The runup was HFT computer algos getting ahead of all real orders at the same time that every daytrading room was sent texts and emails to buy USU by Who? Notice the "sincere laughter generated by trading desks everywhere" quote. Gonna end badly at some point
The USU MicroCap Berserker Algo Is Back
Submitted by Tyler Durden on 07/26/2013 12:32 -0400
Those trading microcap uranium supplier USEC Inc (USU) were treated to a rare spectacle moments ago: one or a series of absolutely berserk algos took the stock up from $8 to nearly $16 in a wondrous example of momentum ignition, where one algo was telegraphing it knew something in a bid to get other algos to ramp the thinly traded stock , and succeeded. This move followed Friday's comparable surge by 70% on even more "no news." A circuit breaker halt followed and then the usual $1 bid/ask spreads as algo after algo was positioning to frontrun other algos, but by then all hell had broken loose. Volume as of moments ago: over 2 million on a stock that has ADV of under 100k. Management reiterated what it said on Friday, namely that it had no comment: "In view of the unusual market activity in the company’s stock, the New York Stock Exchange has contacted the company in accordance with its usual practice. The company stated that its policy is not to comment on unusual market activity" ensuring that the newsfree lunacy would continue.
That's ok though: the sincere laughter that this move has generated by trading desks everywhere at the broken farce of a market was worth the price of admission.
The reverse split occurred just before Congress voted on an ammendment to defund USEC. This made the stock irresistanle to shorts who drove the price from $7 to under $3.
Given that the ammendment was voted down, this was good news, so fair value for USEC stock shoulkd have been somewhat above the $7 level. In my mind, I picked $8 as a "fair value" price Maybe I was a bit conservative, but USEC still has the deck stacked against it. Let's say fair value is $10. Everything above that is probably the DOUBLE short squeeze. I have never seen a double short squeeze, but half the short interest occurred after 6/28 so those shorts were really getting squeezed.
USEC's fundamentals haven't changed. They just got some good news at a time when Wall Street was betting against them.
That Japan may resume nuclear plants operations was the catalyst. Many jumped in to do short trades (watch the volume, there is a lot of churn). Some brokerages do not allow even short in the box. So the squeeze continues providing day traders a golden opportunity. Today may be the last day though.