Inovio Pharmaceuticals - How to Trade the Stock

Buy Inovio on weakness to its annual pivot at $9.66. Add to positions on weakness to monthly, quarterly and semiannual value levels at $5.21, $4.26 and $3.43, respectively.
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Inovio Pharmaceuticals  (INO) - Get Report spiked higher last week on the news that the biotech company received $6.9 million to finance its Phase 1/2 clinical trial in South Korea.

The stock opened Monday at $15.78 and traded as high as $16.50 then faded below its weekly pivot at $15.77.

Inovio’s gain the funds from the Coalition for Epidemic Preparedness Innovations, a foundation that grants money for the development of vaccines for infectious diseases. Here are the details from TheStreet.

In my career I have analyzed many speculative biotech companies. These stocks will trade between a buck a share and five bucks a share then spike higher on a milestone met. 

If the milestone is not sustained back down, they go.

If a stock is trading between $1 and $3 a share, you can buy it as an option on survival. You invest only the money you can afford to lose if the company goes bust.

Inovio was an option on survival as 2020 began. At Monday's open, the stock is up 361% year to date and up 435% since trading as low as $2.95 back on Jan. 3. 

The stock traded as high as $19.36 on March 9 and is 18.5% below this high.

You do not buy a speculative biotech stock based upon its p/e multiple or dividend yield.

You buy it because you anticipate a milestone. In the case of Inovio, it provides a trail vaccine for the treatment of Covid-19.

If they succeed, the sky’s the limit.

My proprietary analytics shows a base within which to buy on weakness between semiannual, quarterly and monthly value levels at $3.42, $4.26 and $5.21, respectively.

The Daily Chart for Inovio

Daily Chart for Inovio

Daily Chart for Inovio

Courtesy of Refinitiv XENITH

The daily chart for Inovio shows a sideways to up pattern since the beginning of the year.

Establishing a speculative long position was justified by the formation of a golden cross on January 21. This buy signal occurs when the 50-day simple moving average rises above the 200-day simple moving average to indicate that higher prices will follow.

After this buy signal the stock could have been bought at is semiannual value level at $3.42. This tracked the spike higher to $19.78 set on March 9.

The milestone expected was not met and the stock plunged back to $5.13 on March 16.

The stock crossed its annual pivot at $9.66 between March 5 and March 12, then the stock returned to this magnet on April 20.

This led to the current spike higher to $16.50 this morning. If you were long this stock your position could have been reduced at its weekly pivot at $15.75.

The Weekly Chart for Inovio

Weekly Chart for Inovio

Weekly Chart for Inovio

Courtesy of Refinitiv XENITH

The weekly chart for Inovio is positive with the stock above its five-week modified moving average at $10.04. 

The stock has been above its 200-week simple moving average or “reversion to the mean” at $5.37 since the week of March 5 as the bad news on COVID-19 began. 

It was tested again as a buying opportunity during the week of March 20 after the first milestone failed at $19.36 on March 9.

The 12x3x3 weekly slow stochastic reading is projected to rise to 44.48 this week up from 37.54 on April 24.

Trading Strategy: Buy Inovio on weakness to its annual pivot at $9.66. Add to positions on weakness to monthly, quarterly and semiannual value levels at $5.21, $4.26 and $3.43, respectively.

How to use my value levels and risky levels:

The closes on Dec. 31, 2019 were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each uses the last nine closes in these time horizons.

Second quarter 2020 and monthly levels for April were established based upon the March 31 closes.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.