Today's upside gap is running out of steam near the stock's 50-day moving average
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) stock is up 11.5% to trade at $16.80, after the Food and Drug Administration (FDA) approved new capsule dosing formulation and tablet strength for Nuplazid, the company's treatment for Parkinson's disease. ACAD is now pacing for its best day since Aug. 9.
Today's surge runs counter to ACADIA Pharmaceuticals stock's longer-term trend. Heading into today's trading, the equity was down 50% as of yesterday's close. In fact, the shares have been lingering near four-year-low territory since a scathing CNN report on Nuplazid in early April. Plus, today's upside gap is being contained by familiar resistance at the 50-day moving average.
Nevertheless, analysts have kept the faith in the drugmaker. All four of the brokerages in coverage rate ACAD a "strong buy." What's more, the stock's average 12-month price target of $47.29 is a whopping 180% premium to the stock's current perch.
Short sellers, on the other hand, have been ramping up the skepticism on ACAD. Short interest increased by 20% in the most recent reporting period to 15.21 million shares, the most since September. This represents almost 16% of ACAD's total available float, and six times its average daily trading volume. Some of today's gains could be a result of the weaker bearish hands throwing in the towel.
Some of these shorts may have initiated options hedges to guard against any upside risk. The out-of-the-money July 18 call saw the largest increase in open interest during the last 10 sessions, and data from Trade-Alert points to buy-to-open activity.