CNS Pharmaceuticals (NASDAQ: CNSP) was up 243% on Friday from a starting point in the mid 60 cents per share range, and is up another 130% this morning premarket. That means the CNSP stock price has been closing in, at times, on $6 - a near 1,000% (one thousand percent) or near 10x rise since Friday. It has to be said that there's no obvious and clear reason for this either. So, we've got to try and make a decision about this. Of course we'd like to trade such stock price volatility, But unless we know why the price changes we can't work out which way to position ourselves for any future price moves.
There are a number of reasons we could put up for consideration here. A small sale clinical pharma research company like CNS could have had FDA approval of something, or even just managed to get something through Phase I or II testing. That would, or could, produce such a stock price surge in CNSP. Or, given that the stock is, even now, showing an 80% price decline over the year perhaps there's a substantial short position that is getting squeezed? Except the short position seems to be only 0.57% and that's not enough to conduct a squeeze upon.
CNSP share price from NASDAQ
The last piece of news from the company itself was a week back, stating that they'd been able to recruit 100 patients into their latest trial on Berubicin for GBM. But that was a week ago and unless the entire market is being very unobservant indeed that seems unlikely to trigger a massive stock price boost 4 days after release. We are though seeing fairly substantial trade this morning. That trade coming well down off the top prices we've seen as well.
The best explanation we can come up with is that it's simply the sort of volatility which sometimes hits small caps. The market capitalisation, even at these price levels, is still only in the $5 to $10 million range. It doesn't take all that much interest to move the price of such a small company. In the absence of any other evidence that's what we'd put it down to too. A classic momentum trade in fact, the price started to move simply because a few more people started to trade it, that attracted more to follow those price movements.
That also gives us an idea of what's likely to happen next - a drift back down to around and about the starting point over time. But note that that's only an idea and the revelation of some actual information could well change that view.
