What's Going On With Check Cap?

Check Cap Ltd CHEK stock took a breather on Wednesday, but the stock has rallied an incredible 232 percent in the past five trading sessions. With no major news out from the medical diagnostics company, it’s likely the stock’s incredibly low float that is fueling the rally.

What Happened

Check Cap is one of a number of low-float stocks that have experienced major short-term rallies on little or no news in recent quarters. When shares start to rise, a flood of momentum traders coupled with a limited float can lead to parabolic spikes in share price.

The only bit of news from the company in recent days has been a note informing investors that the company has regained its Nasdaq listing compliance, once again meeting the minimum bid price threshold.

The company is also reportedly working on completing an SEC filing for a 2.5-million-share public offering.

Why It's Important

Since neither of those pieces of news would seemingly trigger a stock to triple in share price in a matter of days, it’s likely that the move has been technical in nature.

According to shortsqueeze.com, Check Cap only has 85,900 shares held short for a short percent of float of just 1 percent. Those numbers suggest a short squeeze is likely not the culprit behind the large move.

However, the stock’s 8.6 million-share float is minuscule, and a huge jump in trading volume this week explains the extreme volatility. As of 12:30 p.m. EST on Wednesday, Check’s daily trading volume was already 1.7 million shares compared to its long-term average daily trading volume of just 55,500 shares.

At time of publication, Check Cap was trading around $13.40 after closing last Friday's session at $4.05 a share.

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