Ocugen (NASDAQ:OCGN) has not delivered the gains that bulls have been hoping for. OCGN stock has given investors a taste of its potential, surging from sub-$1 in December 2020 to almost $19 a share in February.
Since then though, we’ve seen the stock settle into a tightening range. Shares continue to put in a series of higher lows and lower highs. This pattern — known more commonly as a wedge — will likely resolve one way or the other.
Put another way, traders are looking for a breakout or a breakdown, they just don’t know which yet.
With its $1.64 billion market capitalization, OCGN stock isn’t a massive company. However, based on the state of its business, some investors may not like the valuation. First though, the technicals.
Trading OCGN Stock
When looking at the daily chart of OCGN stock (below), do you see what I mean by the wedge pattern? Just look at the higher lows and lower highs, as the purple lines continue to tighten.
Shares are now trading down into wedge support, although Ocugen is struggling with the 50-day moving average.
Should wedge support give way, it puts the 200-day moving average in play. Surprisingly, this moving average hasn’t been tested amid the stock’s many stumbles over the past several months.
If we see OCGN stock break below the 200-day moving average, keep the $6 level on watch. Short of a few days in April, the $6 mark has been pretty solid support.
On the upside, we need to see Ocugen clear $7.50, then challenge $8. If shares can clear $8, we’ll have a monthly-up rotation over the August high, putting wedge resistance in play. Above that and who knows, perhaps $10 is on the table.
So how do investors trade this one?
Aggressive bulls can be long OCGN stock here, knowing that it’s sitting on wedge support. If they want little risk, they can bail on a break of $7 if it’s not reclaimed quickly. Those willing to take on more risk can see how the 200-day holds up, or even $6.
Conservative bulls will want to wait for a move back over the 50-day moving average, at the very least. Otherwise, they may wait for a close over $8.
Breaking Down Ocugen Stock
Ocugen has plenty of promise, but the problem is that it’s still quite speculative. The company is forecast to lose 28 cents a share this year on no revenue. It’s a clinical-stage bio stock that’s developing gene therapies aimed at curing blindness.
It’s ambitious but it’s clear where the opportunity is.
Analysts expect Ocugen to swing to a profit next year and generate $135 million in sales. However, we all know how these estimates can change and that’s particularly true for a revenue-less biotech company.
There is an opportunity with its vaccine for the novel coronavirus, but even that comes with a heavy dose of skepticism. Developed with Bharat Biotech, the vaccine “demonstrated efficacy in mild, moderate and severe COVID-19 of 77.8% with efficacy against severe disease of 93.4%.”
That was in a Phase 3 trial, which is good that it made it that far. While the increasing variants of the virus have surely impacted those efficacy rates, they lag that of other vaccine options from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA). That said, there’s this consideration:
The Pfizer-BioNTech vaccine, in Israel, was about 64% effective against symptomatic infection by the Delta variant in that country, while the Ocugen-Bharat Biotech vaccine was 65.2% effective against the Delta variant.
Under the vaccine deal, Ocugen would receive 45% of the profit generated in the U.S. and Canada. But this is limiting, too.
First, the vaccine needs to be approved in these countries. Second, 75% of U.S. adults are already vaccinated. That doesn’t leave a lot of room for Ocugen, unless those vaccinated with a different dose end up using Ocugen’s vaccine as a booster. However, that doesn’t seem too likely.
The Bottom Line
OCGN stock is as speculative as they come. There are various ways to leverage the technicals in our analysis, but the stock is clearly susceptible to massive moves. Those moves, if they materialize, will likely happen before investors have a chance to react.
For speculative investors, keep all of this in mind and know that while Ocugen has big upside potential, it could also disappoint. Remember, it was sub-$1 less than a year ago.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.