- AcelRX stock is up 125% premarket
- There’s no obvious news driving the price move
- Knowing what is moving that price is the key to a trading position
The AcelRx (NASDAQ: ACRX) stock price is up 125% (to 136% just in the time to type this sentence) premarket on NASDAQ this morning and the big question is why? For there’s no interesting news to make it do so. There is one piece of not all that interesting news which might have acted as a trigger but it is, well, it’s a bit inconsequential to be a trigger for a price movement like this in ACRX.
Our usual port of call when there’s some massive price movement that cannot be swiftly explained is the stock market itself. To check that it is a real price move, that there’s actually trade at these levels. After all, Southwest Gas (NYSE: SWX) is recorded as down 86% today on the price at which one solitary share was traded. So, to NASDAQ!
OK, yes, it is real trade. There’s buying and selling, in volume, at this new price, this 125%, 136% up. So it’s not a fat finger mistake or an obvious attempt at a little bit of ticker price manipulation. Something has happened to make that price move. For it’s significantly outside immediately prior trading ranges:
So, if this is real trade happening at these very new prices then we’d like to know why. For only if we do can we make a decision upon whether to trade and if so, which way? The answer there being somewhat difficult to answer. Because there’s no obvious news about AcelRx out there on the wires. Q2 earnings are expected tonight, after market close. The consensus estimates are for EPS of minus 0.06 cents and revenues of $550k, both of those up 25% year on year. Not the sort of startling numbers that would lead to a more than doubling of the ACRX stock price. Except, well, this is something we’re beginning to see in small pharma stocks. It happened to Ontrak two days ago. Small phrama stock, results expected after market close, premarket the stock was heavily bid up in expectation of those results. That all faded away by the time the results themselves were about to come out and OTRK finished the day 2% up.
So, that could be the explanation, simply people thinking they’ve spotted a pattern something that will become self-reinforcing. If folk think that small cap pharma will rise before results then small cap pharma will rise before results. Simply because people will buy in to capture the rise. That then leaves us with the trading decision of whether to be on that rise side or to try to capture the fall back if – and when perhaps – that excitement fades away again.
The problem there is that patterns don’t always hold of course. Also, trying to capture the fall would mean going short the stock and going short low liquidity small caps might well be more risk than anyone’s happy with. On the third and gripping hand repeating patterns are exactly what we’re looking for as traders….