In today’s overwhelmingly red market, investors are looking for any beacon of hope. One stock that is creating a lot of smiles today is ION Geophysical (NYSE:IO). Currently, IO stock has skyrocketed more than 60% higher.
Such a move — especially on exponentially increased trading volume – suggests there’s something to watch with this company. Unfortunately, there is little in the way of company-specific news driving ION higher today.
That said, its business model as a technology and services optimization firm focused on the offshore energy sector is something that’s a clear driver. Energy stocks, offshore or otherwise, are surging today. Much of this has to do with the rise in West Texas Intermediate (WTI) crude, which saw a barrel of oil surpass the $130 level for the first time since 2008. Accordingly, investors are now looking for any leveraged exposure to oil out there.
Let’s dive into what else investors may be watching with ION right now.
What’s Behind Today’s Surge in IO Stock?
The further investors zoom out on ION’s long-term stock chart, the more depressing it gets. This is a company that has been in an overall downward trend for a very long time.
The kind of impressive bearish sentiment that has driven IO stock to these levels is noteworthy. In fact, some investors see it as a reason to pile into this trade today. Surging short-seller interest in ION has led to expectations that IO stock could be poised for a short squeeze.
In fact, IO stock has made Fintel’s list of the top-5 short squeeze opportunities this week. This news, combined with surging oil prices, appears to be fueling the rally.
The thinking is relatively easy to understand. ION is a company with a market capitalization under $40 million, even after today’s rise. Should enough buying interest persist, it’s entirely feasible investors could be in for an impressive rally when short sellers are forced to cover. Currently, IO stock appears to have a cost to borrow above 46% and a short interest level around 14%. Those metrics are certainly high, and do lend positively toward such a thesis.
Whether this is the beginning of a short squeeze, or just a one-off daily rally, remains to be seen. However, it’s clear that speculators have found an energy stock to trade as a potential near-term beneficiary of this market volatility.
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On the date of publication, Chris MacDonald 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.
