The Coronavirus Is Spreading and the Market is Reacting
Dear Penny Stock Millionaire,
The deadly coronavirus strain that emerged in Wuhan, China continues to spread around the globe. As of the time of this writing, there are 4,500 confirmed infected people around the world and at least 106 deaths.
Sadly, the real infection and death tolls are likely higher. Some people refuse to go to the hospital and many people have yet to show symptoms. The incubation period for this year’s strand of the coronavirus is two weeks. In layman’s terms, it takes about two weeks before people begin to show symptoms.
That’s leading some experts to estimate that the total number of infections is at least 30 times higher than the official total.
It’s still too early to understand the potential of the disease. The current reports make it seem like the coronavirus isn’t very deadly and that people, especially those outside China, have nothing to worry about. I’d like to believe these reports, but I’m skeptical — better safe than sorry.
Coronavirus Stocks on My Watchlist
I don’t think it’s time to isolate myself and stock up on supplies… yet. On January 27, there were only five confirmed coronavirus cases in the U.S. Given there are over 300 million people in the country, I think it’s a little early to panic.
There are over 110 people in 26 states under surveillance for coronavirus. If the majority of these people have the disease, it’ll get a little scarier. But this isn’t the first time an outbreak has made its way to the U.S. In 2014, people thought Ebola would end the human race, but the authorities quickly mitigated the disease’s risks.
Even though Ebola was swiftly handled, there were multiple trading opportunities around people’s fear. Small, low-float companies love to take advantage of a crisis. Once traders notice the pattern, sympathy plays can emerge … and light up the penny stock market.
The same thing that happened with Ebola is now happening with the coronavirus.
What to Watch During the Coronavirus Outbreak
The first major wave for coronavirus stocks is over. Many of the stocks pulled back because they were running for no fundamental reason. These stocks were running on people’s emotions.
Anytime there’s an outbreak, the media overhypes the disease. That tends to make people think it’s doomsday. This week, the media toned down the rhetoric… but I haven’t seen reputable news about a cure or working vaccination.
Over the next few weeks (or maybe months) — I’ll be watching the news surrounding the coronavirus. If you remember the cannabis sector, shipping sector, or blockchain sector — they all lasted for months. When a stock is part of a strong sector, it doesn’t die easily.
I won’t jump to conclusions, but it’s possible this outbreak isn’t over. And if the outbreak worsens, I’ll capitalize on people’s emotions as the sector heats up for a second wave of spikes.
Now, here are my favorite stocks spiking because of the coronavirus outbreak…
NanoViricides, Inc. (NASDAQ: NNVC)
The stock market always has certain stocks that are stronger than others. The financial media likes to call these stocks sector leaders. Other stocks in the sector tend to follow the leaders — if the leader is strong, the entire sector is strong. Similarly, when the leader starts to fade, the followers quickly reverse.
The most popular example of sector strength is FANG stocks. But over the years, each member of the FANG group has taken turns being the leader. Today’s sector leader might not be the leader next week. It’s important to watch the entire sector to find the strongest stocks.
In the coronavirus sector, NNVC has been the leader. On the initial outbreak news, NNVC spiked from the mid-$3s to over $13 a share before pulling back. This 400% move sparked the sector, and many other coronaviruses and biotech stocks followed.
NNVC chart: 2-month, 1-day candle — courtesy of StocksToTrade.com
Looking at the chart, you can see the wild moves these types of stocks can make. After its massive first run, NNVC gapped down huge. A lot of people thought the virus hype was over…
But as more cases were confirmed and the virus spread around the world, the stock continued to pick up momentum. Fear continued to spread on Friday, January 24, and over the weekend. Which led to a huge gap up.
These types of plays run solely on hype and fear surrounding the virus. The fear dissipated on January 28 which caused the big pullback. If fear rises again, this could rebound nicely.
Some of my biggest trades come from this hype pattern. It can be risky… you don’t know if the hype or fear will continue. But when you’re right — especially when there’s strong sector momentum — the returns can be fantastic.
Novavax, Inc. (NASDAQ: NVAX)
NVAX is another vaccine stock running on speculation. People think the company might play a role in finding a coronavirus vaccine. There are no facts to support this claim, but let people be degenerates.
NVAX chart: 2-month, 1-day candle — courtesy of StocksToTrade.com
Instead of investing and gambling your money on these stocks, day trade them like my students and I do.
Co-Diagnostics, Inc. (NASDAQ: CODX)
CODX caught a lot of short-sellers off guard. The stock initially ran with NNVC. But it had an offering after the first day of its run — giving short-sellers a false sense of confidence. Once the coronavirus outbreak got worse, CODX gapped huge.
CODX chart: 2-month, 1-day candle — courtesy of StocksToTrade.com
Aethlon Medical, Inc. (NASDAQ: AEMD)
AEMD didn’t run directly with the other stocks in this sector. But it’s not uncommon for some stocks to start their runs a little later than the leaders.
AEMD chart: 2-month, 1-day candle — courtesy of StocksToTrade.com
So far … AEMD spiked from the $2.50s to over $4 a share. Like the others, it pulled back hard but hasn’t broken any major support levels yet.
Oncolytics Biotech Inc. (NASDAQ: ONCY)
ONCY falls into this sector, and I’m watching it closely. This stock hasn’t spiked yet. If it starts spiking with meaningful volume, it might become my top watch.
ONCY chart: 2-month, 1-day candle — courtesy of StocksToTrade.com
ImmuCell Corporation (NASDAQ: ICCC)
ICCC is a low-float stock that can put in some huge moves. It ran with NNVC and CODX on the first day of the sector strength. It hasn’t had a secondary run yet.
ICCC chart: 15-day, 1-day candle — courtesy of StocksToTrade.com
Similar to ONCY, if it starts uptrending on significant volume I’ll be interested. I won’t try to predict when or if ICCC will spike. It may not. But I want to be prepared if the trade presents itself.
CytoDyn Inc. (OTC: CYDY)
OTC stocks have been SUPER hot for far in 2020. When OTCs start moving, it’s not uncommon for them to spike for three or four days. On January 28, CYDY released a PR discussing the coronavirus.
CYDY chart: 2-month, 1-day candle — courtesy of StocksToTrade.com
CYDY immediately jumped to the top of my watchlist because of the beautiful breakout chart combined with a great catalyst. This could totally fail, but I really like the setup.
How to Watch the Wuhan Coronavirus Going Forward
There’s a lot of speculation in the news about people being cured of the coronavirus. As far as I can tell, these are just rumors. No authoritative organization has issued a statement about a coronavirus cure or vaccine. Until there’s an announcement, it’s safer to assume there’s no treatment.
The Bottom Line
Keep an eye on these seven coronavirus stocks. I don’t think this sector is done yet … but I don’t try to predict the move or the news. I wait for the plays to set up again and react to strength.
I truly hope the global army of doctors, researchers, and scientists working on a coronavirus vaccine can find one before the outbreak gets out of hand. It’s always tragic to see innocent people lose their lives.
Sector momentum is far different than a single stock that runs for a day or two before crashing. Sectors can last for days, weeks, or even months. It’s very dangerous to try to short them before the backside of the move begins.
It’s been a while since we’ve had true sector momentum in the market. I think a lot of newbie short sellers will get ahead of themselves.
Do your research, and be prepared to take advantage of opportunities as they present themselves in the market.
Editor, Penny Stock Millionaires