According to one short squeeze scanner, these are three basic criteria to use when looking for a short squeeze candidate.
- The number of shares short should be greater than five times the average daily volume
- The shares short as a percentage of the float should be greater than 10%
- The number of shares short should be increasing
This scan will help you find stocks that may be potential candidates for short squeezes. This doesn’t guarantee that a short squeeze is occurring. Our goal is to build a watch list of these types of stocks so we can have them on our radars in case they start making moves.
A short squeeze setup typically requires a catalyst of some kind to turn into a short squeeze in action. Remember, as long as the stock is continuing to trend downward or flat, it’s possible that the short sellers were right about the negative price trajectory and that no squeeze will develop.
The bullish catalyst can come from news or from an earnings report, but it can also be foreshadowed by technical indicators. Momentum indicators like RSI, MACD, and stochastics can be extremely valuable in trying to predict whether and when a short squeeze will develop. If you’re looking for a short squeeze that is not just developing, but imminently occurring, you may want to add filters for price change, such as percent change or current price relative to prior highs.
Scaling Out Before Short Interest Dries Up
Short squeezes typically result in large price movements, so you can couple your short squeeze scan with an intraday price rise greater than 5% or more. You may need to adjust your short shares cutoffs, since a squeeze will shed short shares once it is underway. Make sure when chasing an active squeeze that you don’t buy in near the end of the squeeze, after which prices may fall as demand slumps.
The Short Squeeze Leaderboard
Getty Images Holdings
No stranger to the short squeeze leaderboard since going public via SPAC merger, Getty Images tops the list for the week. Data shows 99.1% of the float short and a cost to borrow of 136.1%, both among the highest of the short squeeze candidates for the week. This one by far meets all three of the short squeeze rules mentioned above.
Biora Therapeutics Inc
Smart capsule technology company Biora ranks second on the leaderboard. Data shows 48.2% of the float short (4.01M shares) and a cost to borrow of 117.5%. With about twice the average daily volume sold short and increasing, this one is very close to meeting all three basic rules mentioned above.
Plastic surgery company Sientra third on the leaderboard.
Data shows 122.3% of the float short (11.3M shares) and a cost to borrow of 6.7%, compared to 122.4% and 7% from last week, respectively. The average daily volume is 184K shares. This one comes very close to meeting all three short squeeze rules mentioned above.
The Traders News Group regularly reports on potential short squeeze, growth, momentum, low float breakout stocks and more.
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