VXRT DAY TRADE SETUP – BULL FLAG FOR 1.14 : 1 MAX GAIN RATIO
Vaxart, Inc.’s stock (VXRT) broke out of a bull flag pattern within the first half hour of trading today. The move came after news coverage mentioned that the company was in the preclinical stages for a coronavirus vaccine. While the breakout was not a powerful one, it did provide an opportunity for traders to receive a maximum gain-loss ratio of 1.14 to 1. See my analysis below.
ACCOUNT OF EVENTS
The setup occurred on Monday, April 27, 2020.
As the trading day opened I checked the major indices to get a feel for how the markets were performing. They were all up, with the Dow jones at +.54%. A headline on CNBC read “Dow futures rise more than 250 points as NY, other states start to make plans for reopening.” Overall, I felt there was an upward bias.
I checked Finviz for the morning’s list of top performing stocks. There were a handful of interesting choices, each with positive news that could potentially serve as a catalyst for a strong move up.
Unfortunately, all the stocks on my short list quickly sold off within the first few minutes of the, so I wiped the list clean. I refreshed my browser’s view on Finviz at 6:35 AM PT and I saw that VXRT, previously nowhere to be found amidst the top gainers, at the number six spot. It was up around 19% with over 2.5 million shares traded.
I checked the news section on my trading platform for any news on the stock, and saw the headline “Six Coronavirus Vaccines Under Clinical Trials, WHO Says.” The article was specific to the company, but it mentioned briefly that Vaxart, Inc. was in the preclinical stages for a coronavirus vaccine. Given the current situation, I felt it was a strong enough catalyst to enter a trade if the setup was there.
I checked the chart and indeed the stock made a strong move up, hitting a high of day of $3.75 at 6:35 AM PT.
At 6:38 AM PT, VXRT tested $3.80, then start pulling back, touching $3.63 for that minute’s low. I had a feeling that support would be at $3.60 so I put in a buy stop market order at $3.81 with an intended stop loss at $3.59.
Between 6:41 AM PT and 6:47 AM PT it indeed tested $3.60. I wanted to shoot for a 2 to 1 gain-loss ratio so I went to my open order and added my stop loss at $3.59 and limit at $4.25 [ (($3.81 – $3.59) x 2) + $3.81 ] with an OCO (Order Cancels Order) condition.
at 6:49 AM PT, VXRT broke above $3.80, filling my buy order. It continued its move up, testing $4.00 at 6:55 AM PT. I like to place my stops at my breakeven point once a stock reaches a 1 to 1 gain-loss ratio. In this case, that level was $4.03, but since it was so close the whole dollar level I moved my stop earlier than usual.
Unfortunately the stock could not push higher than $4.07. It peaked out at 6:56 AM PT, then hit my stop loss at 7:00 AM PT.
While I am disappointed that the stock did not reach my target, I am overall content with how the trade was read and managed. I followed my rules in validating and entering the setup, as well as trailing my stop losses.
As this setup had a maximum potential gain-loss ratio of at least 1 to 1, I am logging it in my data tracker as a winning setup, even though the way I traded it did not result in a profit for me.
NOTABLE DATA POINTS
Day of week: Monday
Approximate market performance at open: Dow +0.54%, S&P 500 +0.75%, Nasdaq +0.91%
Company name: Vaxart, Inc.
Recent news date: 04-24-2020
Recent news headline: Six Coronavirus Vaccines Under Clinical Trials, WHO Says
Approximate performance before buy signal: +19.87%
Approximate volume before buy signal: 2,541,756
Float: 67.20 million shares
Setup: Bull Flag
Buy signal time: 6:39 AM PT
Entry time: 6:49 AM PT
Maximum exit time: 6:56 AM PT
Entry wait time: 10 minutes
Exit wait time: 7 minutes
Order type: stop market buy
Entry price: $3.81
Stop loss price: $3.59
Maximum exit price: $4.06
Maximum gain-loss ratio: 1.14 to 1
Did I trade this setup? Yes