Investment Opportunities for the Start of 2020: Patrons Only

Here is a quick update, as promised in the weekly videos, of the two company stocks I discussed that were working on developing a vaccine for the Wuhan coronavirus. As discussed in my weekly videos, I stated to NOT chase these stock prices higher and that I would prefer a pullback to the breakout points in the charts below. This nearly happened yesterday, and the prices pulled back close enough to the breakout points.

As you can see from the above, Inovio Biomedical (NASDAQ: INO) pulled back in price to $3.92 yesterday, within pennies of its breakout price of $3.83 a share, which made a fine price to take a long position yesterday as I discussed earlier this week. Regarding Novovax (NASDAQ: NVAX), the share price pulled back to $6.26 a share, fairly close to completely filling the price gap back to $5.83 a share, which also made a fine price to take a long position yesterday. The likely time frame to develop an effective vaccine for the Wuhan coronavirus has been estimated at between three months to a year, so the realistic time frame is likely at least six to eight months away at a minimum. If a vaccine is developed and released within three months, I would be highly suspicious of such a quick development from all the articles I’ve read about realistic timeframes for a vaccine development given the known parameters at the current time of this coronavirus.

In any event, since a long position in these stocks would be for a likely 6-month or longer timeframe, and we can’t be positive that the intermediate volatility is over yet, given the prices yesterday of $3.92 for INO and $6.26 for NVAX, I would use a wider mental stop-loss of 12%, which would yield a stop-loss price level of $5.50 per share for NVAX and $3.45 per share for INO.  The safer way to go, in my opinion, is taking a long position in these stocks for the intermediate term. As well, if the stock prices go way up, have your own exit prices on the upside as well to protect profits. I may or may not write another entry regarding exiting these stocks, but it is your responsibility to set your individual exit strategies to the downside to limit losses and to the upside to protect profits.

Regarding those people that want to speculate on higher returns and enter call options, I would wait for even more favorable conditions, which may or may not materialize, to enter call options. Regarding Inovio, I would consider purchasing the call options with an expiration date of 15 May 2020 at a slightly in the money strike price of $4 which closed yesterday at $1.10 a contract. For Novovax, I would consider purchasing the call options with an expiration date of 17 April 2020 at a slightly out of the money strike price of $7 which closed yesterday at $2.05 a contract.

However, unless you are a big gambler, I would not suggest buying call options at the current time. I would suggest waiting for even more favorable conditions of INO descending to the $3.53 to $3.83 price range before buying call options and of NVAX descending to the $5.60 to $5.83 share price before buying call options at these strike prices and expiration dates, which would yield significantly lower prices per call option contract than the prices listed above. Again, this may not happen, and prices may rise from here. However, with options in this case, my preference would be to wait for optimal conditions to buy call options, and if optimal conditions do not materialize, then to refrain from buying any call options.

Again, please read the disclaimer on my blog and ensure that you understand that this post is not investment advice but merely my observations and analysis provided from more than two decades of being in the financial game.  You must decide what to do on your own; however, if you buy into call options then you should clearly already understand the risks involved and always have exit strategies to limit downside and to lock in upside.

J. Kim

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top