Why some people will be trading it today: Dead-cat bounce investors are on this stock, which rallied Monday after a huge drop on Friday sent it from $9.30 to $2.77. Yesterday’s gap up was people pouncing on the bounce, and it paid off as the stock ran all the way up to $5.88 before settling back. Today, people are looking for more rebound.
Why I’m not trading it today: I think the stock will be below the $3 mark because the bad news isn’t just traders moving it, it’s real bad news, the potential end of a drug program deep into the approval process.
What would make me change my mind: I’d only be a player above yesterday’s high. At that point, if it goes to, say, $5.75, it’s no longer people looking people to short cover and there’s real buying pressure. Even then, this would be a day-trading play at best.
Jeff Williams is the lead trader of PennyPro.com. He is a short-term trader of stocks under $10 a share. At the time this article was published on RagingBull.com, he had no open positions, options or orders in XBIT, and last traded the stock on June 1.