Explanation For Wild Price Action In CVR Refining

Most of the time, stocks move on fundamental news surrounding a company, such as earnings, analyst action, changes in management or related news from peers in their respective industry.

However, on some occasions, the price action can be solely determined by volume, or large buyers and sellers, moving in and out of an issue. This is especially true when a large chunk of volume comes in on an option expiration.

This is the exact scenario causing some unusual price action in the shares of CVR Refining LP CVRR.

Traders attempting to profit from a large sell imbalance on Friday's close in the issue were caught completely off-guard when the issue switched to a large buy imbalance moments before the closing bell.

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In other words, traders were anticipating the large sell imbalance to force the issue to close near or even make a new low for the day. Therefore, they sold short the issue banking on booking profits on the closing print. With the issue trading at the $9 level with five minutes to go in the session, these traders were hoping the large seller would take the issue to low of the day $8.51 or beyond.

Unfortunately for those traders, with five minutes to go, the imbalance switched to a large buy imbalance. Therefore, all the shorts had to scramble to cover, and some aggressive traders may have attempted to flip and get long to offset the large imbalance.

In any event, the issue spiked from the $9 area and closed on its high print for the day at $11.25. As usual, when the volume anomalies transpire, an issue will quickly reverse course and correct itself the following session.

This is evidenced by the price action in the issue in Monday's session as it is trading lower by $1.49 at $9.76, which is well-off its opening print of $9.36.

For a recap of this furious price action, take a listen to the issue being discussed on this morning's Benzinga's Pre-Market Prep show here.

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