October has been anything but a shot in the arm for Covid-19 play Novavax (NASDAQ:NVAX). But in a market known to occasionally overreact, is today’s discounted NVAX stock a worthwhile purchase or a name to avoid?
Today let’s look at what’s driving the price action in Novavax, then offer a risk-adjusted determination aligned with those findings.
Blame it on what you will. Arguably though, pharma giant Merck (NYSE:MRK) is where most miserable NVAX stock investors are pointing fingers and flinging angry and hopeful mentions on social media.
MRK and NVAX Stock
On Friday Merck announced successful late-stage study results for its anti-viral pill. The drug protects against the risk of death and cuts the chance of hospitalization by about 50% in certain Covid-19 patients.
To be sure, the world can rejoice over another drug coming to market to help combat the coronavirus. Still, the news is potentially less productive for investors in vaccine manufacturers Moderna (NASDAQ:MRNA) Pfizer (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ) in the U.S., as well as up-and-running overseas vax shops and hopeful upstart Novavax.
But it’s not all bad news for those companies.
First and foremost, an anti-viral medication for those experiencing Covid symptoms isn’t the same as immunization.
Second and of potential benefit for many of our still-unimmunized global brothers and sisters, Novavax’s vaccine stands apart. The outfit’s NVX-CoV2373 is positioned to help in many lesser-developed areas and where delivering and administering drugs safely in above-freezing temperatures is critical for success.
That’s right, unlike its competition, no subarctic logistics are required!
There’s also the delta and other Covid variants to consider. An ongoing and mutating contagion has already set forth the process of booster shots for some populations. Should authorities confirm a more persistent risk, annualized shots in the arms not unlike guarding against the flu, could become the norm.
And today with “mix and match” vaccinations showing efficacy, NVAX stock investors have something more, perversely enough, to look forward too.
NVAX Stock Monthly Price Chart
Source: Charts by TradingView
Boo!! It’s been an unusually tough start to a perennially weak October in NVAX stock. As discussed, investors can thank MRK stock for the transgression — that, and maybe a bit of the broader market bearishness that’s plagued Wall Street this year.
But as bad as the action has been in Novavax, it could turn up looking like a treat for investors buying shares.
Technically, this month’s decline of 14% is shaping up as a bullish hammer candlestick that’s backed by trendline support.
Along with stochastics having narrowed and flattened in oversold territory on the monthly price chart, an opportunity to buy NVAX stock at an attractive-looking discount is shaping up.
Today my advice would be to simply monitor Novavax shares for a bullish crossover. Should the hammer still be intact, technical-oriented investors have a logical stop-loss to exit the position.
In a less-perfect world where often the best-laid plans and trendlines sometimes fail, buying NVAX on weakness, with stochastics confirmation, still makes sense if shares challenge May’s engulfing pivot low.
Appreciatively, it’s early in the trading month. And there’s always a chance today’s trendline bottom could turn into a less-witchy double-bottom variation.
How It All Shakes Out
Bottom line though, with NVAX stock an obviously volatile and largely unproven biotech where a singular failure can seal a company’s fate, in our estimation, any pending purchases are made stronger with a limited-risk spread.
One strategy which prepares itself for longer-term upside, but with the ability to actively manage risk during the best and worst of days, is a fully hedged collar position on NVAX stock.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.