Following is not THE reason for spike, but a factor that surely has contributed to the spike. Also it is a generic description of the pattern that happens so often.
After the inital spike alot of the shares were in the hands of high buyers/chasers. Imagine the total available float as a single bar which is devided into sections. A large section was related to weak hands.
As the price followed a common chart pattern (the pennant) the section of weak shares became smaller and 2 other sections increased. One section that increased is that of the traders that bought at a lower price and are not yet hurting up to a level that they want to sell. The second growing section is that of long holders.
When the section of weak shares dwindles the stock stabilizes and bottoms out. There is just not enough volume left to push the price down. This often happens when a volume nearly equal to or greater than the available float swaps hands.
As sellers dry up so does the volume. That transforms the stock that behaves like a low float stock - volatile on low volume.
Then at some point there are no sellers left. Price dips the usual cent below support right at the moment it was supposed to break out of the pennant. And that ushered in the reversal.
Now the second conceptual part. Selling pressure. Say that I want to load up what would be the best way? Have the sellers sell em to me at my price instead of me buying at their price.
When the sellers dry up it is BULLISH and people often misunderstand why. They think that the price moves up because people apply buy pressure. Well it that were the case it would imply more volume. The reason is simple.. noone wants to sell at such a low price. That makes the sales at bid dry up. SO the ONLY way to get shares is to bid higher and higher. The people that didnt want to sell at low prices still dont want to sell. Those who bough stock on the way down also havent had enough pain to move em into a sale. Also remember that the volume dried up and that the stock behaves like a low floater then. So any buying pressure will toss this stock around. Then add the dumb traders that bought the top, sold the bottom (or near) and that dont want to miss out on the trade.
The earlier theory coined by someone that it was short related is NONSENSE.. there are only few shares short on mesa and those that are short deserve to be wiped out because it doesnt get any more stupid than this - referring to shorting a high volatility stock with positive court news finishing up a pennant formation.
Anyhoo .. any burst of volume will attract numbnuts that chase. USE THAT! Look at the patterns on CTIC march to june, WAVE may to june and so many others. It is a standard pattern. For every spike the section of dumb holders on the tradeable float grows. That section needs to reduce in size. Very often the selloff is in volume equal to the volume used for the spike up .. wierd I know .. but this is a number backed up in a number of books that deal on subjects of volume and float turnovers.
It blows up with dumb traders, it needs to deflate to smart traders, volume needs to dry up to the point that noone wants to sell, then the only way to get shares is to buy more. Low volume creates volatility and that leads to a breakout. That leads to dumb traders chasing and inflating the stock .... and repeat.
