The Psychology behind AVNR and why it is soaring. - C Squared Trading

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The Psychology behind AVNR and why it is soaring.

AVNR chartAVNR is soaring 85.31% today, and at one point was up almost 100%.

Here are some reasons why, and how the stock is up this much.

1. Stocks typically move this much by some piece of news, catalyst or event. Then once the stock doesn’t stop, during day one, it feeds upon itself.

In the case of AVNR the stock is soaring because of positive clinical trial results that affect those with alzheimers disease. The disease affects 5 million plus people, so there is a large market for the drug. And therefore the potential for massive profits.

2. Shares affected. Technically speaking there is a float in each stock. The lower the float the faster the stock moves. This happens because of supply and demand. In the case of AVNR there was a float of 150 million. The average volume traded for this stock is 2.5 million roughly. So by 8am eastern time the stock was already trading its average volume and was up to $7 from its previous close of 6.74. Bears are panicking. By 10am EST it was trading around $11! This is insane.

3. Traders, that were short this stock were now down on their position, and as it moved higher and higher against them, they panicked more and more, and bought the short position back. This causes a net effect of someone buying the stock, on top of that buyers that were bullish, bought more as well. This caused a massive short squeeze. Google that term if you don’t understand it yet.

4. Once the stock broke out of it 52 week high there was no resistance and traders and investors started to pile in and this caused the float to almost flip. This means the total amount of shares outstanding was almost completely bought and sold. 87 million shares. This is 70 million less than its total float and my guess is, there were many short sellers in and out and daytraders, trying to see if they could smack it down or profit from short bursts higher.

The psychology behind it. Now the stock needs to prove to the bulls and longer term folks that it can stay up here in the stratosphere. If it can’t the bears will chase it down again. If it can stay here, then it may continue higher.

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This is not financial advice. This is merely opinion. Please do your own homework.



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