Against the odds, it was a heck of an October for the stocks. And that performance wasn’t lost on a market-leading rally in Progenity (NASDAQ:PROG) and PROG stock.
But can the bullish action and profits for Progenity’s investors continue? Let’s size up shares of PROG both off and on the price chart, then offer a risk-adjusted determination aligned with those findings.
Spearheaded by the tech-heavy, large-cap Nasdaq Composite and its monthly gain of 7.27% and outsized help from Tesla’s (NASDAQ:TSLA) capture of 43.65% or Microsoft (NASDAQ:MSFT) 17.63% takedown, it was an oddly bullish October.
Yet those performances paled to small-cap, biotech play Progenity, which saw its shares soared nearly 137%.
And while PROG stock is a name you’re likely to have not crossed paths with, a nearly nine-fold increase in volume totaling more than 3 billion shares indicates others certainly have, and for good reason.
Progenity is a California-based biotech specializing in precision medicine through in vitro molecular tests to provide patients with actionable information for improved health outcomes.
Progenity’s mission certainly sounds good on paper, and it’s more than just fantastical “what one day will be” kind of stuff too. Modestly at least, sales of nearly $75 million over the past year already indicate is onto something.
But rather than being compelled to appreciate Progenity as one of the next big things on Wall Street, today simply realize it’s something else entirely. PROG stock is a meme stock.
Right now PROG stock is the entrenched domicile of Reddit’s apes staging a late in-the-game coup against the outfit’s bear population.
Indications are 34% to upwards of 50% of Progenity’s shares are held short. That makes the biotech one of the market’s most-heavily wagered against in terms of float.
And while it’s nice to dream about another successful short squeeze campaign like January’s GameStop (NYSE:GME) squeeze, which put Reddit on Wall Street’s radar, most schemes of that nature fail.
What if you’re the type of investor looking more seriously at Progenity and its business as a sustainable venture in your portfolio?
At the moment and probably for more than a few weeks to come, following this quarter’s sales miss and ongoing red ink — a peek at the rearview mirror in PROG stock and why we’re even discussing those shares makes sense before making any buy decisions.
PROG Stock Weekly Price Chart
Source: Charts by TradingView
In the immediate aftermath of PROG stock’s earnings release shares are off just over 10%. Some may see the price action as punitive. But given October’s rally and shares as low as 66 cents in late August, I’d define it as profit-taking.
The other observation is profit-taking in PROG is likely to turn into a full-blown and deeper correction.
Further, the reality is the staying power of apes mostly responsible for Progenity’s swing higher is typically unreliable and of the one-trick pony variety.
Most schemes aren’t GME stock or an AMC Entertainment (NYSE:AMC). Also, following PROG’s report, a miss is a miss.
All told, I strongly suspect bears aren’t going to miss this opportunity, as well as the one on the price chart featuring a tenuous higher-low pattern and ominous stochastics setup.
Given the history of meme stocks and short-squeeze plays, a move towards much tinier small-cap levels near $1.00 – $1.50 and deeper support shouldn’t be dismissed.
If you think you’re a buyer of PROG stock, holding off looks like a very good idea in our estimation.
Bottom-line though, if readers see things differently, agreeably please look to hedge what’s a much riskier risk-asset with a longer-term bull call spread, stock collar or married put strategy.
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 InvestorPlace.com 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.