Yesterday was a day most bulls will want to forget! A sea of red swept the market, as the S&P 500 was down 0.58%, Nasdaq was down 0.64%, and the Dow was negative 0.54%.
In the above map from Finviz, the picture is painted from yesterday. No industry was spared as supply outweighed demand and the market closed red.
While the market experienced a day to forget, one stock, in particular, was not experiencing the same selling and sentiment.
Support.com (NASD: SPRT) closed the day up 41.12% and extended 30% in the after-hours.
The stock was seemingly unaffected by the general selling in the market.
What is SPRT?
Support.com is a technical support company headquartered in Wilmington, Delaware.
The company provides customer and technical support solutions through home-based employees, primarily in the United States.
SPRT is having an incredible year thus far. Based on yesterday’s close, year to date, the stock is up 795.45%. On the week, the stock is up 124.63% and 596.11% on the quarter.
The company reported second-quarter 2021 financial results on the 13th of August. For the second quarter of 2021, revenue decreased by 23% compared to the same period last year. The company reported a net loss of $0.8m, or -0.03 per share in the second quarter of 2021, compared to net income of $0.6m, or $0.03 per share, in the second quarter of 2020.
Market Cap: 475.36m
Short Interest: 40.98%
Average Volume: 10.46m
Six days after reporting lackluster earnings and closing near the low of the day, the stock made a new all-time high and has since more than doubled.
What is the catalyst driving the stock higher?
There has been no company-specific news that has caused the stock to move higher. Instead, it appears that the stock has moved sharply higher due to the high short interest and unusual options activity.
Per Finviz, the company has a 40.98% short interest rate which is exceptionally high. The float of the company is 15.09m shares which means that 6.18m shares are positioned short.
The sizeable short interest rate coupled with the unusual options activity has caused a short squeeze in the stock.
The abnormal volume has played a role too. Yesterday over 100m shares were traded in the stock, providing evidence that the bulls remain firmly in control for the time being, as the stock closed up 41.12%.
The company is trending across many social media platforms as people discuss the stock as a short squeeze candidate. Yesterday it was the top trending stock on Stocktwits.
What’s next for the stock?
Since breaking out to new highs on Monday, the stock has been in a steady uptrend. Yesterday the stock extended from the support line of the uptrend as the squeeze intensified.
Support of the uptrend beginning on Monday is $16. This is by far the furthest level of support to where the stock is currently trading. This support level is also near the price at which the stock opened up yesterday. Therefore if the stock fades below this crucial area, it could signal an end to the squeeze.
The next level bulls will keep a close eye on is the $23 area. Yesterday in the after-hours, the stock consolidated at this area before pushing higher towards $30. Bulls will want to see the stock find support in this area if shares pullback today.
For the stock to continue to push higher, I believe that the stock will need to maintain high short interest. One way of this happening is for the stock to pull back and trap intraday shorts before reclaiming higher prices and squeezing once more.
If the stock fails to hold above the VWAP and makes consecutive lower highs, it might be possible that the squeeze is coming to an end, and the momentum could shift.