When Will BNGO Reverse? A look into S&D

30 nov. 2021

BNGO

Hello all, short article today about the play of Supply and Demand on BNGO. My current positions as always will be listed at the bottom of the page.

The laws of Supply and Demand suggest that the two are inversely related, When supply increases demand decreases and vice versa. When looking at BNGO we have seen a steady decline in price over the last eight or so months. The interesting part to me is the fact that investors have bought far more than selling in this decline. How can the price of something continue to decline even as people buy it. If investors began selling out of the stock heavily, and consistently, a drop in price would be to expected, as the supply of sellers far out matches the buyers. But in the case of BNGO The supply of sellers continues to be below that of the demand of the buyers. We must understand that the stock market is far more complex than just the laws of supply and demand, but these laws tie heavily into human nature. Can we calculate for when we will hit an equilibrium? Yes:

According to the equilibrium price formula, while using the current price and volume as our demand curve, and the average price and volume since the start of the decline. The output of those calculations is as follows:

Demand curve: P = 3.85 - 6,470,000 Q
Supply Curve: P = 5.79 + 9,447,878 Q
Equilibrium Price: 4.64

This suggests we are currently under bought, also known as being in the "Supply Shortage" Zone. This means that soon enough there will be far to little shares to buy and no enough sellers, and the only way to pull back to the equilibrium price is to raise the price of the shares. All of this considers that the demand for BNGO will continue to rise, if the demand for BNGO were to turn negative, this price would not be accurate.

So what do you think about a 4.64 price target? Does it align with your short term thoughts on where this price will go?
(The S&D graph is displayed in blue on the chart)

Current Positions In BNGO:
Stock positions @5.97
Stock Positions @4.00
Short Call options @1.21 for a strike of $5, for 21-01-2022.
Long Put options @0.22 for a strike of $4, for 17-12-2021. This is to hedge against short term downside lost.
Long Put Options @0. 05 for a strike of $2, for 21-01-2022. to protect against a major free fall in price.
Short Call options @0.21 for a strike of $6, for 21-01-2022. This is my most recent addition to continue generating income on my long position- and to help pay for the continuation of purchasing put options against a free fall.