Cancer Screening Success Has Penny Stock Surging

CHEK stock could be spooking shorts

Deputy Editor
Jul 9, 2019 at 10:15 AM
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Biotech stock Check-Cap Ltd (NASDAQ:CHEK) rallied out of the gate this morning, after the firm announced positive final results for its C-Scan test, used to detect precancerous polyps in patients at risk for colon cancer. CHEK stock surged as high as $2.57 earlier, and was last seen up 6% at $2.31.

In fact, the equity is set for its first close atop its 40-day moving average -- a trendline that's served as recent pressure on the charts -- in almost two months. From a longer-term perspective, the security has been trading in a channel of lower highs and lows since mid-March, following a rejection at its 200-day moving average.

While analysts are pretty quiet on the biopharma name, the two who follow the stock are resoundingly optimistic, both calling it a "buy" or better. Plus, the consensus 12-month target price of $10.50 more than quadruples CHEK's current perch, and represents a level the equity hasn't traversed since May 2018. 

An unwinding of shorts could provide some addition tailwinds on the charts. Short interest spiked 20.1% in the last two reporting periods, and now represents 7.2% of the stock's available float. At CHEK's average pace of trading, it would take over seven days to cover all these bearish bets, leaving the door open for a short squeeze. 

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