Could the Glu Mobile Inc. (GLUU) Rally Have Legs?

Glu Mobile Inc. (GLUU) has nearly doubled in value in less than a month

by Kirra Fedyszyn

Published on Feb 26, 2016 at 1:36 PM
Updated on Jun 24, 2020 at 10:16 AM

After popping to a year-to-date high of $4 on reports that Tencent Holdings Limited increased its stake in the company, video game maker Glu Mobile Inc. (NASDAQ:GLUU) is trading a slight 0.5% lower at $3.90 today. After falling to a four-year low of $1.98 earlier this month, GLUU has nearly doubled in value -- with a little help from Taylor Swift and Kendall and Kylie Jenner -- on pace for a monthly gain of more than 75%. But option traders have yet to buy the stock's impressive rally, favoring bearish bets as the shares continue their journey north.

GLUU has outpaced the broader S&P 500 Index (SPX) by nearly 73 percentage points during the past month, and is poised to notch a second straight close above its 160-day moving average -- a feat not accomplished since early August. The equity's 14-day Relative Strength Index of 74 now puts it firmly in oversold territory.

But at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have barely begun backing off their pessimistic bets, with GLUU's 50-day put/call volume ratio of 0.55 still higher than 96% of all readings in the past year.

Short sellers have been betting heavily against the stock, as well. Short interest on the security rose by nearly 21% during the most recent two-week reporting period, and currently accounts for about 18% of the GLUU's total available float.

Glu Mobile Inc. (NASDAQ:GLUU) could run into a speed bump in the aforementioned $4 region, which acted as support for a healthy portion of 2015. But if traders start believing in GLUU's impressive rally, an unwinding of bearish sentiment could help the stock continue its trek higher.

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