In the current market environment for small caps, stocks trading unusual volume has become a significant theme.
Not only has the volume increased drastically in many small-cap stocks, but the range has expanded dramatically as well.
Just yesterday, FAMI traded over 1 billion shares. Yes, that’s right, billion! CEI has consistently traded well over 400M shares over the last few trading sessions.
Therefore, When I notice a penny stock trading with unusual volume, I am on high alert and do a little digging. You never know. It might just turn out to be the next runner.
Yesterday, shares of PROG caught my attention after the stock gapped higher and traded an abnormal amount of volume.
So, let’s take a closer look at this stock and identify critical levels in the name.
PROG, according to Yahoo, is a biotechnology company that provides, develops, and commercializes molecular testing products in the United States. The company also develops therapeutic solutions for gastrointestinal-related disorders.
Progenity, Inc. was formerly known as Ascendant MDX, Inc. and changed its name to Progenity, Inc. in November 2013. The company was founded in 2010 and is headquartered in San Diego, California.
Yesterday, shares of PROG closed the day up 40.74%. The stock traded over 100m shares yesterday, which is super impressive as the stock has an average volume of just 9.22m.
Year to date, the stock is down 71.37% and has been trending lower since the start of the year.
Market Cap: 190.85M
Short Float: 42.15%
Average Volume: 9.22M
There was no company-specific news yesterday to justify this increase in volume or share price.
Identifying Key Levels of Support and Resistance
First of all, from the daily chart, the level that stands out is $2. This level signals the break of the downtrend. As the stock is currently trading above the price in the pre-market, $2 will now become a significant level of support.
Resistance from the daily chart might be found at $3.50 and $4. The last time the stock traded at these levels, volume was increased and on both occasions a short-term top was put in.
The Bullish Case
PROG certainly looks attractive to the bulls right now. The stock traded unusual volume yesterday and is currently trading above critical resistance of $2, as I am writing this. Both occurrences are bullish and might signal further upside momentum.
Combine that with the stock’s float size and short interest, and a perfect recipe for a short squeeze might exist.
Volatility and range can be expected in the stock as it is currently experiencing range expansion and abnormally large volume.
The short interest of 42.15% is an eye-opener. That is significant short interest, and therefore the bulls might believe that this is a perfect candidate for the next short squeeze.
The Bottom Line
It is very easy to fall victim to FOMO, especially in this market!
This stock has just broken out, and therefore it is essential to remain patient and give the stock time to establish new, clean levels of support and resistance.
If I am bullish, you might want to see the stock spend time consolidating over $2, then $2.5, and continue to trade large volume while holding above the VWAP.
As I mentioned, the range has begun to expand, and therefore the stock might dip below support and potentially short trap.
It’s important to always wait for confirmation before committing, as the ‘Next Runner’ could turn out to be a dud.