Earlier today, esteemed gentleman Raul3 queried yours truly with the following:

Since I like to accommodate reader requests asap, I immediately dropped all “real” work to procure the ad hoc request of this iBC colleague.  Before I even pulled up the chart, I knew that this was going to be a bit more challenging to analyze using Price by Volume because there is a limited history.  ZNGA has been publicly traded for a little over a year, so we are going to go directly to the daily chart to provide us with the historical look that we desire.

Without further ado:

The volume pocket I have identified is (mostly) a result of that ridiculous near $2 gap from last July.  Since the stock had never traded in that area prior to the gap, there are literally no souls who have ever owned a share of this stock between 3.40 and 4.45…that was, until Friday (and today). Now, I’m not sure how the dynamics of supply and demand will affect a volume pocket that exists solely because of a gap.  If you are wondering why this stock is rocketing higher, well, this is as good of an explanation as any.

To the best of my knowledge, the rise in share price is not the result of a profitable (or decent) business model (just ask Rhino what he thinks about this company); however once a stock enters the volume void, trading based solely on fundamentals will likely lead to more frustration than success.

Nevertheless, based on my analysis, I see no reason why this stupid company cannot keep running to fill that gap up to about 4.5.  Once/if that happens, all bets are off and I would get the hell out of there with most of your profits intact.

-EM

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