Top COVID Play Moderna Reverses After Hitting All-Time High

Moderna Inc. (MRNA) rocketed more than 14% overnight, hitting a 2-month high after the New England Journal of Medicine reported positive results in Phase 1 trials of an investigational vaccine designed to protect against SARS-CoV-2, better known as COVID-19. The former small cap, now valued at $31 billion, has garnered greater interest than dozens of other vaccine-focused biotech and pharmaceutical plays due to encouraging early test results. Investors and speculators have taken note of their progress, lifting the stock more than 400% so far in 2020.

Moderna Encouraging Phase 1 Results

In a Wednesday interview, Moderna Chief Medical Officer Dr. Tal Zaks said the vaccine had produced antibodies that blocked the ability of the virus to enter the cell. More importantly, it’s induced a ‘rapid and strong immune response’, producing antibodies at or above the level of those previously diagnosed with the infection. He indicated the compound was well-tolerated by Phase 1 subjects but admitted a series of ‘adverse events’ that included arm soreness, flu-like symptoms, fatigue, and headache.

According to the U.S. government’s National Institutes of Health, the Phase 1 trial had no participants over the age of 55, which is COVID-19’s most affecting age group, dampening investor enthusiasm after the opening bell. In addition, Moderna has yet to fully evaluate the durability of the immune responses. The company has already begun enrollment in Phase 2 and will launch a Phase 3 efficacy trial later this month. Even so, few analysts or epidemiologists expect a safe and effective commercial vaccine before the start of 2021, at the earliest.

Wall Street And Technical Outlook

Wall Street consensus rates the stock as a ‘Strong Buy’, based upon 14 ‘Buy’ and just 2 ‘Hold’ recommendations. It isn’t surprising that no analysts are recommending that shareholders sell their positions, given massive upside potential. Of course, there’s also tremendous risk in holding this stock because a roadblock or setback could trigger a high percentage decline, especially if the delay provides a time-to-market advantage to a major competitor.

Moderna’s technical outlook looks extremely bullish but biotech plays have the power to ignore classic rules of price action when major catalysts hit the headlines. The stock broke out above the 2019 high near 30 in March and nearly tripled in price into the May at 87.00.  It traded just above that level at the start of Wednesday’s U.S. session, setting its sights toward triple digits. However, heavy speculation routinely attracts ‘weak hands’, raising odds for multiple whipsaws.