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Shares of Omega Diagnostics Group Plc (LON: ODX) rallied 12.3% after hitting a significant support level, which could indicate that its recent selloff is over. However, we have to dig deeper into the company to form a solid thesis.
The biotech company focused on CD4, infectious diseases, and food intolerance has not made any announcements in April and has left investors waiting for news regarding the commercial launch of its CE-marked Mologic's COVID-19 lateral flow test.
The firm has signed a lucrative contract with the British government to manufacture COVID-19 tests, but the work is yet to start. The company is waiting for the Department of Health and Social Care (DHSC) to provide an approved lateral flow test to start manufacturing the tests.
Omega Diagnostics expects to increase its production capacity to produce up to 2 million lateral flow tests each week. The company will sell Mologic’s lateral flow tests for professional use under its Visitect brand.
The firm’s contract with the DHSC is worth a maximum of £374 million, which could generate significant profits for the company once a lateral flow test is available and the production process kicks off.
The recent bounce could indicate that the company is about to make a positive announcement, given that the technicals usually precede the fundamentals, but only time will tell. In the meantime, the odds favour a bullish reversal as buyers swing acquire control of the price.*
However, nothing is guaranteed in the markets, and we could easily see price break below the support zone and head lower.
*This is not investment advice.
Omega Diagnostics share price.
Omega Diagnostics shares edged 12.32% higher to trade at 79.75p, rising from Wednesday’s closing price of 71p.
Omega Diagnostics shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are Omega shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies
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