There may be a possible short squeeze developing in CAGC China Agritech Inc right now. The stock has fallen very quickly back to a supportive range on very light volume with a small falling wedge formation. China Agritech Inc has a 20% short ratio as many shorts have piled on speculating that CAGC has ‘auditor problem’ or phony accounting. China Agritech Inc was down graded on September 8, 2010 to 9 dollars.
The Ag sector as a whole is booming right now and CAGC has indicated in its investor material that the November to December quarter is typically its strongest quarter. So it would seem that this down grade is somewhat suspicious. CAGC has indicated right after the down grade that it will select and switch to a ‘big four accounting firm within the next month’. If they do succesfully set that up and remove any phony accounting concerns, CAGC may rally quite strongly from short covering and new longs.
I like stocks that do low volume retests back to previous supporting ranges. It can lead to big upside bounces especially when you have a stock with a high short position ratio in it.
I am long CAGC since 11 and change for a short term upside bounce from this deeply oversold condition.
The presumptions is still heavy weakness, so this may only be a 1 to 3 day upside bounce. . .