• CLOV traded up 146% in Monday and Tuesday's sessions.
  • The health insurance SPAC has been under scrutiny for marketing practices.
  • Clover Health traded up more than 25% in Wednesday's premarket.

One of Chamath Palihapitiya’s SPAC progeny is back in the news – this time, Clover Health Investments (NASDAQ: CLOV). Following an adverse research report in February and the general market malaise for special-purpose acquisition companies (SPACs), at the end of last week, CLOV was down more than 46% year-to-date. But something happened over the weekend on Reddit's WallStreetBets forum, and Clover bounded 32.4% and 85.8% (a combined 146%) in the first two sessions of the week.

Is CLOV stock a buy?

After being blasted by the feared short-selling firm Hindenburg Research in early February, Clover – a Medicare Advantage provider with a proprietary technology for keeping track of patients’ medical history – lost much of its lustre. Hindenburg found plenty of “deceptive marketing,” such as owning a health insurance broker that failed to explain to clients that it was owned by Clover and being under an active investigation by the US Department of Justice. The founder and CEO, Vivek Garipalli, also ran a prior hospital chain in New Jersey that was sued by the federal government for price-gouging. Those blemishes have not stopped Clover from receiving investments from the likes of Google parent Alphabet and Sequoia Capital, however, as well as hosting Chelsea Clinton on its board of directors.

CLOV daily chart

In the first quarter of 2021, revenue grew 21% YoY, a successful but rather modest jump compared with other SPAC luminaries. And yet, the 146% jump on Monday and Tuesday says something is afoot. With most meme stocks, the only set of decent analysis comes from support levels and Fibonacci ratios. Current support on Wednesday comes at $17 where CLOV experienced its highs of December and January. This coincides nicely with the 423.6% Fibonacci extension. Before that, however, is the 261.8% retracement at $20.27. The $8.53 and $10.14 price levels are the current measures of the 20-day and 9-day Simple Moving Averages (SMAs), but it is doubtful CLOV will drop that far in the near term. Typical WallStreetBetts' pumps are measured in weeks or months.

On the upside – the reason you are reading this article – there are targets at $25.52 and $28.76, the 361.8% and 423.6% extensions, respectively. However, since the premarket price is already up 25% to $27.66 on Wednesday morning at the time of writing, it is likely these profit-taking points will be blown out of the water once the market opens. Good luck!

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