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Vaccine news… again

Hey Market Pilots,

Early this week, Pfizer came out with news that their vaccine trials demonstrated a 90% efficacy rate. On the surface, this is great news and the market reacted in kind, with massive gap ups in sectors that need a vaccine in order to get back to business as usual. On the flip side, many names got hammered with a gap down since the notion is a vaccine would actually make that business service less needed. Most of the initial moves have faded from their extreme situations, so the real question remains: is it real this time?

We have seen this kind of activity at least twice, maybe three times, in the recent past as hopes of a vaccine based on some sort of progress news would juice the market. The first one we saw was in June of 2020 when the “high touch” names exploded and went absolutely insane. We can see this represented by the ticker JETS which is an ETF of the airline sector:

There might have been some technical basis for this as well as most of the beat-up names were finally getting past their Daily 50 SMA’s. As with any moves which get overbought based on news, they quickly came back to where they were and continued to bump around the lows.

Then in August and September, there was another blip of vaccine news that sparked a bit of a rally, but this one was not met with the same fervor. Perhaps traders were wiser to the media’s tricks this time.

And that brings us to this week in November where there is more concrete news from the Pfizer trials. The market is biting on this one with more intensity and volume, but we don’t yet know if it will legitimately take hold.

As traders, we should be able to follow the charts and determine if this move has legs and starts to run. Part of that means we will need to use our indicators like the Moxie Indicator, which conveys the strength and momentum of the trade. The other part is that we need to use moving averages as a sort of guide for support and resistance. What we saw back in June was that there was an initial pop which then faded into support. Once price met that support and decided it was good enough, it then ran with unbridled energy to explosive new highs. 

It appears we are currently in the “fade to support” stage and price is looking to test that support, wherever it may be. If in the coming days, it finds the support it wants and begins to build strength, we could see another legitimate run based on this round of vaccine news. But beware, we have seen this before and while there was a run, each of them has ended abruptly. So be on the lookout for each possible path, set your stops, and let’s look for the opportunity if it indeed shows up.

Over and Out,

Your Profit Pilot.

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