Why Clover Health Stock Looks Poised To Smack Shorts: A Technical Analysis

Clover Health CLOV is under r/WallStreetBets’ spotlight again after printing second-quarter earnings. The Medicare advantage provider reported a whopping $412 million in revenue, more than double the consensus estimate of $205.4 million.

Clover was soaring 20% toward the $10 mark early Thursday morning. Although Clover respectably printed a blowout quarter, and the share price could go much higher due to that, the stock also has bizarre characteristics that have helped to make it a short squeeze candidate in the past.

Between June 7 to July 9 Clover Health soared about 205% from $9.35 to an all-time high of $28.85. Like GameStop Corporation GME back in January, Clover’s underlying statistics appeal to retail traders looking to squeeze short sellers:

• Small Float: Clover has a relatively small float of just 112.38 million shares.
• Ownership Levels: Clover has an unbelievable 119.64% of its float tied up in the hands of insiders and institutions with 95.06% of its shares held by institutions and 24.58% by insiders.
• Short Interest: 25.26 million shares, meaning 22.47% of its total float, is held short although this number has dropped from 35.89 million in June.

See Also: How to Buy Clover Health Stock

The Clover Health Chart: After Clover’s parabolic run in June the stock sold off over 72% and found a bottom at the $7.84 mark. For the past 20 trading days, Clover has held above the level and traded in a tight sideways pattern under $8.99.

There has been low volume in Clover’s stock during the sideways trading, indicating a lack of both sellers and buyers. Often when a security’s volume drops off for an extended period of time, either huge bearish or bullish volume comes in to break it from the sideways pattern.

Clover closed Wednesday just below the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending below the 21-day, which is bearish. If Clover trades above the $8.70 area on Thursday it will be above both commonly followed EMAs and the short-term sentiment will be bullish.

The 200-day simple moving average (SMA), which is a tool used to measure overall sentiment in a stock, is at about the $10.50 area. If Clover trades below the SMA, overall sentiment is bearish; if the stock is able to clear the level, the sentiment will shift to bullish.

If Clover’s stock gaps up on Thursday, traders will want to see whether big bullish volume comes in to hold the stock at its opening price or drive it higher. If the gap up is followed by big bearish selling volume the gap may fill.

Clover Health’s closest support and resistance levels are at $7.84, $8.99, $9.94 and $11.52.