Novavax (NVAX) gained some unwanted attention today by dropping more than 80%. Yes, 80 percent. Eighty, 8 zero.
The sharply lower opening created a huge gap. This would have been a great learning experience if it happened last week as I could have used it in my graduate class on technical analysis when we discussed gaps. Let's check the charts.
In this daily we can see a four-month base pattern in February through May followed by a rally and more base-building. NVAX was trading above the rising moving averages -- 50 and 200 days. The On-Balance-Volume (OBV) line was rising from a February low and there were no bearish divergences to worry about. Things were looking up and then BAM.
In this point and figure chart of NVAX, above, we can see the sharp downtrend on this chart. Point and figure charts do not have gaps and this chart is normal, but the breakdown means that a new base pattern has to be built.
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There are a number of issues to consider from a trading standpoint as we start the week.
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