Lightstream Resources Ltd. LSTMF

My take .

[PUNJABI]

Anytime a stock spikes some retail investors get excited & start speculating about a takeover.  There are is always a small possibility of takeover / merger. This happens more when the sector is very strong or very weak.  The sector is very weak & there are abundant bargains out there. Strong companies can take advantage of opportunities. Personally I think that when the sector has been decimated it is the right time to buy at depressed prices. When the sector is at the peak the buyer ends up paying too much for the assets. The only advantage is that if the stock is trading ahead of fundamentals then the use of shares for acquisition can work for the company.

The conditions are ideal for mergers & takeovers. I think that the CEO who owns 5.8 million shares would be interested to sell if the price is right. But I did not see any trading pattern which is indicating that the takeover is in works. You have just two buyers. If there is anything going on then someone of other investors / brokers would have known by now & you would have seen broad based buying.

Financial community / brokers have friends they share information. Retail investors sometimes get caught in the buyout out speculation & make wrong decisions.  They buy when they should be selling & vice versa.

You have to understand the different players in the market place & how it may affect the share price.

There is forced selling & buying that takes place which accelerates the momentum. Initial moves after extremely oversold conditions can be very violent.  You have to understand little bit of psychology of investors and how fear & greed can impact the stock in certain market conditions.

You have to understand the different techniques employed by investors & institutional investors. Institutional investors at time are like big gorillas because of the size of their trades. When they exit they will knock down the stock & when they buy they can push the stock up. Some institutions are reckless in their buying & selling.  They may buy or sell the whole large position in a short time.  I have seen institutions sell at the bottom & some create tops of the stock. It is not their money; they do not feel the same pain as individual investor. They take a decision & execute. Some are so big they do not have time, they just buy & sell & be done with.

Margin works both ways. When the stock is going down investors get margin calls & are forced to sell their positions.  Brokers have different margin requirements. I understand that when LTS broke below $3.00 it was not marginable for some brokers, so some  forced selling would have taken place. Now the stock is above that price so some investors have extra money to add more shares. According to the last short report 1.2 million shares were added to the short position at the average share price of $2.771. Not a smart move. Some may have shorted below that too & may have be retail investors too. There are margin requirements for short position too. From $2.77 to last close it is around 40 % pop.  There might be some margin calls or stop losses triggered & buying back of shares. When the stock creates a bottom & starts to rebound some of the short sellers at much higher prices may consider to lock in their profits.

Some institutions have stop losses on their long positions too for risk management. When the stock tanks it triggers them & put extra downward pressure on the stock. Some do not reinvest in the stock till they see strength in the sector. Lot of retail & intuitional investors go on the sidelines till they see some sign of reversal. They do not want to catch the falling knife. They like to pay bit extra & would chase the stock. 

You have traders that are looking at the top gainer or the largest volume for the trade.  They do not know much about the stock & would jump in which adds to the momentum.

There are different things that are taking places which accelerated the momentum. It is were common to see that a  stock can over swing on both sides. Remember even the companies that are in serious financial trouble & there is no hope & the share price collapse do get dead cat bounces from time to time.

There are  lot of factors involved in two day spike. Might not be able to list all. Very oversold stock & sector.  Stock was beaten down to pulp & was mispriced by the market. When a stock drops from $30 to under $3.00 the market is pricing in bankruptcy. This company is not going bankrupt. It had a perfect storm on the down side. Institutions some of them may be short were creating fear among investors. This stock was one of the stocks that was made the poster boy to suffer most as a result of weak  oil prices.
 
 Market conditions improved. The oil bounced offs its multi year low. You had a buy back with picked up over 2 million shares under $3.00 the float has become smaller. 1.2 million shares short caught on the wrong side of the trade. 

Extra buying power for some as the stock is marginable for brokers that had $3.00 requirement.

 Few come back from the sidelines as the stock is showing sign of life. Some traders & investors chasing the stock.

Technically the stock had started to consolidate. The short sellers could not push it down further. Looks like a reversal. Some investors feeling combatable with stock on technical basis. Some buying on technical basis & indicators.

You have OPEC meeting. Investors are repositioning for that event. Some may be buying or covering ahead of the event.  

You have dividend date coming next week. They are investors including intuitions that come in for divided. Someone  who is interested to buy may consider buying  a bit earlier for Div. Some come in just to get dividend & then take out money.  I like to trade dividend. Have a list of monthly dividend paying stocks.  Get in bit early the price has to meet certain criteria. Most likely sell just before the dividend date. Some times on the last date  the increase in the share price is bigger than the div so I sell. The point is that Div attracts buyers. LTS had a div yield over 15 % & now has dropped to 12.31 % still it is attractive & much better than one percent or less than one percent paid by your bank or broker on idle funds.

LTS is a high beta stock. It swings lot more than the other stocks / market on both sides.  Momentum creates its own momentum.  Fear & greed also plays a role. Fear that the stock may go down  a lot & fear that they may be left behind & chase the stock.
 
I would go on but hate typing. Never learned to type properly.