King Goes From Mere Volatility to Major Volume Spike

Print Email

King Digital Entertainment PLC (NYSE: KING) seems to be running on up and up, and shares are back near a post-IPO high. Monday’s gain was massive, up at 14.5% at $20.45 in late-day trading.

The question to ask is what to make of this latest move. It isn’t a just a volatility alert. This is now a serious volume spike alert!

Investors have made money betting on Zynga Inc. (NASDAQ: ZNGA), but only if they caught the bottom around $2.75 or so. That stock is now at $3.23, but its stock briefly went to $14 in early 2012 after its IPO. Let’s just say it has been a rough ride ever since – with 2013 sales falling to $873 million from $1.28 billion in 2012 and $1.14 billion in 2011.

Zynga’s market cap is $2.86 billion now. King’s is listed as $6.4 billion. Sterne Agee tried to address the volatility here. The firm’s Arvind Bhatia, who rates the gaming company as Neutral, said in an intra-day report:

While we haven’t been able to identify a concrete reason for the stock’s 22% appreciation in the last two trading sessions, our best guess is it may have been triggered, at least in part, by end-of-the-quarter short covering and in part by positive sell-side commentary. This is a heavily shorted stock (10.8M shares or nearly 50% of the float is short) with a short-interest ratio of 13 days.

Bhatia also said that King’s rise may be tied to the recent rise in shares of a smaller competitor — Glu Moble Inc. (NASDAQ: GLUU) — now above $5 from under $4 last week. That gain is based upon the release of its Kim Kardashian: Hollywood title.

After seeing this sort of run, it feels like a chat room run from the old day trader days a decade ago. Anyhow, volatility is an understatement for shares having risen from $17 to over $20.80 in just two trading sessions when no news has been released by the company.

ALSO READ: Active Trader Poll: Predict Where MannKind Stock Goes in 2015

As for the King Digital volume spike, the stock hit 5.9 million shares by 2:30 p.m. ET (with 90 minutes to close, plus after-hours). Average volume is 1.31 million shares. Volume was almost 3.5 million shares on Friday, but Monday’s volume is the highest reading since the 6.75 million shares traded back on May 7 and then again since the first and second day this stock ever traded from the March IPO (41 million on March 26 and 8.4 million on March 27).

RSS Facebook Twitter