Avalon Holdings Corp (NYSEAMERICAN: AWX) is flying early on in the pre-market this morning, following up on the strong gains that the stock saw on Friday. However, I urge you, be careful if you’re going to trade this run. Today, we’ll talk about:
- Why the stock is climbing and why you should be careful;
- what we’re seeing from AWX; and
- what we’ll be watching for ahead
Why AWX Is Flying
As mentioned above, Avalon Holdings is gaining big this morning. In fact, the gains are better explained in multiples than percentages. When we saw this, we started to dig to see what the story was. After all, the stock is trading on massive volume and seeing massive gains, there’s got to be some news right? Wrong! The truth is that there is no news that substantiates such a massive gain in the value of the stock.
This is why we urge you to be careful. What the AWX run this morning looks like is short float manipulation. Essentially, firms can manipulate their stock price by restricting the tradable float. In doing so, this constrains short sales on the stock. Ultimately, this reduction in float squeezes the pessimistic investors out… at least for the short term, ultimately leading to gains in price. Nonetheless, when the float is released, shorts dive back in and the price falls dramatically. That’s exactly what I believe is taking place with regard to AWX at the moment. So, if you’re thinking about jumping in at these levels, be careful. This thing may go up a little more, but drastic declines are on the horizons.
What We’re Seeing From The Stock
Usually, it’s the news that moves the market. However, when it comes to Avalon Holdings’ massive run today, there was no news. This one is all about investor excitement and shorts being squeezed out of the equation. Nonetheless, as is normally the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (8:36), AWX is trading at $29.00 per share after a gain of $18.75 per share or 182.93% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on AWX. In particular, we’re interested in following the story surrounding the company’s continued run and what we will be an eventual crash back down to a realistic valuation. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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