Friday, March 26, 2010

Volatility and small stocks

I've owned 1,000 shares in a small biopharmaceutical company named ARCA biopharma (ABIO) for 9 months now.

The company's principal focus is developing genetically-targeted therapies for heart failure and other cardiovascular diseases.

I bought during a downturn in their fortunes. As you can see in that graph on the left, of the past of the stocks performance, things were rather bleak last June. I saw the stock fall and bought when it leveled out at $5 a share (see asterisk).

Unfortunately the slide soon continued and the stock went down to $3 a share, eventually getting down to $2.20 in mid-July. At that point I was down $2,800 --- at least on paper. As you can see from the graph, the stock didn't move much for quite a while.


Today is a different story. ARCA Biopharma announced a patent issued to it for treating heart failure patients with Bucindolol. This has caused the stock to surge.

I sold during a momentary lull early this morning and made an $800 profit. The stock immediately dropped a bit and I congratulated myself on excellent timing. But... then the stock jumped more than 2 points (which would have been $2,000 in my very empty pockets). Damn shame, huh?

The interesting thing to notice here, highlighted in UNC blue, is that the stock normally trades around 25,000 shares a day. And today, at noon, only half way through the trading day,the trading volume is 1,000 times that. ARCA Biopharma is on track to trade 50 million shares today.

That's insane because there's only 7.6 Million shares outstanding. So this means that every single share the company has is going to trade 7 times today. Talk about churning a stock! *whew*

While I'm glad to have finally shed this stock that was such a loser these past 9 months, I do admit I wish I'd made a little more profit in the process. Small stocks sure can be a roller coaster ride!

Another thing to think about it this: ABIO was trading at $3 yesterday and it peaked this morning slightly over $9. Anyone lucky enough to buy yesterday and sell today would have tripled their money. Nice.

3 comments:

Tracie said...

You are making me wish I had bought yesterday!

Hopefully you can have some fun this weekend with your "winnings?" "earnings?" ........new money! =)

Netchick says hi too!

kenju said...

You should have held it!! I bet it will go even higher.

utenzi said...

You could be very well right, Judy. As is, I sold just under $6 a share and it got up to $9.22 so I left around $3,300 on the table. Ouch. And if it goes up further next week....?

On the other hand, this is a stock that's been delisted from NASDAQ so it could easily sink quickly. The huge number of shares trading hands today speaks of stock manipulation---I'm glad to have gotten out of it when I did (but I do wish I'd profited a mite more in the process)