- Recent developments bode well for Novavax’s (NVAX) continued Covid-19 rollout.
- Investors continue to draw a different conclusion on the bearish NVAX stock chart.
- Bears need to protect themselves against upside risk with this hedged position.
It’s a new calendar month and the broader market is taking some well-deserved profits for a second straight session. And Covid-19 vaccination play Novavax (NASDAQ:NVAX) is mostly participating in lockstep and on the defensive.
On again, off again Russia-Ukraine peace talks are continuing Friday, but expectations of a nearby agreement are seeing a bit less optimism from investors (and that includes NVAX stock). As a result, and following a massive second-half win by Wall Street’s bulls last month, the markets are seeing some modest pressure ahead of the weekend.
The broad-based S&P 500 is off 0.2%, while the tech-heavy Nasdaq is off by 0.37%. Sandwiched in-between the two is NVAX with a decline of around 0.46%. But looks can be deceiving.
Shares of Novavax haven’t played in the rebound out of a bear market. And chalking up Friday’s price action as profit-taking could be a huge mistake.
Let’s take a look at what’s happening to NVAX today, then come up with a pair of strategies to approach Novavax stock.
Jabs for NVAX Stock’s Bulls
Despite the S&P 500 and Nasdaq reversing smartly to finish March up by about 3.50%, shares of NVAX ended down nearly 12%. What’s more, the pressure occurred despite seemingly positive improvements for Novavax.
Earlier this week, brokerage B. Riley Financial’s Mayank Mamtani reiterated its buy recommendation and price target of $250 in NVAX stock. The forecast offers a promising 241% of upside with Novavax shares changing hands at $73 in Friday’s session.
The bullish advice wasn’t without cause either. Mr. Mamtani sees two key factors boosting NVAX’s “long-term competitive positioning” and help with a much-awaited emergency use authorization (EUA) in the U.S.
First, the analyst is positive on a recent immune response profiling study.
The testing demonstrated on par, if not stronger, durability and cross-variant protection by Novavax’s NVX-CoV2373 versus mRNA vaccines found in Moderna (NASDAQ:MRNA), Pfizer (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ).
Also going unnoticed, Novavax’s vaccine has been approved for emergency use in India for children between 12 and 17 years old.
The combination should sit well with many Americans. As a group, Americans and particularly those with children under 18, have stated a strong desire for other Covid-19 vaccine options using more traditional methods like Novavax’s.
Novavax’s Bearish Albatross
Source: Charts by TradingView
However, what’s not sitting well with investors is NVAX stock. As noted above, shares remained benched last month. Worse, the price action resulted in shares stationed near 52-week lows after falling out of a bearish flag pattern in February.
Entering April, and despite Mr. Mamtani’s optimism, a markedly lower stock price shouldn’t be discounted. With the monthly chart price action failing to hold NVAX’s Covid-19-related 76% retracement level and the lower Bollinger band beginning to widen and drop, $40 to $50 isn’t out of the question.
A technical-based alarmist might warn a full-blown 100% retracement and sub $10 is in the cards given NVAX stock’s latest Fibonacci failure.
But Novavax’s business condition should protect it against that kind of outcome.
Notwithstanding the U.S. wildcard, NVX-CoV2373 is hard at work overseas. Also, there’s ample cash for life beyond Covid-19 and the chance for other treatments and therapies as well.
For investors though, if the story on Novavax’s price chart is going to change for the better and sometime soon, reversing March’s pattern breakdown backed by a bullish stochastics crossover is pivotal to a larger bullish cycle emerging.
How to Approach Novavax Shares Today
Right now, the odds continue to favor lower prices in NVAX stock. But that’s bound to change.
Importantly, given the volatility in biotech’s of Novavax’s caliber, the change of character could be dramatic and crippling for stock traders on the wrong side of the action.
Thus, if you’re inclined to position bearishly, a May or June dated, ten to fifteen point bear put spread like the NVAX stock June $65/$55 combination makes sense based on what’s been discussed.
And if you’re a bull, a word to the wise would include waiting for an indication of a bottom. From there, you can use a vertical that protects and serves as a bull market takes hold.
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.