Most investors have probably never heard of Genetic Technologies (NASDAQ: GENE) before the coronavirus. However, ever since they announced a possible COVID-19 risk test, investors could not get enough. That is until today’s trading halt prevented people from investing. The COVID-19 pump and dump theory is becoming painstakingly common as the virus rages on. A potential sell-off mixed with a price-sensitive event post-trading halt is causing investors to be unsure whether they should invest. Thus, today’s article will breakdown GENE’s rise and deconstruct possible investments.
Table of contents 1. Why is GENE a trending stock? 2. What does the trading halt mean for Genetic Technology investors? 3. Possible GENE investments.
Why is Genetic Technologies suddenly surging?
GENE is an Australian diagnostics company that focuses on developing severity risk tests. Diagnostics simply meaning creating devices that can detect diseases or other conditions. The trend all began when GENE announced that they were working on a COVID-19 severity risk test. Essentially the test aims to assess the risk of an individual attracting a serious disease after attracting COVID-19. Genetic soared, like most companies who drop COVID-19 related statements.
However, it appears Genetic might not be a one-trick pony, as long as the trading halt news maintains optimism. Because GENE already confirmed manufacturing deals to set up the rollout. Also, GENE is engaging in discussion with Medicare, Medicaid Services (CMS) and the National Association of testing Authorities, Australia (“NATA”) for regulatory Approval of the COVID-19 severity test kit in the US and Australia. More prototype, implementation, and regulatory updates can be found here. YIG urges investors to understand the developments before investing.
What does the trading halt mean for GENE investors?
Trading halts signifies a price-sensitive event is coming up. The halt is a symbol of hope for the bulls and a warning sign for the bears. Considering GENE’s relatively impressive risk test development, another related PSE would send the stock rising. Hence the bullish optimism. However, sometimes a clarification statement follows a trading halt. A clarification statement is made when a previous announcement caused a considerable amount of misinformed buying/selling.
GENE’s trading halt could indicate that the bulls overhyped up a COVID-19 risk test statement. All we have so far is that the trading represents a query for the price movement. Thus, neither the bears, or bulls have weight. Because if nothing is wrong, the bulls could reign supreme, and if the price was inflated, the bears would take GENE to the woodshed.
Breakdown of the possible GENE investment strategies
Before I begin I must remind our viewers that this is not financial advice but rather my commentary from my extensive knowledge
Short answer: All strategies hold value. However, time decay favours shorting more than it does riding the wave. (opinion not advice)
Riding the GENE wave
The story of GENE could shape up to be a COVID-19 spectacle. The optimistic futures is causing the bulls to load up now in anticipation of future volcanic activity. A manufacturing update, patent approval, bio-bank updates, or government backing could trigger a surge. Hence, cementing your position before the rocket takes off makes sense. However, do not look to ride the wave because everyone is investing. Because you might win a couple of times, but on average, sheep investing will get you slaughtered. Instead, know the company, look at GENE’s position in the COVID-19 picture, and ‘understand’ what the hedge funds, and everyday investors believe.
Going long with call options
Going long means investing in the same direction as the crowd. The herd for GENE is bullish. The recent injection of bearish fever is in light of the trading halt and possible pump and dump picture. Investing in GENE call options means you expect the price to go up. Call options might be enticing for investors with little capital. Because the options contract allows you to hold a significant amount without a high outlay. However, before investing you must understand the risks of options and the possibility you could get burnt.
Investors who feel like GENE captures the pump and dump theory to a T might want to short. Shorting GENE means going against the general direction of the stock price movement. Investors looking to short GENE could sell a call or buy a put. In selling a call, you are betting that the stock price will not reach a certain price. Considering pump and dumps eventually reach a climax you could profit from bullish investors thinking the price will go higher. If you are correct, the options will expire worthless , and you could profit off the premiums.
However, YIG would like to point out that when selling calls you are vulnerable to unlimited losses. So if GENE roars after the trading halt you could lose a lot of money. Alternatively, you could purchase GENE puts. In which you would profit if the stock price went down. (opinion not advice) Considering the market is walking on eggshells and GENE could be a pump and dump, investing in puts seems like low risk with high odds of success. (opinion not advice) However, shorting via puts or selling calls could turn out disastrous if GENE continues its bullish momentum.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin, Senior Manager of YIG.