Monday’s Trading in Plasma Stocks Offers a Great Lesson in the Importance of the Premarket

By: Spencer Israel

On Sunday evening the FDA issued an Emergency Use Authorization for plasma as a potential treatment for Covid-19, confirming a rumor that had been circulating for weeks. As a result, a number of plasma therapy and blood collection companies saw their stocks spike on Monday morning, as traders speculated about the implications of the news.

This group includes, but is not limited to, ADMA Biologic (ADMA), Cerus Corporation (CERS), Grifols (GRFS), Kamada (KMDA), Liminal BioSciences (LMNL), T2 Biosystems (TTOO), Thermogenesis Holdings (THMO), and XBiotech (XBIT). 

If there can be one takeaway from Monday’s trading action, it’s the importance of paying attention to the premarket session. Monday offers a clear example of why ignoring the trading activity between 4:00-9:30 am can create misconceptions about stocks. 

Stocks Opened Higher
When premarket trading for U.S.-listed stocks opened at 4 am ET, each of the stocks in that group opened above their Friday close. Within minutes, every stock in this group was blasting higher as more and more traders piled into the trade. 

These stocks were lighting up the premarket session, averaging a volume of roughly 900,000 shares before the open. A quick look at a stock scanner at the market open on Monday would have yielded the following results:

LMNL up 59%
ADMA up 46%
KMDA up 27%
THMO up 19%
TTOO up 13%
CERS up 11%
XBIT up 11%
GRFS up 6%

But percentages don’t always tell the whole story. In fact, they hide the reality of what really transpired during the premarket session. 

Stocks Faded Throughout The Morning
If you had only looked at your stock scanner at 9:30, you would have assumed each of these stocks was having a fantastic morning driven by buyers. But this is not the case.  

If you look a little closer at the premarket trading—as the table below shows—every stock in this group had actually fallen off their premarket high by the time 9:30 rolled around. And in the case of LMNL, the stock actually opened down from its 4:00 am print.

4:00 AM Premarket high 9:30 AM 4:00 PM Time of High
ADMA $3.00 $6.00 $3.69 $2.87 4:02 AM
CERS $7.60 $9.00 $7.94 $6.83 5:44 AM
GRFS $17.55 $18.15 $17.86 $16.69 7:55 AM
KMDA $11.80 $12.95 $12.68 $11.73 9:33 AM
LMNL $22.50 $28.01 $20 $13.59 7:03 AM
TTOO $1.61 $2.20 $1.67 $1.55 4:03 AM
THMO $4.15 $6.66 $4.56 $4.11 4:06 AM
XBIT $20 $25.80 $20.38 $19.57 8:10 AM

In all, only KMDA managed to make a new high of the day after the 9:30 am open. The other seven stocks made their highs during the premarket session—in some cases just minutes after the 4:00 am open—only to spend the remainder of Monday giving back those gains and then some.  

The Takeaway
Paying attention to what happens during the premarket can drastically color how you think about a stock at the open. 

Anybody ignoring the five and a half hours of trading before the regular session on Monday would have assumed that these plasma stocks were being driven higher by buying activity. But in reality, they were being driven down by sellers. The fact that every stock in the group closed red on the day belabors the point that sellers were in control. 

The author holds no positions in any of the stocks mentioned.

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