to catch a falling knife without getting injured. Personally, I believe even the most ardent bulls should wait for a stabilization period before thinking about ZOM.
What everyone must realize is that extreme boom-bust cycles tend to see sharp movements in both directions. With the amazing ride that ZOM stock took, it’s not out of the question that shares could tumble further still.
As I said before, the market has spoken. You don’t need to push your luck here.
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.