IsoRay’s (ISR) proved to be the little small-cap that wouldn’t quit on Wednesday, posting double-digit gains on heavy volume once again. The stock was up more than 25 percent by noon with more than 13.5 million shares moving, representing the fourth day with gains in excess of 25 percent since its wild ride started on March 14.
Since March 21, IsoRay has been pulling back, surrendering a chunk of its massive gains after news that it would be selling 5.6 million new shares to two institutional investors, dropping more than 45 percent off of the 52-week high of $3.77 a share it reached on March 20. However, shares gapped up over 5 percent to open Wednesday at $2.17 apiece and took off from there, with shares reaching $2.65 by noon and looking like they may keep climbing.
There were no clear news items motivating the spike, making it appear as though IsoRay has simply become the momentum play du jour for traders. The heavy trading and enthusiasm around the stock appears to be beginning to become self-fulfilling, with the massive volatility attracting the attention of traders, and ultimately creating even more volatility as eager buyers and sellers alike try to time the market.
However, the recent pullback may have also provided technical traders with the motivation they needed to make an entry into this play. While the heavy spike last week resulted in a 14-day RSI reaching a positively dizzying level of 95, the subsequent pullback drew that level back under 70 and out of traditional overbought territory. Meanwhile, the stochastic RSI level had plunged under 0.30 during that same period, taking it very close to oversold territory.
IsoRay’s transition from little-known microcap to heavily-traded battle-ground stock has been a rapid one. To think that just two weeks ago sweet, gentle IsoRay was quietly developing its Cesium-131 brachytherapy with a miniscule market cap hovering around $35 million. However, since it started to gain on March 14, the stock has tripled in value and its average daily volume has spiked from just over 1 million shares a day to over 10 million shares a day, a number that represents about a quarter of its total float changing hands on any given trading day.
While it’s unclear where things are headed, today’s gains on what appears to be entirely a momentum play could be a sign that IsoRay’s current sky-high valuation is unsustainable in the long run. Given that this was a company worth less than $50 million dollars prior to a Seeking Alpha article just 12 days ago, it seems entirely possible that this is simply an example of traders run amok, jumping onto a rushing train without considering where it’s headed.
However, the gains coming on the heels of the three-day pullback from its peak could also mean that investors, bullish on the company’s monopoly on Cesium-131 brachytherapy and the news of its successful deployment in treating an aggressive form of kidney cancer in a 12-year old, are getting back into the stock after the pullback created a new buying opportunity. Certainly, IsoRay’s momentum had appeared to reverse itself last Friday, so today’s gains could also be interpreted as a sign of more to come.
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