Evelo Biosciences (NASDAQ: EVLO) stock is up 214% Friday morning and there's no particular news to back it up. No announcement from the company, no news releases. A useful assumption therefore is that it's just a piece of speculation. In a company with a $9 million market capitalisation and a 5% short interest this isn't that difficult to achieve.
Evelo has been doing well of late. Their eczema drug failed the testing protocol, they laid off most of their staff. There's little here that's all that exciting. In the absence of any grand news to change opinions there shouldn't, therefore, be any exciting moves in the stock price. That last is obviously untrue - so, what's happening here?
Evelo Biosciences stock price from NASDAQ
In the absence of specific information we have to speculate from the evidence that we've got. And to us that looks like a fairly standard attempt to ramp the stock. Starting last night - after hours - a series of high priced buys in the thin trade of that time of day. That then attracts others to the momentum trade. At which point the instigators of the high price can sell the stock they hold at those now high prices and retire from the fray. This then leaves the momentum traders facing that gently falling price as nothing to back up the price jump arrives.
Sad to have to say it but this is just how the world of penny stocks works sometimes. The advice from it being that if we don't know why a stock price is rising then we should be very careful about trading it. Simply because if we don't know why then we'll not know when it will stop or even reverse.
Our expectation is that the EVLO share price will continue to decline during the day.
