What a week it’s been for shareholders in Satixfy Communications (NYSEARCA:SATX). Shares of the satellite communications company started the week around $11.50 per share, then surged to nearly $40 per share on Tuesday. They sunk below $21 on Wednesday and have once again shot higher. Today, SATX stock is trading around $50 per share at the time of writing, marking as much as a 100% increase over yesterday’s close.
This extremely volatile price action appears to be tied to little news. In the absence of any securities filings this week, investor speculation and momentum-driven algorithmic trading appear to be driving at least some of this move. As a relatively low-volume stock, such moves can be more common. For SATX stock, an average of around 300,000 shares are traded per day. However, in today’s session, nearly 1.4 million shares have changed hands at the time of writing.
Let’s dive into what investors may want to make of this move.
Is Now the Time to Buy SATX Stock?
For low-volume stocks such as Satixfy, these sorts of moves can certainly happen from time to time. The given valuation of a company on a particular day is simply marked at the value the last trade was made by investors. If fewer shares are available to purchase than what’s being demanded in the market, enough investors hitting the bid can cause such violent rallies.
Of course, when the profit-taking starts, this sort of momentum rally can end — and quick. Thus, while showing explosive upside, SATX stock could have equally disastrous downside. In the absence of news, it appears momentum traders (and potentially algorithmic traders) have jumped on this stock as a quick trade.
It’s worth noting Satixfy is a relatively new company, having hit the market in late-October. Thus, perhaps some price discovery is taking place with this company. That said, the absolute nature of the intraday moves we’re seeing isn’t natural. For those with any sort of risk tolerance level, this is likely a stock to avoid right now.
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.
