Why Qudian Inc. Stock Bounced 19% Higher This Morning

Qudian Inc. (NYSE: QD) finally hit bottom last week -- or so investors can hope, as they gaze happily upon the near 19% stock price bounce (still up 14.7% as of 11:15 a.m. EST) that the Chinese online small consumer credit provider is enjoying this morning.

Why is Qudian stock bouncing? There are two theories. The first is that, after falling nearly 50% over the last two weeks, it has finally hit bottom. "Shorts" are closing out their positions and buying the stock back to cash out their gains before Qudian shoots even higher. This could happen if other shorts get squeezed by the price spike, and are forced to close their own short positions, propelling the stock even higher.

The second theory is more ominous: Qudian stock has not hit bottom, and after shorter-term shorts have taken their profits, the longer-term naysayers will return and resume selling Qudian stock short. In short, this is a dead cat bounce in Qudian's stock price, and one that won't change the underlying fact that things are not going well for the company.

Source: Fool.com