Unquestionably, our most precious sense is our vision. I’m not disparaging the others but our sense of sight is what allows us to function and operate the best in this high-paced society. Sadly, myriad conditions take away this gift, which is one of the reasons why biotechnology firms like Second Sight Medical Products (NASDAQ:EYES) have been hard at work finding effective solutions. And in the case of EYES stock, it’s responding to brilliant news.
Earlier this month, the Food and Drug Administration approved the company’s Argus 2s Retinal Prosthesis System. According to InvestorPlace writer William White, Argus 2s refers to a pair of glasses integrated with advanced optical technologies that provide vision for those with retinitis pigmentosa (RP). As you might expect, EYES stock has since rocketed higher from its low single-digit range to a double-digit price tag.
According to information provided by the U.S. National Library of Medicine, “Retinitis pigmentosa is a group of related eye disorders that cause progressive vision loss. These disorders affect the retina, which is the layer of light-sensitive tissue at the back of the eye. In people with retinitis pigmentosa, vision loss occurs as the light-sensing cells of the retina gradually deteriorate.”
Moreover, RP “is one of the most common inherited diseases of the retina (retinopathies). It is estimated to affect 1 in 3,500 to 1 in 4,000 people in the United States and Europe.” As a result of this relatively high frequency, EYES stock theoretically has an expansive patient base, auguring well for future growth.
Most importantly — at least in the present market context — social media chatter has been increasing for EYES stock with its usual “F the shorts” bravado. And why not? If everyone on the internet likes a particular trade, then that’s not a freight train you want to stand in front of.
Perplexing Setup in Play for EYES Stock
Mind you, the narrative for EYES stock isn’t all about various vulgarities I can’t repeat in public. Instead, we do have a compelling technical setup for the biotech firm.
If you take a look at its price chart, you’ll notice that between March 8 through March 19, EYES stock has printed what appears to be a bullish pennant formation; that is, a horizontally aligned triangular shape with the apex (sharp end) pointing to the right. Moreover, the robust move on March 5 represents the pennant’s flagpole.
Also, we’re seeing high volume on the flagpole and lessened volume in the consolidation phase (March 8 – 19). Therefore, if we see a breakout move to the upside occur on high volume, perhaps similar to what we saw on the flagpole day, then it gives traders confidence that EYES stock will continue moving higher.
Still, technical patterns are about probabilities, not guarantees. This is where the social media chatter starts to worry me. If you scroll through various posts on StockTwits or what have you, you’ll notice proponents clamoring to perform intimate reverse mergers on the shorts. The problem, though, is that there doesn’t seem to be many shorts to reverse merge with.
As of Feb. 26, 2021, the short percentage of float is only 1.18%. If you look at some of the popular short-squeeze trades, they have much, much higher short ratios. This means that those who are seeking to implement backdoor accretions probably need to watch their six as well.
Indeed, this mentality speaks to something that I’ve discussed in the past and that is both bulls and bears are necessary for normal market functioning. You can’t just have trades going in one direction; otherwise, you create extreme boom-bust cycles.
In the end, too much speculation means the longs will dump out, leading to a most ironic selloff.
This May Be a 70/30 Moment
This doesn’t mean that you shouldn’t take a chance on EYES stock. Rather, I’d just be ultra-careful and use speculation funds instead. Based on the technicals, I can see the very real potential of this going higher. On the other hand, the dubious reason why social media warriors are buying EYES gives me pause.
Certainly, if you were using options trading to gamble on volatility rather than a directional move, EYES stock is a very compelling target. I never guarantee anything but an imminent strong move seems like a foregone conclusion. I just don’t know what the direction is.
If you’re going to force an opinion out of me, I’d say this. With your speculation money, this may be a 70/30 moment. Put 30% into this setup now but keep the 70% in cash for a potential discount.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.