Rockwell Medical, Inc. (RMTI) Gaps Higher; Are Bears Worried?

Rockwell Medical Inc's (RMTI) move could set up a short-squeeze situation

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Published on Jan 26, 2015 at 11:20 AM
Updated on Apr 20, 2015 at 5:09 PM

Rockwell Medical Inc (NASDAQ:RMTI) gapped up at the open to $12.47 -- its highest point since April 2014 -- after the Food and Drug Administration (FDA) approved its iron replacement drug, Triferic, for commercial sale. The stock was last seen 1.5% higher at $10.97, likely disappointing many bears in and out of the options pits.

On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.17 stands higher than two-thirds of all other readings from the past year. In other words, option players have initiated bearish bets over bullish at a faster-than-usual clip during the past two weeks. A reversal in sentiment among option buyers could translate into additional tailwinds for RMTI.

In the same vein, nearly one-fifth of RMTI's float is in the hands of short sellers, accounting for 11 sessions' worth of pent-up buying pressure, at the equity's typical daily trading pace. If RMTI can extend today's rally, a short-squeeze situation could ensue, adding even more fuel to the security's fire.

The analyst community remains split on RMTI, with three of the covering brokerage firms issuing "strong buy" recommendations, and the other two doling out "strong sells." Also, the stock's consensus 12-month price target of $22.20 is more than double current trading levels.

On the technical front, Rockwell Medical Inc (NASDAQ:RMTI) has outperformed the S&P 500 Index (SPX) by more than 30 percentage points during the past month. With today's gain, the stock has added 7.8% in the past 52 weeks, but could run into a roadblock in the $12-$12.50 region, which has stifled upside momentum over the past several months.

Daily Chart of RMTI Since April 2014

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