An Update on Reverse Splits - Obalon $OBLN Therapeutics and Friends

Friday, Obalon $OBLN, after undergoing a 10-to-1 reverse stock split the day before, gapped down on after filing a stock offering only to see the stock soar 50% on that day.

Here's the chart:

Intraday (2 day) chart of OBLN after its reverse stock split

As a fun aside, I was noticing as the stock was ramping higher, this stock was going crazy on StockTwits.  Maybe getting as many as 500 tweets an hour.

StockTwits bullish on OBLN

In a previous article, we talked about how reverse splits combined with recycled news have been on fire lately, and I think a lot of penny stock traders have been following stocks who have undergone recent reverse split, looking for that 100-200% move.

So let's pull up some charts of how recent reverse splits have been performing.  All of these example have reverse-split in the last 30 days.

Here's Yuma Energy $YUMA that had a 15-to-1 reverse split on July 3rd.  Ouch.

YUMA chart daily

Here's NeuralStem $CUR that had a 20-to-1 reverse split on July 7th.  Friday these guys announced an offering at $2.70.  Ouch

CUR chart daily

Here's Neovasc $NVCN who had a 10-to-1 reverse split on June 28th.  Also ouch.

NVCN chart dailiy

So it looks like most reverse splits continue to head lower, so while this is long-term true, there may be some shorts who get in too early, causing squeezes, and occasionally massive squeezes.  To look at some chats that have had massive squeezes after reverse splits, check out this article.

So if you're trading these things on the long side, you may be able to pick up some momentum from time to time, but be careful out there.

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