Similar to the previous spikes, this one is hard to be reasonably explained too. It is not that astonishing. Stock markets are often illogical. The previous shares’ surge from the end of January was at least accompanied with news about the appointment of a new director. This time, there is nothing to serve as a base for the sudden rise of the stock.
It implies that there is maybe speculative interest in the company, which has pumped the share price. Probably, shorters are responsible for the stock explosion.
It is challenging to find other possible explanations for the 140% surge witnessed on Wednesday. The massive buying led the stock to a new 52-week high at $0.145 on a huge turnover of 4.28M shares. This volume surpasses almost 18 times the average for the company.
Looking at the chart, we might suppose it will not be the last eruption of the stock. Company’s fundamentals, however, look negative and suggest that the share price should drop instead of going up.
At the end of September 2010, Rare Method reported a working capital deficiency of $414K. At the same time, revenue for the three months ended Sep. 30, 2010, declined by 49% from the comparable period in 2009. This is a consequence “of the loss of a significant client”, as the company admits in its financial statements.
The lack of solid financial background will probably hamper the upward move of the shares in the future. It will be a real surprise if the stock manages to come even close to its price levels from the good old times in the summer of 2005. Back then, RAM was worth $0.335. At present, it is traded 82% less that value, at $0.06 per share.
Currently the stock is overbought, which implies that a decline in the price might ensue. This is something which nobody can guarantee though.
