Shares of top vaccine contender Moderna, Inc. (MRNA) have settled near $70 following a two-month correction and could rally to new highs in coming weeks. The upturn may surprise market watchers, given suspicious insider sales that booked windfall profits when the company first announced progress on a COVID-19 vaccine in May. Buying pressure has remained solid as a rock between then and now, while overbought technicals have finally worked out of the system.
- Moderna executives sold stock into bullish May comments on vaccine progress, undermining credibility.
- Buying cycles are realigning after a two-month correction.
- Resistance in the upper $80s could slow or end the rally.
Meanwhile, close ties with the Trump administration are paying enormous dividends, with board member Dr. Moncef Slaoui resigning his post to head "Operation Warp Speed," the government’s fast-track program for vaccine development. Moderna has now accumulated billions of dollars in American, Canadian, and Japanese contract commitments for the manufacture and distribution of a vaccine, even though it's just now engaged in Phase 3 trials.
Wall Street consensus on Moderna stock is mostly bullish, with a "Moderate Buy" rating based upon eleven "Buy," two "Hold," and one "Sell" recommendation. Price targets currently range from a low of $41 to a Street-high $134, while the stock opened Monday's session more than $20 below the $92 median target. It's tough to qualify this placement due to the high-risk/high-reward scenario, in which a rival's more effective drug could trigger an aggressive decline. Credibility may also come into play, with many Americans now saying they don't trust vaccine development due to politicization.
Insider trading involves trading in a public company's stock by someone who has non-public, material information about that stock for any reason. Insider trading can be either illegal or legal, depending on when the insider makes the trade. It is illegal when the material information is still non-public, and this sort of insider trading comes with harsh consequences.
Moderna Daily Chart (2018 – 2020)
The company came public at $22 in December 2018 and sold off into the mid-teens. A recovery wave stalled near $30 in April 2019, completing a trading range that broke to the downside in July, yielding an all-time low at $11.54. Committed buyers then took control, carving a shallow uptick that surged to a new high at the end of February, when Moderna tossed its hat into the COVID-19 vaccine ring.
High volatility into April translated into an ascending triangle pattern, with resistance in the mid-$30s. The stock broke out mid-month and surged higher in three waves, hitting an all-time high at $95.21 in July. The subsequent decline into September failed the breakout above the May high at $87, which now marks tough resistance. Buying interest resumed in the mid-$50s, reinforcing May support while lifting price back above the 50-day exponential moving average (EMA), where it has been consolidating gains for the past two weeks.
The on-balance volume (OBV) accumulation-distribution indicator topped out with price in July and entered a brief distribution wave that bottomed out just one week later. The sideways pattern into September is bullish in this case because the stock fell nearly 20 points during the same period without triggering a more aggressive shareholder exodus. Buy cycles are now realigning, setting the stage for higher prices.
Price action since early August has carved an inverse head and shoulders pattern, with a neckline at $72 (red line). A breakout could attract strong buying interest, lifting the stock into the upper $80s, where the confluence of the failed breakout and broken trendline could slow or stall progress. As a result, that marks an advantageous level for short-term traders to take profits while longer-term speculators roll the dice, hoping to win while acknowledging potential failure.
An inverse head and shoulders is similar to the standard head and shoulders pattern, but inverted, with the head and shoulders top used to predict reversals in downtrends. This pattern is identified when the price action of a security meets the following characteristics: the price falls to a trough and then rises; the price falls below the former trough and then rises again; finally, the price falls again but not as far as the second trough.
The Bottom Line
Moderna stock looks ready to break out above resistance in the low $70s and resume an uptrend that could reach the triple digits.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.