I am a technical trader who also uses fundamentals for better results. In this case, Ocugen (NASDAQ:OCGN) offers plenty of technical clues, but it’s very thin on the fundamentals. The company has shifted businesses completely to pursue the novel coronavirus opportunity. That worries me quite a bit so spoiler alert, I would not invest in it at all. On the other hand, OCGN stock moves well enough to offer trading opportunities in the meantime.

The scoreboard for OCGN stock is crazy. It’s up 2,950% in a year, +26% in two years, and down 93% over five years. OCGN stock moves fast so it could be fun to trading short-term. There is support near $7, and resistance going into $12 per share. A breach of either of those lines will carry momentum in that direction.

We should also set the scene for stocks in general. The indices are making highs but investors are nervous. The business of vaccines has never been better because of the 2020 pandemic. Many companies have had their stocks get second lives because of it. Novavax (NASDAQ:NVAX) is one and its stock is up 2,180% in a year. Just before the pandemic, management did a reverse-split to avoid de-listing.

OCGN Stock: Too Long on Hope

Ocugen is hoping to also ride the vaccine wave to stock success this year. The company reported earnings yesterday and after the initial pop, OCGN stock fell 7%. It may have had help from the indices because they too had a bad day. The S&P 500 showed promise early but then stumbled in the afternoon.

Regardless, the short-term reaction to any earnings report is completely binary. It has more to do with expectations than actual quality of the report.

In this case there weren’t many performance metrics to share. Investors were looking for news about progress toward releasing the vaccine. OCGN has plans to market the Indian vaccine Covaxin in the U.S. Their goals include 100 million doses this year, as early as Q2. That should have been good news but investors don’t believe them. I agree, because that sounds too aggressive, since they don’t even have authorization from the FDA.

Investors are realistic about the hurdles that face the company. The regulators will be hard to convince to allow emergency U.S. usage. Even if they do, the Indian counterpart company Bharat Biotech will keep 55% of the profit. The road to riches from this covid-19 vaccine is not going to be easy for Ocugen.

Moreover, if they need to do research, they will find that the pool of recruits has shrunk. The U.S. reported administering 100 million doses already. That’s one-third of the population that won’t qualify for any FDA testing program. The longer they go without actual progress, the less the likelihood of having their vaccine on the market.

Overall, the vaccine business hasn’t lived up to the massive expectations from a few months ago. The best example is Moderna (NASDAQ:MRNA). They’ve already had their vaccine on the market and the stock is well off its highs. I am grateful that my wife has had their jab already. But I am not rushing to buy their stock. As successful as the MRNA rollout was, the stock is mid-range. Pfizer (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ) stocks are struggling worse. This is in spite of also having vaccines already in circulation.

Perception May Never Become Reality

Investors tend to overshoot in both directions and somewhere in the middle lies the truth. The buy-vaccine-stocks meme was too strong for its own good. From that perspective even NVAX stock is still in danger. It seems that traders pile in on hopium until the products are out. If that’s the case, then I’d avoid OCGN stock completely.

Currently, it is in the middle of its 2021 range. The February rally was an astonishing 600% and smart money booked the win. Those who stayed long have already committed to it for a long time. Expectations of higher highs than $19 per share are too lofty now. They will need a miracle or two to get back to even.

Another sticky point for me is the process of reverse splitting. It creates illusions of success where there isn’t any. Current OCGN stock price is under $9, yet the all-time high is almost $800. In December of 2019, management reverse split 60 to 1. In reality it’s a 15 cent stock. I avoid such charts especially for the complete lack of fundamentals. It could serve as the poster child of speculative bets. If long already I don’t add on dips. Averaging down on a binary gamble is making is a bad idea. I wouldn’t even do it in NVAX.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Nicolas Chahine is the managing director of SellSpreads.com.