2019 was a tough year for Novavax (NVAX) investors.
The stock started the year trading near $45 per share. NVAX finished 2019 just under $4.
The biotechnology company disappointed investors when its top drug candidate – ResVax, a vaccine for respiratory syncytial virus – failed in a pivotal trial. NVAX lost 70% of its value overnight – falling from $40 per share to $12.
That was back in February 2019. Throughout the rest of 2019, shares of NVAX slowly decayed all the way down to near $4 per share.
Investors had all but given up on the stock. And, that’s what gave my Breakout Alert subscribers an amazing opportunity earlier this year…
You see, NVAX had another vaccine candidate in its pipeline that, if approved by the FDA, could’ve pushed the stock sharply higher.
NanoFlu is the company’s flu virus vaccine. Phase 2 results for the vaccine were impressive. And, the company expected to release the data on the Phase 3 clinical trial sometime during the first quarter of 2020.
Positive data could’ve doubled or tripled the value of NVAX. Negative data could’ve cut the stock in half.
But, with NVAX trading for just $4 per share, the risk/reward potential set up an interesting speculation…
Take a look at this chart of NVAX…
NVAX had been in a low-level consolidation pattern since August. This is a bottoming pattern where, following a steep decline, the stock just chops back and forth in a narrow range, and builds up energy for its next move.
Notice the three (red, blue, and green) lines on the chart have coiled together (circled in green above). Energy was building in this chart, and it was happening just before the release of pivotal clinical trial data.
These three lines – which, out of respect for my subscribers, I cannot reveal the details of – are what make up my FLIP Trades system. When I see them coil together like in the chart above, it tells me there’s a big move coming…
Safe to say I liked the setup. I saw lots of upside potential and relatively little downside risk. If NVAX could break out decisively above the $5 per share resistance level, then the next resistance level at $8 would come into play. And above $8, the next resistance was all the way up at $12.50.
On top of the technical pattern, investors would’ve likely started buying NVAX in anticipation of the release of the NanoFlu clinical trial data. And, I wanted us to get into the stock before that buying started.
So, I told my subscribers to pay up to $5.00 for NVAX. That would give them an excellent risk/reward setup.
And here’s what happened next…
Just as I predicted, investors began buying up NVAX shares in anticipation of the Phase 3 clinical trial announcement. We wound up with a 130% gain on the trade, so I instructed my subscribers to sell half of their position and keep the remainder on risk-free.
Then, a few weeks later, news came out that NVAX was working on a vaccine for the virus, and shot up past my third resistance level at about $13. We didn’t quite nail the peak – I instructed my subscribers to close the trade during the big run-up, at around $9.50. But we managed to close out the remainder of our position for a 126% average return.
That’s the power of my FLIP Trades system.
Now, I get it… Buying stocks might seem like the last thing you want to do right now.
But, if you have a system to follow, like my Breakout Alert subscribers do… then you can easily tip the odds in your favor. (In fact, some of the best trades I made in the last bear markets were from the long-side.)
I look forward to spotting this setup in many different stocks as we head into the new bear market. And if you’d like to learn more about how you can get on my exclusive email list, where I deliver these picks twice per month, watch this video presentation I recently put together. It details how FLIP Trades work, and how they’ve become such a dependable moneymaker for my subscribers.
Best regards and good trading,
Jeff Clark