Momentum Mover of the Day: USEC (USU)
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Shares of USEC Inc. (NYSE: USU) are seeing substantial upside today despite no news. USEC's stock price has spiked so far during today's trading session: shares have risen about $1.42, or 35%, to as high as $5.34.
The stock may still be feeling upward momentum from an announcement made earlier this week that the Company had purchased a centrifuge plant in Oak Ridge, Tennessee. On the other hand, this movement seems unusual as USEC shares have marked a stronger surge today compared to Tuesday's 10% gain when the news was actually released. Furthermore, shares of USEC are seeing heavier volume today: the stock has already traded about 7.6 million times, versus Tuesday's 4.7 million trades.
Several indicators can shed some light onto today's mysterious move -- the RSI, or relative strength index, and the short percent of USEC's float.
Both the RSI and short percent suggest a bullish sentiment; prior to the news release Tuesday, USEC's RSI was just under 40, meaning that the stock was nearly oversold. When using the RSI, which measures a security's price relative to its past performance, investors often consider an RSI rating of below 30 "oversold" and a rating of over 70 "overbought". Shares of a stock that are oversold usually don't stay that way for very long as supply typically exceeds demand and buyers come in as they believe they are getting a bargain.
Next, USEC's high short interest could be another cause for today's upside move. At the beginning of March, USEC had about 26% of its float shorted. While this certainly proves that many investors were bearish on USEC, it could be an upward signal as a high short interest can sometimes spark a short squeeze. A short squeeze happens when prices start to go up after positive news hits a stock that is heavily shorted. Short sellers, who are betting against the stock, are forced to quickly cover their positions by buying back their shorted shares. This causes the stock price to move sharply higher.
As shares of USEC have fallen about 40% since mid-February, today's momentum is likely the result of shorts locking in their profits as the stock appears oversold, although this is only speculation. [BCS]
The stock may still be feeling upward momentum from an announcement made earlier this week that the Company had purchased a centrifuge plant in Oak Ridge, Tennessee. On the other hand, this movement seems unusual as USEC shares have marked a stronger surge today compared to Tuesday's 10% gain when the news was actually released. Furthermore, shares of USEC are seeing heavier volume today: the stock has already traded about 7.6 million times, versus Tuesday's 4.7 million trades.
Several indicators can shed some light onto today's mysterious move -- the RSI, or relative strength index, and the short percent of USEC's float.
Both the RSI and short percent suggest a bullish sentiment; prior to the news release Tuesday, USEC's RSI was just under 40, meaning that the stock was nearly oversold. When using the RSI, which measures a security's price relative to its past performance, investors often consider an RSI rating of below 30 "oversold" and a rating of over 70 "overbought". Shares of a stock that are oversold usually don't stay that way for very long as supply typically exceeds demand and buyers come in as they believe they are getting a bargain.
Next, USEC's high short interest could be another cause for today's upside move. At the beginning of March, USEC had about 26% of its float shorted. While this certainly proves that many investors were bearish on USEC, it could be an upward signal as a high short interest can sometimes spark a short squeeze. A short squeeze happens when prices start to go up after positive news hits a stock that is heavily shorted. Short sellers, who are betting against the stock, are forced to quickly cover their positions by buying back their shorted shares. This causes the stock price to move sharply higher.
As shares of USEC have fallen about 40% since mid-February, today's momentum is likely the result of shorts locking in their profits as the stock appears oversold, although this is only speculation. [BCS]
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