It’s going to be a long, long time before we can all safely get on a cruise ship again.
But based on the action we saw on Monday, with cruise line Carnival Corp. (CCL) skyrocketing up 39.29% by close, you’d think that it had been announced that Covid-19 had been eradicated.
In reality, the announcement that we did get was that American pharma giant Pfizer Inc. (PFE) and its German biotech partner BioNTech SE (BNTX) released some preliminary results from their Phase 3 trial for a Covid-19 vaccine, showing that the vaccine candidate prevented over 90% of Covid-19 infections.
As a result, the Dow shot up 6%, the Russell 2000 index of small-cap stocks up spiked 7.5% at one point, and the S&P 500 was up 4.5%.
Meanwhile, the tech-centric Nasdaq was flat for most of the day, and closed down 2%. Big names like Amazon.com Inc. (AMZN) and Facebook Inc. (FB), which had been winning stocks for most of this year with the pandemic forcing us to stay indoors, closed down 5%.
Netflix Inc. (NFLX) was punished even worse, closing at -8.59%.
Clearly, optimism for a vaccine is one of the biggest potential market movers right now.
And look, there’s no denying that the vaccine news from Pfizer and BioNTech is amazing. It’s a great accomplishment – and may even be remembered as the “moon landing” of this generation. The fastest vaccines ever produced are the Measles Mumps Rubella (MMR) vaccine and the Ebola vaccine – both took between four and five years. We now have a vaccine that could be in available in less than a year. Just, wow.
But what many traders and investors are forgetting here is the production and distribution timeline. While hope for a brighter tomorrow is something we’ve all needed for a long time now, expectations need to be tempered.
In the meantime, this week’s price movements have created some amazing profit opportunities as reality sets in on this over-exuberant market. And they’re not in the stocks that the rest of the market is flooding into right now.
Look to short shares of CCL while they’re still in the $16.50 to $18 range. Take profits on half of your shares when they dip below the prior resistance level of $16. I’d recommend exiting the position when shares fall to around $14.50, just above where the price was sitting before the Pfizer announcement.
On this short, you’d be best to enter the position with the stock above $94. Look to take profits on the first half of your shares at $85, and close the rest of the trade at $77.
Second, we have the work-from-home stocks that have been the darlings of the stock market this year. These are the firms that have been crucial to enabling millions of people to keep working from home, including web conference firm Zoom Video Communications Inc. (ZM), cloud provider Microsoft Corp. (MSFT), and online document management company DocuSign Inc. (DOCU). All three closed down yesterday, with Zoom and DocuSign both down about 15%.
The change to working from home may have been kick started by Covid-19, but there’s no turning it back – not fully. This is now a systemic change. People have moved, set up home offices, and learned new habits because of it.
Most importantly, millions of people prefer it, cost and efficiency benefits are clear, and there’s no putting this cat back in the bag now.
These work-from-home stocks have been punished way too hard, and will soon rebound. So buy them on the dip for some easy profits. Though ZM has the bigger short-term upside, I particularly like the technical set-up on MSFT. As you can see, the stock recently broke through a strong resistance level and has fallen back to it as support, giving us a great entry position:
I think MSFT is a great buy in the $210-215 range. Set your first profit target at $230, and your final target at $240.
(Please note: these prices of the stocks I’ve recommended in this article are somewhat volatile at the moment and may currently be outside of the entry price range I’ve provided. If so, you can choose to either enter the position at current price, or wait a day or two to see if you can get a better entry position.)
Great trading, stay safe out there, and God bless you,
D.R. Barton, Jr.