Crown Media Holdings, Inc (NASDAQ:CRWN
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) is all excited after adding 42% within a single day, but as the reasons for such a buying were not clear, the gains could tremble as fast as they were added.
Heavy enough buying at the end of the day still points to more chances for price appreciation as the end of the week approaches, but a continuous rally is questionable. The recent resignation announcement from CFO Brian Stewart should have cut the price, but instead traders were surprised with humongous gain.
Traders should understand that the current fundamentals do not support such a high valuation. The rising price put the market cap at $265 million, while the balance sheet shows an accumulated capital deficit of $1 billion. The rising price should be accompanied by at least increasing revenues, which we don't have here either.
Positive cash flows are the only reason why Crown traded as high as it did, but there was a downtrend preceding the current move and the overall direction cannot change in such a turning motion without the support of very positive news from the company.
Thus, the price rally is likely to fall apart next week, unless there will be some important information unveiled.