Vaccine stock takes a shot

  • NVAX erased half of its March–Aug. rally over past 3 weeks
  • Reports of insider selling also pressuring stock?
  • Shares bounced yesterday after reaching key level

When is a 22-week, 1,308% rally not really that big?

When it was nearly twice as big three weeks ago.

That’s not really fair—for the record, a 22-week, 1,308% rally always gets to wear the “big” label—but that was the position COVID-vaccine high-flyer Novavax (NVAX) found itself in yesterday after a third-straight day of heavy selling.  

Rumors on Monday that the White House was considering using emergency authorization to fast-track AstraZeneca’s (AZN) COVID-19 vaccine (something AZN denied)1 apparently weighed on several other stocks in the vaccine race, including NVAX, which had already pulled back 27% from its August 5 all-time high after a jaw-dropping 2,641% rally off its March 16 low of $6.91:

Chart 1: Novavax (NVAX) 3/11/20–8/25/20. Novavax (NVAX) price chart. Tagged the 50% retracement level.

Source: Power E*TRADE

Yesterday the stock followed up with an 18% intraday sell-off that dumped shares to the 50% retracement level of the March-August rally—which would have been a conspicuous potential support level even if the stock hadn’t rallied 16% off of it by the closing bell. (Fibonacci followers probably noticed how the stock bounced off the August 12 low near the 38.2% retracement level.)

Another bit of news that emerged as all this was happening was that company insiders had been unloading shares—nearly 153,000 valued at nearly $24 million according to data submitted to the Securities and Exchange Commission (SEC) on August 20. An “uh-oh” signal?

Debatable, given that all these transactions were already scheduled and in the books as of August 18, and three of the five insiders involved bought as many shares as they sold, and total insider purchases were almost exactly the same as sales over the past three months (181,700 shares vs. 181,728, respectively).2

If you proactively identify key price levels, you can let the market come to you rather than chase it.

Bottom line, stocks that rally 2,600% in a matter of months are susceptible to sharp retracements. Given that volatility is par for the course in the biotech sector in the calmest of market conditions, the wild swings in stocks like NVAX shouldn’t be that surprising—and they may offer opportunities for disciplined traders.

There are many (many) horses in the COVID-vaccine race, and it’s still unclear how close we are to the final lap (Novavax just announced they were moving on to Phase-2 clinical trials, by the way3). In other words, there’s more volatility to come.

Traders interested in these stocks need to pick their spots, and while there’s no way of knowing where or when a sell-off will stop, those who identify key price levels in advance at least have the advantage of letting the market come to them, rather than chasing it with the rest of the crowd.

Market Mover Update: For the third time in the past month or so, Microsoft is pushing at the top of the consolidation it began forming back in July:

Chart 2: Microsoft (MSFT), 2/25/20–8/25/20. Microsoft (MSFT) price chart. Upside pressure?

Source: Power E*TRADE

With implied volatility (IV) levels relatively low (below their 30-day average yesterday), bullish MSFT traders may be considering call options to play a potential upside breakout, since lower IV can sometimes translate into relatively low options premiums.

Today’s numbers (all times ET): MBA Mortgage Applications (7 a.m.), Durable Goods Orders (8:30 a.m.), EIA Petroleum Status Report (10:30 a.m.), Survey of Business Uncertainty (11 a.m.).

Today’s earnings include: Five Below (FIVE), Tiffany & Co (TIF), Dick's Sporting Goods (DKS), Williams-Sonoma (WSM), NetApp (NTAP).


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1 Fortune. AstraZeneca denies it is in discussions to fast-track U.S. approval of its COVID-19 vaccine. 8/24/20.

2 Insider Actions for Novavax Inc. 8/25/20.

3 Novavax begins Phase II part of Covid-19 vaccine trial. 8/25/20.

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