The Coronavirus will impact many portfolios as well as lives, here are four companies working on a solution, reports Matt Weller.

The rapid spread of the Coronavirus and the potential for global economic disruption led to the worst day for U.S. stocks in two years on Monday and a near repeat on Tuesday.

Though the human and financial cost of the virus is massive and growing, every crisis presents opportunities for savvy traders. For example, the likelihood of disruptions to business travel schedules stemming from COVID-19 (the technical name for Coronavirus) has prompted traders to bid up the stock of Zoom Communications (ZM), a remote video conferencing platform, to record highs; in fact, the stock is up an incredible 59% so far this year alone.

One more direct way to speculate on potential beneficiaries of Coronavirus’s spread is through the pharmaceutical companies seeking to develop vaccines and treatments for the virus such as Gilead Sciences (GILD) and Johnson & Johnson (JNJ), which are providing treatments.

For its part, Gilead has caught a bid after a World Health Organization (WHO) official stated that “There is only one drug right now that we think may have real efficacy and that's Remdesivir," referring to Gilead’s experimental drug that was also used to treat Ebola. GILD has been able to shrug off the broader market’s headwinds to close at its highest level since 2018, and positive results from expanded trials of Remdesivir may boost the stock further in the coming weeks.

Meanwhile the Janssen Pharmaceutical division of Johnson and Johnson, another healthcare stalwart, has a strong track record of quickly developing vaccines for epidemics and began working on a vaccine for COVID-19 weeks ago. While it may be a step behind Gilead in developing a potential breakthrough drug, it’s hard to bet against Johnson and Johnson’s team. JNJ has pulled back to test its 50-day exponential moving average along with the broader market, presenting a potential opportunity to buy the stock at a discount for bullish traders (see chart).

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Source: TradingView, GAIN Capital

Higher Volatility Plays for More Aggressive Traders

Of course, with market capitalizations in the $100-400 billion range, even a breakthrough treatment for COVID-19 may not move the stocks of GILD and JNJ as much as aggressive traders would hope. While those stocks could remain profitable from their other business lines, they may not be the Coronavirus play.

Instead, more aggressive traders may prefer to keep an eye on smaller capitalization stocks like Moderna (MRNA) and Regeneron Pharmaceuticals (REGN). Recently, the Coalition for Epidemic Preparedness Innovations (CEPI) agreed to fund Moderna to create a vaccine for Coronavirus after seeing its strong results from a Phase One vaccine trial. Looking at the stock, MRNA has gapped higher Tuesday and is trading roughly in the middle of its three-month range between $18 and $24. A break above $24 could mark the start of another leg higher.

Finally, Regeneron has tested two of its drugs, REGN3048 and REGN3051, on similar diseases in mice and saw a substantial decline in viral loads in the lungs. The company is currently experimenting with a combination of drugs “designed with the goal of enhancing efficacy, reducing the development of viral sequences that lead to resistance, and increasing potential utility in future outbreaks as viruses continually evolve.” 

Whether any of these drugs prove to be effective remains to be seen, but traders aren’t waiting for results: REGN has already rallied 33% this month, but given it’s $50 billion market cap, it could still gain more ground if its drugs are found to be effective.

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Source: TradingView, GAIN Capital

There are no doubt countless other companies seeking a breakthrough to address the Coronavirus, but based on our read of the current situation, GILD, JNJ, MRNA and REGN may offer some of the best opportunities for traders hunting for a cure.

Hear what Matt Well had to say about Geopolitics, Economics and the Forex Markets at the recent Las Vegas TradersExpo. Matt Weller | Global Head of Market Research | GAIN Capital mweller@gaincapital.com | w: www.forex.com www.cityindex.co.uk