Clover Health Investments Corp. (NASDAQ:CLOV) rose 4.42% on Monday despite receiving a downgrade from JPMorgan.
The health insurance company is a Reddit-favorite and on June 7, 8 and 9 was the target of a short squeeze. The squeeze caused Clover Health’s stock to shoot up 205% before falling into a steep downtrend and declining almost 69%.
The stock has the typical characteristics of Reddit darling because its underlying statistics indicate the stock is manipulated:
- Unbelievable Levels of Ownership: 130.59% of Clover Health’s 112.38 million share float is held by institutions and insiders with institutions owning 106.19% and insiders another 24.40% of the float.
- High Levels of Short Interest: 35.89 million of Clover Health’s shares, or 31.93%, are held short. This number has decreased slightly from 41.27 million shares held short in May but is still extremely high.
On Monday, Clover Health’s stock retested support at the $9 level and bounced which prompted institutions to purchase an unusual number of Clover Health call contracts. The institutions could be hedging their short positions with the bullish options if they’re worried another short squeeze is on the horizon.
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The Cover Health Chart: On June 8, Clover Health found a bottom near the $9 level and has retested it three times since. The $9 level has acted as both heavy resistance and heavy support in the past which gives bulls confidence it will hold as support this time. When it did on Monday bulls came in and drove the stock up on above-average volume.
Clover health printed a big bullish engulfing candlestick on Monday, which indicates higher prices may come over the next few days. Bulls will want to see continued bullish momentum and high volume pop the stock up over its next resistance level.
Clover Health is trading below both the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending below the 21-day EMA, both of which are bearish indicators. The stock is also trading below the 200-day simple moving average indicating overall sentiment in Clover Health is bearish.
Bulls want to see Clover Health’s stock pop over its next upper resistance level at $9.94. If it can regain the level as support, it has room to trade up toward $11.52.
Bears want to see big bearish volume drop the stock below support at $9. If Clover Health was to lose the level as support it could fall to the $7.30 mark.