On April 10, 2007 I opined that China BAK Batteries (NASDAQ:CBAK) was positioned for a short squeeze. In my words “Expect short-covering support to further accelerate price increases in the coming week.” A week later the Fools at Motley Fool echoed similar sentiment on CBAK in an article entitled “Get Ready for the Bounce.”
Over the past 3 weeks CBAK has rallied 23%. The selling volumes have also diminished and are more in line with historical 3-month averages. With 13.61% of the float sold short this stock is positioned to rocket upon the tiniest bit of good news.
The option players provide a compelling reading for the front month of June. The significant build up of calls and puts at the $ 5 mark suggests that the stock will trade around this mark in the coming month.
Going forward I expect to see further stock price appreciation for CBAK.
Disclosure: The author is long CBAK.
CBAK 1-yr chart