Moderna: Likely To See Continued Downward Pressure (Technical Analysis)

Moderna, Inc. (NASDAQ:MRNA) is a biotechnology company based in Cambridge, Massachusetts, that specializes in developing innovative medicines and therapies using messenger RNA technology. Founded in 2010, the company has rapidly established itself as a leader in the field of RNA-based drug discovery and development, with a strong focus on creating new treatments for various diseases, including cancer, infectious diseases, and cardiovascular disease. With a pipeline of promising drugs and therapies in development, Moderna is poised to play a significant role in the future of medicine.

Investors have been using Moderna stocks as a good investment vehicle to add to their portfolio due to the strong pipeline, RNA technology, growing market, and strong financial stability. Moderna has a strong financial position, with solid revenue growth and positive cash flow. This financial stability provides investors with peace of mind, knowing that the company has the resources it needs to continue developing new treatments and executing its business plan. Despite strong financial stability, the stock price of Moderna has dropped by 76.88% in 2022. Due to the emergence of head and shoulders, the recent decline has established a strong bearish tone, and a break below the neckline of head and shoulders, which is $166, is likely to initiate a significant drop in Moderna’s stock price.

This article will discuss the key levels in the stock price of Moderna based on the price action analysis. The emergence of a double top and head and shoulders pattern is likely to result in a significant price decline.

Financial Stability of Moderna

Due to the Covid-19 pandemic and the company’s role in the global response to the virus, Moderna’s revenue increased significantly in 2021, from $803 million in 2020 to $18.47 billion in 2021. The key factors in the increase in the overall revenue of Moderna were COVID-19 vaccine sales, strong demand, collaborations, and partnerships with government and public health organizations. However, Moderna’s revenue has been steadily declining since its peak in the fourth quarter of 2021. The revenue is steadily decreasing on a quarterly basis. The revenue for Moderna was $7.21 billion in the third quarter of 2021, while the revenue is $3.36 billion in the third quarter of 2022. The earnings report for the fiscal quarter ending December 2022 will be released on February 23rd, 2023. The revenue for Moderna is declining due to several factors, including lower demand for the Covid-19 vaccine as the global pandemic began to wane and production ramped up for competitors, as well as lower demand for the flu vaccine. Additionally, the company faced pricing pressure from governments and other buyers as well as supply chain disruptions.

Since financial revenue is decreasing on a quarterly basis, the stock price is also decreasing in 2022 due to lower demand. The entire stock market was affected in 2022 as a result of higher inflation and high-interest rates from the Federal Reserve, however, the decline in Moderna emerged from the strongly bearish structure. The stock prices have risen 4211% from the August 2019 low of $11.54 to the August 2021 high of $497.49. A significant price increase was caused by the high demand for vaccines as a result of the Covid-19 pandemic.

However, when market demand for vaccines began to decline in 2022, stock prices fell by 76.88%, from a high of $497.49 in August 2021 to a low of $115.03 in September 2022. The recent market correction from all-time highs does not appear to be complete, and Moderna’s share price is expected to fall further due to the emergence of a bearish price structure.

Bearish Pressure Likely to Continue

The chart below depicts the weekly outlook for Moderna, in which the recent decline in Moderna’s share price has produced a strong double top. The first peak of the double top is observed in August 2021 at $497.49, followed by the second peak in November 2021 at $376.65. In between the peaks of a double top, the stock price is also viewed as being highly volatile. After falling to significantly lower levels, the price formed a reverse symmetrical triangle from the period of January 2022 to January 2023.

Currently, the price has re-emerged a double at the resistance of the reverse symmetrical triangle. The first peak of this double top is seen on December 2022 at $217.25 while the second peak is observed on January 2023 at $207.51. The neckline of this double top is found at $166.

The neckline serves as a support level and its break suggests that this support has failed and traders start to sell positions, leading to increased selling pressure and a potential drop in the market. Additionally, a break of the neckline also triggers stop-loss orders, further fueling the downward momentum. Therefore, any breach of $166 would result in another decline in the stock price of Moderna. Based on the long-term price structure of the double top, a breakout of $166 is likely. On the other hand, a move above the symmetrical triangle line would negate the bearish view. In this case, the symmetrical triangle line runs at $215.

The daily chart for Moderna shows head and shoulders patterns, which further illustrates the bearish outlook. The neckline of the head and shoulder lies at $166, therefore, a break below this level will initiate a downward pressure. Therefore, a move above $215 would negate the bearish outlook for Moderna. RSI is also trading below 50 levels and looks to decline further.

Conclusion

Based on the preceding discussion, it can be concluded that the strong revenue for Moderna, Inc. in 2020 and 2021 was primarily due to Covid-19 sales and market demand. However, the company’s revenue is declining on a quarterly basis. Moderna’s price structure is also extremely bearish and indicative of another market decline.

Additionally, it is observed that $166 is the neckline of the head-and-shoulders pattern, and any break below $166 is a selling opportunity in the stock. On the other hand, a break above $215 would invalidate the bearish outlook and lead to higher prices since it will break the reverse symmetrical triangle. Investors should attempt to sell rallies in the stock price of Moderna in anticipation of lower prices.