Hype and hope have faded as have shares in recent weeks. But is today’s Bionano Genomics (NASDAQ:BNGO) worth your investment monies? Let’s take a look at what’s happening off and on the price chart of BNGO stock, then offer a risk-adjusted determination aligned with those findings.
The trading year started off with big ol’ bang in shares of BNGO. Amid a volatile bull run in cryptocurrencies led by Bitcoin (CCC:BTC-USD), 3D stocks printing the color of money for investors and select SPACs such as Virgin Galactic (NYSE:SPCE) blasting higher, BNGO stock was right up there with the best of them. Well, not GameStop (NYSE:GME) of course. But a rally of just over 400% into mid-February was nothing to sneeze at.
Today, that hard work has been chopped in half. Shares closed Thursday at $7.83 and a whisker away from losing its mid-cap status with BNGO stock just narrowly above $2 billion in valuation.
Source of the Pressure
So, what’s behind the pressure in Bionano Genomics? Multiple decompression for growth stocks? A rotation out of concept plays and into value stocks whose rubber is already meeting the road? Absolutely. Misplaced company-specific hype and hope for BNGO have also played a hand.
Much of this 2021’s out-the-gate tear higher was on the back of Bionano’s optical genome mapping (OGM) system. Known as Saphyr, the technology fills a critical gap between long and short-read sequencing technologies and a certain asset for uncovering structural variants within genes.
In January, Saphyr was widely introduced to the healthcare community as part of a well-received industry symposium hosted by Bionano. And for more than a couple good reasons, too. In layman’s terms, Saphyr’s real world applications include more targeted cancer treatments and prenatal screening. Also, there’s even the ability to understand the novel coronavirus better among other possibilities.
Saphyr obviously holds strong promise, but wider spread adoption isn’t months away. It’s more likely years in-the-making. The good news is Bionano is off to a good start with institutions such as Mayo Clinic, Duke University and Penn State College of Medicine among those already using the OMG system.
The bad news for BNBO stock investors? The reality check of a longer timeline could be seen as a chink in the armor of Saphyr and in turn for momentum investors wanting more from this healthcare tool. The thing is the type of aggressive investor driving Bionano’s rally aren’t known for their staying power. Patience and an unwavering bullish commitment don’t go hand in hand. And it obviously hasn’t.
Lastly and further compounding the unwind in enthusiasm and valuation, Bionano’s rally was also fueled by hopeful speculation of ETF wunderkind Cathie Wood’s Ark Invest being interested in BNGO stock. It hasn’t happened.
More than three months of persistent stock promotion along the lines of “today is finally the day!” ARK Genomic Revolution ETF (NYSEARCA:ARKG) will show more than just mouthpiece interest, BNGO remains a goose egg for the fund through the end of the first quarter.
BNGO Stock Daily Price Chart
Source: Charts by TradingView
Today and with momentum rightfully deflated, BNGO needs a new driver. In fairness, it could be Ark Invest. But right now those large footprints nowhere to be found. It’s simply the price chart which investors might chose to focus their attention on.
Technically, the big retreat from February’s high has taken the shape of a well-supported triangle or a corrective “W” base. I’d label both patterns as slightly irregular or modified, but potentially very bullish for BNGO stock in the days and weeks ahead.
Modified? As the provided daily chart shows, I’ve used the Feb. 24 high for the starting point of each pattern rather than the Feb. 16 high of $15.69. Why? It looks critical following a wide doji centered around BNGO’s former $10 all-time-high and price action quickly failing. What’s more, shares have revisited $10 level, which has acted as resistance within both base structures.
Indications of a Bullish Move
With stochastics bullishly positioned for a move higher, nearby breakout entries promise the start of a more bullish price cycle in BNGO shares. Specifically, a triangle breakout above $8.75 or a move through the mid-pivot that’s aligned with the $10 level are stock levels of interest.
If and when shares begin to confirm those buy decisions, the August $11/$16 bull call spread is one favored defined and reduced risk strategy that also offers sufficient time and leverage to capitalize on a pattern-driven trend change.
On the date of publication, Chris Tyler holds, directly or indirectly Greyscale Bitcoin (OTCMKTS:GBTC) and Ark Genomics Revolution ETF (ARKG), but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.