Stocks To Watch: SemiLEDs Corporation [NASDAQ: LEDS] was a huge gainer in Wednesday’s trading session. While it retraced later in the day, it retained most of its gains and was up by 28.09% at the close of the session. This bullish momentum was driven by news that a Chinese investor was buying 19% of all the company’s outstanding shares. Mr. Xian Chang Ma, who is also the CEO of Shandong Tengjunxiang Biotechnology Co. will be buying 680k shares of the Taiwanese light-emitting diode chip maker at $3 a share. LEDS board of directors will meet on the 30th of August to decide whether or not to accept the offer. If they agree upon the deal, then Mr. Ma will be nominated to the company board.
News of a deep-pocketed investor scooping a huge amount of the outstanding shares saw the stock trade on heavy volumes in yesterday’s session. Volumes shot up above its daily average to hit 17 million shares in the session.
Events around this stock saw it open Wednesday’s session with a gap up. Heavy buying volumes saw it push above $4 before a price rejection saw it close the day at $2.90. This is an indicator that, in spite of the huge increase in bullish sentiment, selling pressure was also quite high. In the day, the key level to watch will be yesterday’s close of $2.90. If LEDS opens the day above this level, and holds, it will be a good indicator that bulls are still in control. However, if it fails to push above this level, there is a probability that the stock could turn bearish and possibly close the gap.
Looking back at its historical price action, the stock is up by about 9% in the year. This means it is lagging the PHLX Semiconductor index, which is up by roughly 30% year-to-date. It has also lagged the S&P 500, which is up around 16% in the year. As such, if this bullish reversal fails, LEDS bearish trend could continue.