Here’s an update on my Novavax ($NVAX) trade from last Friday. Hint: It has a 1/2 happy ending. (May 11, 2020)
NVAX
I want to go back to Novavax ( NASDAQ: NVAX ). This was a Chart of the Day video that I recorded last Friday. I got into this stock because of the way it had kind of traded here; it was in an obvious uptrend so that is kind of a no-brainer but it’s the entry that is another thing.
What I wanted to do was get in and be able to keep a stop below here. I wasn’t really thinking too much about the 50-day moving average, it is a little bit too low. So I got into the stock on Friday and then held it today and of course, now I look like a real superstar but a lot of that was just dumb luck. Not really dumb but let’s put it this way: When you do good things a lot of times good things happen but sometimes not.
The good thing was that this was at a good entry point. I certainly didn’t know that the stock was going to up 83 percent. It gapped up a little bit today, 5 percent, it gapped up about $1.00 and then it was real strong and it just kind of kept going. What I want to point out though is this: I know some of the Twitter geniuses, all the garbage and rubble that is there, I’m sure there are some people that will tell you that they could have predicted this, I’m not one of them. I will be the first to admit it, I had no idea this was going to do this.
Here’s the thing, if you focus on finding good setups sometimes good things happen. And if a bad thing happens part of your setup is that it was a low-risk setup where you knew what the stock had to do in order for you to say, “Oh crap, I’m wrong.” And you knew exactly how much you would lose if you did have to hit the eject button. And so because you see this kind of thing you say, “Yes, I can take this trade because I know what my downside is.”
It’s not like you look at this stock and say, “Wow, this is going to explode. I have got to get in here right now.” No, this is not really even a volatility squeeze at all. I wasn’t looking at this as a real explosive move. I was looking at this as this is an uptrending stock with a good entry. It was the entry that intrigued me and so I am in the stock. If the stock had gapped up here and then held right around $19.00 or so, I’d be looking at this stock and I would go, hey, this is great. I had a good entry, I’m happy, but instead, the stock did this.
So when you get a good entry take it because good things can happen. Not always, in this case a good thing happened. So what did I do? Well first, I actually did buy a little more stock this morning but then the stock started running so fast I didn’t really have to keep buying more stock because my position was growing. It’s nice how it does that when price just runs up. So after hours when I was preparing for the videos that I do I noticed that Novavax ( NASDAQ: NVAX ) was up a lot more. And so then I am thinking, okay, this thing is up 83 percent, somewhere around there, I thought, this is stupid if I don’t take some kind of the profits off the table but I only took half.
The reason is that this is a COVID deal, it’s a COVID trade, all the big ones are and so they are going to get more funding. They entered into some agreement with Emergent BioSolutions ( NYSE: EBS ), and by the way, they lost money. They reported a loss of $0.58 a share; the only problem was, it’s a problem for the bears; the consensus estimate was $0.67 so they actually crushed earnings estimates. When you are expected to lose $0.67 a share but instead you only lose $0.58 a share that is actually a pretty good beat.
So the stock was up so much here, and I am trading half, I’m keeping half on the table so that I can be in position to make money tomorrow if the stock continues to run. But I have booked profits on half the position just in case the market tomorrow says we don’t really care and the stock is traded down. Either way, it has been a good trade for me.
The most important thing is, on the exits, don’t ever try to top tick the whole thing, and don’t forget about the fractional exits. You can take half off the table. You can take a quarter off the table. Just book some profits when you have them because what you are going to find if you don’t is, you are going to see your trading account go up and down in value and it is going to start eating at you when you say, “Well, crap, I should have done this. I should have done that. I should have done this, I should have done that.”
If you have some kind of a profit protecting mechanism so that you can book profits. And then at the same time stay in a stock for bigger gains, if they are going to be there, you are going to find your profit curve just basically doing this, and this is what you want to see. You want to see a nice uptrend. Maybe sometime it will be completely flat or even down. But you want to see this kind of uptrend in your profit curve.
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