Tag: TXMD

Top Low Priced Short Squeeze Stocks

by Fred Fuld III

Unless you haven’t paid any attention to financial news at all, you probably already know that GameStop (GME) has gone up over 700% in the last five days. The movie theater chain, AMC (AMC) was available for a little over two bucks ten days ago. Today, it traded for 25.80 this morning in pre-market trading.

You also probably know that these huge gains have been caused by short squeezes.  Back on September 18 last year, I published an article called Top Restaurant Short Squeeze Stocks, and it listed four companies that were heavily shorted. In just the last four months, those stocks have had stellar returns.

The worst performing stock was up 38%. Not a bad return for four months. The best performing was Dave & Busters (PLAY), which was up 138%. Here are those four stocks, with the percent of float shorted at the time, the days to cover at the time, and the return if you had bought the stock back then and sold today.

Stock Symbol % of Float Days to Cover % Gain
Shake Shack SHAK 26% 5.7 85%
Dave & Buster’s PLAY 33% 1.8 136%
Red Robin RRGB 35% 3.4 64%
El Pollo Loco LOCO 19% 11.2 38%

Many of the heavily shorted stocks you have seen on the news during the last couple days are high priced, with a majority of them trading over $100 a share. That’s a lot of risk. So If you are looking for low priced stocks that might be short squeeze plays, I will cover that shortly.

But first, a review about the short squeeze and its terminology. When you short a stock, it means that your goal is to make money from a drop in the price of a stock. Technically, what happens is that you borrow shares of a stock, sell those shares, then buy back those shares at a hopefully lower price so that those shares can be returned. This all happens electronically, so you don’t actually see all the borrowing and returning of shares; it just shows up on your screen as a negative number of shares.

Short selling can be profitable, but sometimes when the stock moves against the short sellers, and begins to rise, the short sellers jump in right away to buy shares to cover their positions, creating what is called a short squeeze. When a short squeeze takes place, it can cause the share prices to increase fast and furiously. Any good news can trigger the short squeeze.

Some traders utilize this situation by looking for stocks to buy that may have a potential short squeeze. Here is what a short squeeze trader should take into consideration:

Short Percentage of Float ~ The float is the number of freely tradable shares and the short percentage is the number of shares held short divided by the float. Amounts over 10% to 20% are considered high and potential short squeeze plays.

Short Ratio / Days to Cover / Short Interest Ratio -This is probably the most important metric when looking for short squeeze trades, no matter what you call it. This is the number of days it would take the short sellers to cover their position based on the average daily volume of shares traded. This is a significant ratio as it shows how “stuck” the short sellers are when they want to buy in their shares without driving up the price too much. Unfortunately for the shortsellers, the longer the number of days to cover, the bigger and longer the squeeze.

Short Percentage Increase ~ This is the percentage increase in in the number of short sellers from the previous month.

Check out the following list, but be aware, that often some stocks are heavily shorted for a reason. All these stocks have significant short metrics.

Stock Symbol % of Float Days to Cover Stock Price
Ayro AYRO 23.28% 0.51 7.24
Clovis Oncology CLVS 42.43% 6.54 7.94
Senseonics SENS 30.95% 1.36 2.51
TherapeuticsMD TXMD 28.89% 14.30 1.59
VBI Vaccines VBIV 25.64% 6.62 3.15

So as an example, VBI Vaccines has over 25% of the float shorted, and it will take over six days for the short sellers to cover their positions, based on the average daily volume.

Obviously, there is no guarantee that these stocks will go up, but if I was short any stock selling for less than $10 a share, I wouldn’t want to waste any time covering my position, before all the other short sellers clamor in and drive the price way up.

Disclosure: Author owns TXMD. No recommendations are express or implied.

 

The Top Short Squeeze Stocks in Biotechnology

The biotechnology industry has some of the most volatile stocks, which may be one reason that stock traders like to trade them.

A trading strategy that has become popular is buying short squeeze stocks, the stocks that are heavily shorted but could move up quickly on any good news due to short sellers scrambling to buy in their positions.

When you short a stock, it means that you expect to make money from a drop in the price of a stock. Technically what happens is that you borrow shares of a stock, sell those shares, then buy back those shares at a hopefully lower price so that those shares can be returned. Of course, this all happens electronically, you don’t actually see all the borrowing and returning of shares; it just shows up on your computer screen as a negative number of shares.

Short sellers can make a lot of money, but sometimes when the stock moves against them, the stock starts to move up, and the short sellers jump in at once to buy shares to cover their position. This is called a short squeeze. When a short squeeze takes place, it can cause the stock to rise fast and hard. Any type of positive news can trigger the short squeeze.

So other traders take advantage of this situation buy looking for stocks to buy that may have a potential short squeeze. Here is what they look for:

  • Short Percentage of Float ~ The float is the number of freely tradable shares and the short percentage is the number of shares held short divided by the float. Amounts over 10% to 20% are considered high, and potential short squeeze plays.
  • Short Ratio / Days to Cover / Short Interest Ratio -This is probably the most important metric when looking for short squeeze trades, no matter what you call it. This is the number of days it would take the short sellers to cover their position based on the average daily volume of shares traded. This is a significant ratio as it shows how “stuck” the short sellers are when they want to buy in their shares without driving up the price too much. Unfortunately for the shortsellers, the longer the number of days to cover, the bigger and longer the squeeze.
  • Short Percentage Increase ~ This is the percentage increase in in the number of short sellers from the previous month.

Here are some stocks that are heavily shorted that may warrant a closer look. Remember that some stocks are heavily shorted for a reason.

Insys Therapeutics (INSY) has 68% of the float shorted, and a short interest ratio, also known as days to cover, of 14.5. This means that based on the current average daily volume, it would take almost 15 days for short sellers to cover their positions.

Egalet Corp (EGLT) has 64% of the float shorted, with a days to cover ratio of 9.5.

Heron Therapeutics (HRTX) has a short interest ratio of 12.8 and 55% of the float shorted.

Lannett Company (LCI) has 45% of the float shorted, with a short interest ratio of 10.1.

TherapeuticsMD (TXMD) has 39% of the float shorted, with a short interest ratio of 31.9.

Eagle Pharmaceuticals (EGRX) has 42.5%of the float shorted, with a short interest ratio of 11.3. This company also has a very low float and very low number of shares outstanding.

With any luck, you may be able to make a short term profit on short squeeze stocks.

Disclosure: Author didn’t own any of the above at the time the article was written.