Longfin Corp (NASDAQ: LFIN) is having an incredibly strong day in the market today, but it’s not for any reason that you might expect. Here are a couple of clues… The stock dropped dramatically yesterday as shorts ravaged the ticker and no news has been released today. Below, we’ll talk about:
- Why LFIN is making a run for the top;
- why the run won’t last long;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
Why LFIN Is Running For The Top
As mentioned above, Longfin had an incredibly rough day in the market yesterday, capping off recent and dramatic declines in the value of the stock. In fact, the movement was so bad that the CEO of the company, Venkat Meenavalli, appeared on CNBC attempting to defend the company by saying that the short sellers were destroying the share price. In some ways this is true, but it’s important to look into why. With all of the fears surrounding cryptocurrency, the declines make sense in some ways.
Nonetheless, LFIN is flying in a dramatic fashion today. So, what’s the deal? Well, it’s known as a short sale circuit breaker. Essentially, this is a rule that puts a restriction on the ability to sell shares of a particular stock short after dramatic declines caused by short selling. So, essentially, the short sellers have their hands tied behind their backs today, leading to massive gains as the bulls take control of the shares.
Why This Run Won’t Last Long
Short sale circuit breakers are a lot of fun because they create some pretty compelling short-term opportunities. However, it’s rare to see these gains last long. At the end of the day, the restriction on short selling will be lifted relatively soon. From there, we’re likely to see more shorts ravage LFIN, pushing the value of the stock down yet again. So, be careful here!
What We’re Seeing From The Stock
With the short sale restriction in place, the shorts have no way to manipulate the price lower today. So, it’s no surprise that we’re seeing dramatic gains in the value of LFIN today. After all, the ball is in the court of the bulls. Of course, our partners at Trade Ideas were the first to alert us to the gains. Currently (10:53), LFIN is trading at $17.00 per share after a gain of $5.39 per share (46.43%) thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will be watching the action on LFIN incredibly closely. As the cryptocurrency space is met with more scrutiny, the stock is likely to see more hard times ahead. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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