Don’t Fall for the Ape’s Banana Trick in Clover Health

Clover Health Investments (NASDAQ:CLOV) has handily outperformed the market this week. Today though, I’d warn other investors to steer clear of a nearby banana-in-the-tailpipe trick and damaging backfire in CLOV stock before making any purchase decisions. Let me explain.

CLOV stock: stethoscope laying atop medical papers
Source: Shutterstock

GameStop (NYSE:GME). AMC (NYSE:AMC). They’re the crown jewels of this year’s meme stock theatrics. You know, the high-profile trading schemes made possible by Reddit’s WallStreetBets swing-from-the-fences, bullish community and collectively these days, referred to as apes.

And this week the apes have continued to earn the colloquial title and entitled to beat their collective chests.

CLOV Stock and the Memes

Both GME stock and AMC soared after a couple of months of listless downward drifting which even the most ardent bulls had to be asking themselves the question, “why am I in still in this?”

For those bulls and apes that did remain committed to GameStop and AMC shares, today the patience may have proved worthwhile. Maybe.

By the numbers GameStop climbed as much as 43% at Tuesday’s highs before settling down with gains of around 30% heading into Friday. Similarly, shares of AMC jumped just over 40%, but have since seen its weekly returns chopped in half.

But how does CLOV fit in with a video game retailer and cinema chain whose business models are stressed even by today’s digital-based world, as well as negatively challenged by Covid-19? Clover Health is a next-gen Medicare provider brought public by respected institutional investor Chamath Palihapitiya and his Social Capital Hedosophia funds, right? Correct.

Under Chamath’s guidance, diversified growth plays Virgin Galactic (NYSE:SPCE), SoFi Technologies (NYSE:SOFI) and Opendoor Technologies (NASDAQ:OPEN) have all been brought public prior to CLOV stock.

Today though, a rosier long-term narrative for CLOV is being trumped by short-term and very real issues.

Earnings Results Offer Insight

Despite being fairly well-positioned in a healthcare market owning longer-term growth drivers, today the cost of doing business is challenging Clover Health’s ability to realize a successful end-game.

Clover’s Mixed earnings results earlier this month demonstrate as much.

The outfit delivered strong sales growth, but burdensome and larger-than-expected losses. The report also saw an immediate bid in shares all but disappear just one session later. That’s not great to see.

Moreover, there’s another dilemma aside from growth-oriented investors still shying away from Clover Health at current stock levels.

CLOV stock remains a meme stock. Worse, Clover Health isn’t even particularly good at being a sideshow in that popularized market niche.

For one, Clover’s short interest is currently a less-than-impressive 7.5% with the amount of days-to-cover at less than half of one trading session. Yeah, that’s nothing to write home about.

How about this week’s “solid” stock gains of 9.55% through Thursday’s close? That needs to be addressed for what it really is. And it’s not much.

In dollar terms works the gain works out to a rather measly 74 cents. Even sadder and why it matters so little, CLOV stock is about two bucks removed from its all-time-low and roughly $20 beneath or 70% from June’s ape-driven all-time-high.

Lastly, CLOV’s relatively tame rally occurred in lockstep with GME’s and AMC’s much more substantial price reactions on Tuesday.

All told and right now, Clover Health is revealing itself as a third wheel riddled with weaker-looking monkey business and where being mindful of a banana in the tailpipe makes sense. Thanks Axel.

CLOV Stock Weekly Price Chart

Clover Health (CLOV) some bear flag failure isn't likely finished punishing bulls
Click to Enlarge
Source: Charts by TradingView

Source: Charts by TradingView

On the CLOV stock price chart, I’d honestly like to be more upbeat. But that would require a blind eye to a more bearish reality.

Technically, the observation is this week’s bid is a likely a trick to lure bulls into Clover Health shares on the premise a patterned bear flag is failing.

Regrettably though, there’s simply little to refute the waning strength in shares was anything more than ape-driven monkey business, which could get a lot nastier for CLOV shareholders.

Bottom line, Clover Health is increasingly prone to a full-blown backfiring to new all-time-lows given today’s weak short-interest, the company’s current business shortcomings, as well as business dealings by both bulls and apes in CLOV stock up to this point.

On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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