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Why DermTech Stock Soared Today

By Keith Speights - Dec 23, 2020 at 3:24PM

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No news was good news.

What happened

Shares of DermTech ( DMTK 4.89% ) were soaring 15% higher as of 3:09 p.m. EST on Wednesday after rising as much as 32.6% earlier in the day. The stock shot higher so quickly that trading of its shares was temporarily halted. However, DermTech didn't announce any news to drive today's big gain.

What's the best explanation for the jump? DermTech's average daily trading volume over the last 30 days has been a little over 200,000 shares. Today, though, the trading volume for the stock surged to more than 2.1 million share,s with a significant spike in trading shortly after 10 a.m. EST. It appears that one or more large buy orders were placed, creating a lot of upward pressure on DermTech's share price.

Doctor examining the skin on a young woman's arm

Image source: Getty Images.

So what

Typically, big one-day gains with no news as a catalyst aren't anything for investors to focus on too much. However, it's important to understand that DermTech's momentum didn't start today.

DermTech's shares have gone up and down to a lesser extent throughout much of 2020. Last week, though, the company announced results from its Trust study evaluating its Pigmented Lesion Assay (PLA), a noninvasive melanoma "rule-out" test. This study confirmed that PLA can eliminate melanoma with a 99% negative predictive value. Since that announcement, the healthcare stock has skyrocketed more than 50%.

The company could see increased momentum for its genomic skin cancer tests in 2021 with the Trust study results in hand. Some investors appear to be jumping aboard the bandwagon now instead of waiting for DermTech to potentially report higher sales in future quarters.

Now what

There are two key things to watch with DermTech going forward. One is the impact of the COVID-19 pandemic, which has caused headwinds for the company this year. Another is DermTech's progress in securing payer reimbursement for its genomic tests. The company has made progress on this front in recent weeks, signing reimbursement agreements with Blue Cross Blue Shield of Illinois and Blue Shield of California. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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DermTech, Inc. Stock Quote
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