Tonix Pharmaceuticals (NASDAQ: TNXP) is gaining significant investor backing after releasing a COVID-19 announcement. TNXP stock price instantly surged. It’s no secret, COVID-19 press releases are the wallet magnets of the stock market. However, the share price movement of Tonix is unique. Mainly because TNXP did not gap up by an astronomical amount. Leaving many investors intrigued as to whether they stumbled across a gold mine. Thus, today’s article will deconstruct the COVID-19 announcement, the position of Hedge funds, and provide our viewers with everything they need to know before investing.
Table of contents 1. Why is TNXP trading higher? 2. Wall Street is bullish on TXNP - is that a good thing? 3. Everything you need to know before investing in TNXP.
Is TNXP in the COVID-19 race or another loose end?
TNXP announced a research collaboration with Columbia University yesterday. The partnership focuses on studying the immune responses to COVID-19 in healthy volunteers who have recovered from the virus. TNXP and Columbia will look to place more importance on T cell and antibody response that COVID-19 causes. Some investors might be thinking so what, there are countless COVID-19 stocks, what makes this one different?
Firstly, TXNP is aiming to the fulfill an unmet COVID-19 research need. According to Dr. Trakht, “T Cell responses to COVID-19 have only recently been reported.” Thus, the collaboration is designed to fill the topic with some data and provide a basis for COVID-19 vaccines. Also, the data could assist TNXP in selecting patients for their vaccine TNX-1800.
Overall, TNXP’s focus on an unmet COVID-19 need and the possible link to the vaccine market was enough to bring out the bulls. Ultimately, triggering a 11% rise yesterday and a 5% surge in pre-market (at the time of writing).
Analysts are bullish on TNXP
Writing candidly, analysts target prices, and ratings hold both little and significant influence over the stock price. On one hand, the target price is usually higher than the current price to indicate a bullish rise. Ultimately, providing retailers investors a guide as to what direction the institutions believe the stock will go. However, YIG would like to point out that analysts are always playing catch up. For example, if the stock keeps rising the analysts keep raising their target prices and vice versa for bearish movement. Thus, investors should not necessarily become attached to the analysts pricing but instead use it as a guide for bearish or bullish direction. Second, Analysts rating becoming influential when a lot of retailers follow suit. The more reputable the analyst the more sheep following. Investors can use this to their advantage to understand how the masses perceive the stock.
In the case of TNXP, Roth Capital has a “buy” rating on the stock with an expected value of $4. Considering, TNXP currently trades at 0.66 cents Roth Capital is extremely bullish.
Everything you need to know before deciding to invest in TNXP
Before I begin, I am obliged to remind our viewers that this is not financial advice but rather investment commentary from extensive research.
Investing in the COVID-19 hype
Investors might hear COVID-19 unmet research need and expected stock price of $4 and think I’m sold. Overall, investing while there is COVID-19 noise behind TNXP holds value, but make sure you check for red flags before jumping in (opinion not advice). Red flags could include an increase in people shorting the stock, institutions, and many buyers investing in the hype. Also, YIG would like to point out that COVID-19 investors have a demanding appetite. If COVID-19 announcements do not follow, the first investors tend to sell due to impatience. Ultimately, triggering a sell-off. Thus, investing in the hype could pay-off but understand the risks first.
Investors should not ignore shorting TNXP
The COVID-19 fantasy stock does not always go to plan. Some investors might think the news will only stay behind TNXP for a week before they get sold off. The COVID-19 inevitable sell-off theory seems to hold. Especially as vaccine frontrunners like Moderna, Novavax, and INO have been torn apart by the bears along their stock rise.
At the moment, the bulls reign supreme, which means put options are cheap. However, YIG would like to point out that options tend to be great if you expect an explosive re-direction. For a TNXP short to reap the highest rewards, you need a lot of buyers to be wrong. Buyers are increasing, but are they wrong is a question you need to answer. If the COVID-19 dies out, TNXP could trade sideways in which your put option would expire worthless. Thus, if you think the stock price will ripple sideways, selling a call could be an excellent strategy to profit off optimistic buyers. However, before shorting TNXP, or any stock, you must understand the risk of options.
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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.