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Earlier this month, I wrote about Progenity (PROG).

The stock perked my interest after it traded heavy volume and closed the day up 40.74%, on no apparent news.

That change of character resulted in me taking a closer look at the stock.

I previously identified vital support and resistance levels and outlined a potential bullish case for the stock.

I outlined $2 as a critical level of support and noted that it would be necessary for the stock to hold above this level.

Fresh news was later released, which resulted in a breakdown, and the stock traded below critical support for multiple days before reclaiming $2.

So, could the false move lower quickly result in a move higher?

Let’s take a look.

First of all, what is PROG?

Progenity is a biotechnology company that provides, develops, and commercializes molecular testing products in the United States.

The stock is up 109.80% this month and down 59.70% year to date. Yesterday, shares of PROG closed the day up 58.52%.

Since bottoming out at $1, the stock has impressively bounced over $2. During that time, the share price has more than doubled in a month. On a higher time frame, however, the stock is still in a downtrend. That downtrend explains the -59.70% return year to date.

Key Stats from Finviz:

Market Cap: 319.74M

Float: 20.98M

Short Interest: 42.15%

ATR: 0.26

Average Volume: 23.46M

 

When I first wrote about the stock earlier this month, shares of PROG were trading above the critical resistance of $2.

That level marked resistance of the downward trendline.

The stock, however, was not able to hold firmly above this level of resistance due to breaking news.

On the fourth of October, PROG announced a $20m direct offering of common stock, priced at $1.50.

The news sent shares of PROG much lower, and for the next four days, the stock traded below resistance on light volume.

However, yesterday, PROG brushed off the $2 failure from last week and the announcement of the offering and bounced back sharply.

The action yesterday has once again resulted in a potential squeeze higher setting up.

First of all, notice how the volume sharply dropped off when the stock traded in a tight range below $2. Then, as soon as the volume increased yesterday, the stock gained momentum and broke above critical resistance. This might signal strength and the potential for a short squeeze. According to Finviz, the short interest is over 42% in the stock.

For four consecutive days, $1.50 stood firm as the level of critical resistance. Yesterday the stock broke through $1.50 on increased volume and held above. This was the first indication of a reversal and move higher in the stock.

The next level of resistance was $1.80. Like the price action experienced at $1.50, the stock broke above and held above this crucial area.

Shortly after that, the stock broke above $2 and highs from the beginning of the month. Significantly for the bulls, the stock closed above $2 and the previous high.

What’s Next for PROG?

The recovery in PROG yesterday might signal that a move higher is highly probable. The short interest in the stock remains high, and the stock is now firmly trading above critical short-term resistance levels and a higher time frame technical breakout level.

If the stock can base over previous resistance, turning into firm support, it might experience momentum to the upside and squeeze shorts.

$2.50 – $3 might become the new levels of resistance as the stock continues to advance.

After breaking above yesterday, bulls might not want to see the stock break below $2 and held below.

The final line in the sand for the bulls might be between support levels of $1.50 and $1.80.

Author:
Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

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