Shares of Huadi International (NASDAQ:HUDI) are roaring higher on Friday, up more than 200% on the day. So what’s got HUDI stock more than tripling so far in the session?
The stock is moving on record volume, having already topped 25 million shares traded. It’s now approaching 28 million shares, more than double the stock’s previous record of about 12.5 million.
To see the rally in HUDI stock is not completely surprising, although there seems to be a missing catalyst. There’s been a burst of more speculative action in the market lately, although there’s no real certainty as to how long it can or will continue. Further, it’s happening in a handful of related stocks.
Clearly, there is a bit of a squeeze situation going on with these names. Momentum traders are grabbing a hold of these stocks and running them higher. Of those listed above, four out of five have market capitalizations below $400 million. That certainly helps.
What to Make of HUDI Stock
So we’re talking about low-volume, low-market cap stocks. Another observation they all have in common? These companies are based in China and Hong Kong.
Huadi is “a holding company primarily engaged in the new products development, manufacturing, marketing and sales of stainless steel seamless pipes, tubes and stainless steel bar. Its core product is HuaGang stainless steel seamless pipe.”
For a stock that usually trades 150,000 shares a day, the fact that it’s over 27 million is pretty wild. It’s even more interesting considering that it only has 14.24 million shares outstanding and a float of less than 4 million shares.
Shares began trading in January 2021. After hitting a stretch of bullish momentum later in the year, HUDI stock wasn’t a complete disaster in 2022 like most others. In fact, shares hit new highs (at the time) in mid-October, when many other stocks were hitting 52-week lows.
Huadi then erupted in November, rallying 242% on Nov. 3 and 70% on Nov. 4 — good for a two-day gain of 483% — before collapsing lower. HUDI stock fell 91% in the next session.
So is this run for Huadi sustainable? My guess is no, but it’s hard to know how far these types of moves can go or how long they can last.
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On the date of publication, Bret Kenwell 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.