When a stock breaks out of a tight trading range in heavy volume it can be a sign of further upside to come. This is not only because a technical trend line has been broken but because a flood of buyers that have entered the stock are likely to provide support potentially adding on any weakness.
What sparks a high volume move in a stock can vary from a company-specific press release to industry-related news to a large purchase by an insider or institution. Although there is no guarantee that there won’t be an immediate selloff, often the dynamics of trading supply and demand dictate that a sustainable uptrend is in progress.
The week is young but there has already been some significant upside breakouts from stocks of all shapes and sizes. Some of the more compelling moves have occurred in the U.S. small-cap space where stocks tend to be more volatile and therefore have more upside potential. Here are three of the biggest breakouts.
Is MacroGenics Stock a Buy?
MacroGenics (NASDAQ: MGNX) has picked up where it left off last week when it bounced off the $20 level in convincing fashion. The biopharmaceutical company recently announced results from a study of its key drug candidate Margenza in a study of patients with metastatic breast cancer. The readout was disappointing, and the stock sunk to its lowest level since February.
This set the stage for some major buying. Volume increased for three straight days culminating in a rally to $27 on Monday in more than three times the average daily volume. Investors that still believe in MacroGenics sole FDA-approved drug saw value in the stock and a silver lining. The recent breast study showed that a large subset of the patient population had a significantly higher survival rate compared to data from the study of Roche’s Herceptin.
Another thing is driving interest in MacroGenics is the support of sell-side research firms. Following the press release, H.C. Wainwright reiterated its buy rating and offered a $41 target. A few days later, Leernik Partners also called the stock a buy opportunity. So, while small-cap biotech stocks carry a lot of risk, the recent analyst opinions and high-volume bounce could presage a bigger rally ahead.
What is a Good Uranium Stock?
Energy Fuels (NYSEAMERICAN: UUUU) is riding a four-day winning streak and has broken out of a nearly three-month downtrend in strong volume. The stock is benefitting from broader momentum in the uranium mining space that has coincided with surging uranium prices.
The spot price of uranium is up nearly 40% over the past month and above the $40 level for the first time since 2014. As is often the story with rising commodity prices, the sharp jump in uranium stems from a combination of strong demand and limited supply of the silvery-gray metal.
Much of the demand has come from the Sprott Physical Uranium Trust which has been buying huge amounts of uranium since August. At the same time, governments around the world including the U.S. and China are increasingly embracing uranium as part of their clean energy ambitions. A portion of President Biden’s infrastructure bill funding is earmarked for the nuclear power industry which accounts for about one-fifth of the country’s electricity generation.
Meanwhile, uranium supply has been hampered by pandemic-related constraints that have weighed on global production. This is good news for Energy Fuels which is a leading domestic producer of uranium, vanadium, and various rare earth elements. With the demand and supply dynamics unlikely to shift anytime soon, digging up shares of Energy Fuels under $10 may not last much longer.
Does Lovesac Stock Have More Upside?
Like the classic B52’s song of a similar name, Lovesac (NASDAQ: LOVE) is “where its at” for small-cap growth investors. After correcting from its June 2021 peak above $95 per share, the home furnishings retailer appears to be in the mood for another amiable rally.
The high-volume reversal began last week when Lovesac reported strong second-quarter results. With the market expecting a small quarterly loss, the company delivered earnings per share (EPS) of $0.52 and comfortably beat on revenue as well. Whereas other furniture companies have been saddled by supply chain challenges, Lovesac has thrived since the start of the pandemic thanks to strong consumer demand for comfortable sofas, chairs, and yes, loveseats, to spruce up their homes.
In the wake of Lovesac’s stunning Q2 report, Wall Street has also cozied up to the company. Three firms have reiterated their ‘buy’ ratings and the target prices range from $102 to $105. With the stock trading in the mid-$60’s and momentum building fast, Lovesac is not one to sleep on.
Before you consider The Lovesac, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and The Lovesac wasn't on the list.
While The Lovesac currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
View The 5 Stocks Here
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist