Short Squeeze Candidates Published: 2022-08-30
The Elusive Short Squeeze
Just what is a short squeeze anyway? When a stock has a large enough short position market conditions can create this fairly rare type of situation called a short squeeze.
The stock price might go up because of some news event or a trader or firm may have to cover an existing short position, which also causes the price to rise. In any case, it is usually some catalyst that triggers an already ripe stock to get short squeezed. As the price goes up and more and more shorts are underwater it causes a self-perpetuating cycle of rising prices. Anyone in the unfortunate position of holding a large short position on margin has to buy back the stock quickly or face staggering losses. Hedge funds have been wiped out completely by short squeezes in the past.
How can you benefit?
Shortable Stocks is a pretty unique site in that it offers a lot of information about short positions in individual stocks. It's also accessible to the common person since, let's face it, it's downright cheap. At the risk of angering the moderators maybe I should say it's very affordable. Anyway, there are several tools you can use in combination to hone in on the next big short squeeze meme stock. The first is obviously their short squeeze score. They don't share their secret sauce, but I can tell you it is rather sophisticated. Bed Bath and Beyond (BBBY
), for example, was near the top of their list BEFORE it squeezed. So I would say start with their list of the top 500 short squeeze stocks. Then, you can look for trends with the fee rate and short borrow availability. The fee rate is the annualized interest rate that you get charged to hold a short position. A higher fee rate makes it more expensive to hold. Borrow availability is simply the number of shares available to short at any given time. The numbers here are a good proxy for the market as a whole. When the borrow availability gets low, well, look out! And when it gets to zero the existing shorts have to resort to all kinds of chicanery to keep the stock price down. I also watch the individual short sale transactions to see what type of short sales they are. I feel it is more meaningful when the majority of the short sale transactions are not just market makers. Also, short volume trends are important as they can signal when there is a concerted effort to keep a stock price down.
Volkswagen in 2008 was pretty epic
Who remembers Gamestop GME?
AMC wasn't too bad either
Early 2021 was a lot of fun
Gamestop and AMC were household names that people had written off as failed enterprises. Large short positions set the stage for the epic short squeezes that ensued. The charts above show the damage done/ money made. Lots of money changed hands in those few months.
What about now?
Anyone can look back and show you what happened in the past. The real value is in predicting the future (obviously). Let's take a look at 5 of the top short squeeze stocks right now on Shortable Stocks.
These are all short squeeze candidates. There's no guarantee they'll end up doing anything at all so keep that in mind.
1. FAZE FaZe Holdings Inc. 4. TBLT ToughBuilt Industries, Inc. 5. BBAI BigBear .ai Holdings, Inc.
I don't know anything about these top 5 stocks except that they're ranked highly on the short squeeze list. Do your own due diligence. They could all be steaming piles of dog crap for all I know.
Long Story Short
No pun intended. OK, well, maybe a little. Anyway, there are a lot of tools available on this site and it's very accessible to the common person. I also like the fact that this site seems to be looking out for the "little guy," which seems to be in pretty short supply these days. With the right tools, some due diligence, and some good old fashioned luck you can find the next short squeeze stock!
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