The Clover Health stock price has lost 24% in July’s first three trading days and 65% from June’s high. So, does this spell the end for the CLOV squeeze?
Clover health Investments Corp (CLOV: NASDAQ) crashed 14.60% yesterday, finishing at $10.00, a loss of $1.71 from Friday’s close.
Clover recently completed a reverse merger with Chamath Phalipatiya’s Social Capital Hedosophia Holding’s Corp. This was one of many of Chath’s high profile SPAC deals this year.
To say the stock has been volatile would be a huge understatement. Seven weeks ago, CLOVE was trading at $6.52. three weeks later, the stock was 340% higher at $28.85. However, following four consecutive daily losses, Clover is again approaching a single-digit stock price.
Typically, early investors in Special Purchase Acquisition Companies (SPAC’s) must hold their shares for a fixed period of time. In the case of Clover, the lock-up period is 180 days. The recent southbound acceleration in the Clover Health stock price follows the end of the lock-up period, expiring tomorrow.
Therefore, it appears investors are unloading their positions with the expectation that more shares will hit the market tomorrow.
Yesterday’s $10.00 closing price was the lowest the stock has traded in exactly one month.
Moreover, the liquidation has resulted in CLOV breaking below some significant levels of support. Furthermore, should the selling continue in today’s session, Clover’s outlook could deteriorate further.
Previous horizontal support was seen at $12.00 and $11.24. Additionally, the 50-day moving average at $10.44 and the 200 at $10.83 further underpinned the price.
However, those significant support levels are now barriers to the price on the upside.
At $9.62, the 100-day moving average is all that stands between CLOV and the March low of $6.32. So this should be considered a crucial level for Clover investors.
But, and it’s a big one, the stock still has a huge amount of short interest. At 36.71% of the available float, the 41,400,000 shares made available to short-sellers may offer the bulls a glimmer of hope.
Although the market is pricing in large selling ahead, it’s by no means a certainty. And while the price may continue lower in the short-term, this decline may prove brief and shallow unless the short interest reduces considerably.
I, like many others, will be interested to see how the next couple of days play out.
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