Stocks that Go Parabolic and Why Remark Holdings May Be On Deck
Market and company specific conditions present in many parabolic gain situations -
1) a trading day where many who are usually market participants are absent or those present are less than engaged. Trading days usually characterized by significantly lower trading volumes than a normal day, like the day before a holiday or holiday weekend. The half trading days (day after Thanksgiving and Christmas Eve) each year are the most obvious examples.
2) a stock has new found momentum going into that trading day. It can start on one of those half trading days, but most often it occurs on the trading day when it has had a day or two of increasing momentum days. The best possible scenario is when it has momentum leading up to one of the half trading days.
3) The stock has a smallish float - key to a parabolic move - there are simply not that many shares to be had and the demand for shares at a given price exceeds the available shares so the bid is being driven higher faster than those who wish to sell are placing their orders. Long’s looking to sell recognize what is happening and start to pull back when they realize they can sell at higher prices if they wait. Shorts start getting pressured by their brokers to bring in more capital - not so that they can short more shares but they must bring in additional capital just to maintain the short position they have. The path of least resistance there is to buy to cover and when they do that adds fuel to the fire and pushes the shares higher. If the stock moves up quickly, some shorts are not given the choice of adding capital as brokerages will raise the capital requirement and/or force a buy in of the position. When that occurs there are no "limit" orders, they go into the market and buy at the market until the short position is covered and this pushes the price up much higher very quickly. As is often the case with such situations, there are day traders looking high and low to find a stock with this kind of action going on
4) Short Position - parabolic moves are often driven by or at least exacerbated by short sellers scrambling to buy to cover. When the stock moves significantly higher they are faced with the choice of allocating more capital to that trade or covering. If the stock moves significantly higher in a very short period of time, they can get hit with the double whammy of need to bring in more capital based on the move up but it is also quite common for brokerage houses to raise the capital requirements when they see a spike in volatility. This is when you most often see forced buy ins and panic buying that pushes share prices to high that would not have achieved in such a short period otherwise.
5) Plausible Valuation Justification - not necessary for a parabolic move higher, but makes such a move much more likely. When a company has a new or unique product or service with a very large addressable market that it is well positioned to address, it becomes easier for fundamental driven traders to both buy a stake and to hold those shares when the stock starts moving higher. If everyone dumped their shares on the first 100% leg up, it would make it more difficult for the stock to make a parabolic move, but that will not be the case where there is a good reason to hold.
Remark Holdings' situation covers each item above -
1 - tomorrow is the half day
2 - Remark is up about 60% over the last few trading days on record volume.
3 - Remark stock has a float of less than 15 million shares and the CEO owns about 25% of the shares.
4 - the short position reported by Nasdaq was the largest in the company's history, by about 300%. It is widely known that there is a very large unreported or "naked" short interest that may be several million shares based on the unauthorized listing in Germany.
5) Remark's Kankan has deals generating revenue in the finance and food service regulation business in China that each could justify a billion dollar valuation if the company even takes a high single digit market share. The company's Fintech product was live for 3 months and was used for $100 million in loans in a $300 Billion market growing by 30% per year. They get 5% market share that would be $15B in loans and the model is to take a % of each loan. Kankan is the early leader in that market. Kankan also has AI based object recognition technology installed and operating in hundreds of restaurants in Shaghai and the government is requiring all of the country's restaurants to have that service. Kankan is not the only one offering that service, but it is the leader in Shanghai so far and that bodes well for their potential to gain market share in other regions. Bottom line, Remark's Kankan is the picture of a billion dollar startup in progress. It went from zero to $6m in revenue in about 7 months, it will bump that to $30m+ over the next 12 months on ORGANIC growth alone per the CEO and all the analysts watching the story unfold think that number may be $40m or greater. It is not hard to justify a billion dollar valuation for an AI company growing like Kankan when it has an early lead in markets that are growing like those in China.
The MARK situation has all the trappings of a stock that could go parabolic on Friday and/or Monday. Would like to hear some discussion of how high MARK could go
