Is This the Sell the News Moment for Moderna Stock?

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I am lucky that I get to write about investing in Moderna (NASDAQ:MRNA) stock on the day after the FDA panel approves its Covid-19 vaccine for emergency use. I expected to be writing about a buying frenzy this morning, but it’s not so much. In fact Moderna stock fell after hours on the headline.

Source: Ascannio / Shutterstock.com

The old saying “to buy the rumor and sell the news” may be playing out here. This also what happened to Pfizer (NYSE:PFE) last week. Its stock is down 12% of the recent highs, languishing after its full approval.

The more logical explanation is that it’s just simple price action — nothing more than that. People should expect stock stalls or falls after a 120% rally in 30 days. Giving back 20% is normal. In fact I would expect MRNA to fall closer to $110 per share and still not change a thing.

The bulls are completely in charge of the stock. Proof of it is that it’s up an astonishing 600%-plus year-to-date.

It’s hard to feel sad for results like these.

The only way to avoid losses is to book along the way. It is piggish behavior to stay invested fully invested the whole way from $20 to almost $200 and not bank one coin of it. I have been cautious about this stock before, but I’ve suggested to chase the breakouts. The same message applies today. The bulls should chase it if they can breakout from the MRNA resistance through $165.

Moderna Stock Fundamentals Are Okay to Lag

Source: Charts by TradingView

From the fundamental perspective, it’s hard to argue the point of value for Moderna stock. The stock price now is mostly based on future revenues from its scientific efforts.

The price-to-sales line is massive, showing 200 years worth of sales already baked into the stock price today. That leaves a lot of room for disappointment from investors who hold it. Those who have high expectations tend to demand results. And when they don’t see it, they throw a hissy-fit.

It comes down to perception versus the MRNA stock price action. There is support at $130 per share and then a big range of potentially frothy candles. Wall Street more often than not likes to fill gaps and consolidate hollow zones like these. I would not be surprised to see a dip towards $100, but just to gather more strength. Sharp rallies like these need pullbacks to rotate owners. The weak hands will shake out. Therefore, MRNA will have owners  with more conviction so it can continue its ascent on Wall Street.

Time to Deliver the Goods

The onus is on management to prove that it deserves the credit it already received from investors. It is one thing to capture the imagination, and it’s another to actually deliver on the promises. Zoom (NASDAQ:ZM) will find itself in exactly the same spot around June of next year. It is exciting to see budding companies like this put up results after so much promise. Patience will reward investors that want to buy Moderna cheaper than now. Meaning I wouldn’t be rushing into buying it right now but I also wouldn’t be shorting either.

The thesis today is to buy the dip, and it could come because of outside factors. The whole market is overextended on the charts. Even though we’re going into a Santa Claus rally period, it’s a threat.

The U.S. politicians will play a role with what happens next. They have been squabbling over a second stimulus since the summer. The tragedy about it is that they tabled the discussion so they could go on vacation back then. U.S. business are desperately needing help, especially in the states like California and New York. Governments there reverted to locking down their states. In my area, I get the impression that entrepreneurs have so far ignored the orders. There is even a curfew order that’s not happening.

The vaccine is necessary, even if there are skeptics. First Pfizer, now Moderna and there are many more to come. We will bury this Covid-19 fear soon, so the stock markets should be fine. Meanwhile, it remains a threat to all stocks, including this one.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Nicolas Chahine is the managing director of SellSpreads.com.