There are a few indications and characteristics that I typically look for when trying to determine whether a stock might squeeze higher.
Unusual volume is significant because that tells me that the stock is in play. Often, increased volume will increase the likelihood of heightened volatility and momentum in a particular direction.
Float size is another essential indicator because the size of the float relative to the volume being traded can be a good indicator of the stock’s potential to make extended moves.
Easy to borrow stocks might have a better chance of squeezing because if the stock is easy to borrow, it can easily be shorted.
Yesterday I noticed a stock that had all three of the above. This begs the question, could this stock squeeze higher? Well, let’s take a closer look.
Voyager Therapeutics (VYGR)
Yesterday the stock finished the day up 56.68% after announcing positive news. The stock, year to date, is down 45.87%.
The action yesterday saw the stock trade just over 200M shares. Compare that figure with the stock’s average volume of just 3.36M, and you begin to realize just how impressive yesterday’s action was.
The stock also experienced significant range expansion, as yesterday’s range was almost three times larger than the stock’s ATR.
What is VYGR?
VYGR, according to Yahoo, is a clinical-stage gene therapy company. The company focuses on the development of treatments for patients suffering from severe neurological diseases. The company’s lead clinical candidate is the VY-AADC, which is in an open-label Phase 1b clinical trial to treat Parkinson’s disease.
Market Cap: 147.99M
Float: 32.65M
Short Interest: 2.66%
ATR: 0.26
Average Volume: 3.36M
The stock gapped up yesterday after the company announced a license option agreement with Pfizer for novel capsids generated from Voyager’s Tracer screening technology.
As per the announcement, Pfizer may exercise options to license novel capsids to treat certain neurological and cardiovascular diseases. Voyager is said to pocket $30m upfront and is entitled to receive up to $20m in exercise fees for two options.
The positive news saw the stock gap up significantly and break out of the higher time frame downtrend. This technical breakout might signal a momentum shift.
The stock was predominantly range-bound yesterday. As a result of yesterday’s action, precise levels of support and resistance have been developed.
First of all, the support from the higher time frame trend break is $2.8. A move below this level might signal an end to the move and the potential for a short squeeze.
$3.50 is critical support from yesterday, as the stock found support multiple times at this level. In the near term, the bulls will want to see this level continue to hold as support.
$4 – $4.10 acted as critical resistance on multiple occasions yesterday. If the stock can break above and hold above this level, thereby turning it into support, momentum to the upside might build.
It is important to remember that the stock traded its float almost six times yesterday and that it was easy to borrow. This information, combined with the critical levels developed from yesterday, might provide a clean opportunity.
A move over resistance might not be enough, though, as I have seen multiple penny stocks break above resistance in the current market and then fail.
Therefore, if this stock is going to continue higher, it might be necessary for the stock to base above resistance, indicating that the buyers have firmly stepped up.
