Camber Energy Inc (NYSEAMERICAN: CEI) is having an incredibly strong start to the trading session this morning, gaining nearly 50% in the pre-market. While the stock is rocketing, you’ll be hard pressed to find a reason why.
We’ve searched Yahoo! Finance, the company’s investor relations website, and the SEC for any clues as to why the stock may be running, and we’re right there with you. Nonetheless, there is a reason for the gains. Here’s what’s going on:
CEI Stock Seems To Be In The Beginning Of A Short Squeeze
Short squeezes are a common occurance in the stock market, and it seems to be what’s taking place surrounding Camber Energy this morning. Short squeezes start with heavy short interest.
According to Short Volume the short sale percent on Friday was 58%, with the short percent over the past 50 days coming to an average of above 50%. Of course, this has played a role in the declines that we’ve seen in the stock as of late. The numbers also show that short interest on the stock has been very high.
The next part of the recipe for a short squeeze to take place is for gains to begin. Shorts make money when stocks fall in value. When gains take place, they have to raise to purchase shares in an effort to do what’s called covering their positions. Essentially, when shares to cover the short positions are purchased, the short sellers cut their losses.
This seems to be the case for CEI today. After the declines seen on Friday, traders started to see buzzing indicators letting them know that the stock was deep in oversold territory. This acted as the catalyst for the upward movement this morning.
As traders started to pile in, looking for a strong day trade, the price of CEI started to move toward the top. As mentioned above, when gains come in heavily shorted stocks, short sellers race to buy shares and cover their positions.
With both day traders looking for a nice profit by buying shares and short sellers looking to cut losses by buying shares, the beginning of a short squeeze is starting to emerge. Make sure to watch it closely too. 50% gains may just be the start as short squeezes can lead to gains in multiples!
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My View On CEI Regardless Of The Short Squeeze
Camber Energy is no golden child of the stock market. The company has made serious mistakes in the past on both the financial side and the operational side. However, recently, I believe that CEI has been turning a page.
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