Tag: UPST

How to Spot Potential Short Squeeze Opportunities on the NASDAQ

Ever found yourself shorting a stock only to see a sudden spike, prompting an urgent need to cover your position as soon as possible?

What happened was called a Short Squeeze. Even the most seasoned traders have experienced this phenomenon. But do they really know what happened? 

A short squeeze happens when a heavily shorted stock has a shape increase in buying volume causing short sellers to close out their positions, which drives the prices higher from the covers. As you have read in a previous article about NYSE Squeezes, NASDAQ is home to many short squeezes as well. 

The most famously known NASDAQ short squeeze is GameStop (GME) in 2021. GameStock is a brick and mortar gaming merchandise retailer that had declining sales, which caused investors to heavily short the stock. GameStop had more shares sold short than the total number of shares available for trading (a situation known as a “short interest”). 

A group of retail investors on the Reddit forum r/WallStreetBets noticed that GameStop was heavily shorted and began buying the stock which started driving up the stock price. As the aggressive buying started to surge, this put pressure on the short sellers to cover their positions (buying back at higher prices to limit the losses). 

The unprecedented surge in GameStop’s stock price caused extreme volatility and attracted widespread media attention. The GameStop short squeeze had significant repercussions in the financial markets, leading to losses for some hedge funds that had heavily shorted the stock and prompting scrutiny from regulators and lawmakers. It also sparked a broader interest in retail trading and the democratization of investing. 

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 refers to the proportion of shares held short divided by the total float, where the float represents freely tradable shares. A short percentage exceeding 10% to 20% is typically regarded as high and may indicate potential short squeeze opportunities.

The Short Ratio, also known as Days to Cover or Short Interest Ratio, is a crucial metric in identifying potential short squeeze opportunities. It represents the number of days it would take for short sellers to buy back their positions based on the average daily trading volume of shares. This ratio is significant because it indicates the level of difficulty short sellers face when attempting to cover their positions without significantly impacting the stock price. However, for short sellers, a higher number of days to cover implies a greater and more prolonged squeeze, increasing their potential losses.

Short Percentage Increase refers to the percentage growth in the number of short sellers compared to the preceding month.

The following are some heavily shorted NASDAQ stocks that may be worth considering for a short squeeze.

CompanyCompany SymbolShort InterestShort % ChangeShort Interest Ratio
Novavax IncNVAX41.58%5%6.4
Beyond Meat IncBYND37.86%1%7.8
Immunitybio IncIBRX36.07%7%11.4
Upstart Holdings IncUPST35.63%-11%2.6
Luminar Technologies IncLAZR35.28%13%11.6
Prime Medicine IncPRME34.06%-7%3.9
Blink Charging CoBLNK32.27%-1%2.3

The first stock on the list, Novavax Inc (NVAX) has over 41% of its float shorted, an increase of 5% over last month. The short interest ratio is 6.4, which means that it would take the short sellers over six days to cover their position, based on recent average volume. Take a look at the chart below, you can see increased volume in the past few days…

The second stock on the list, Beyond Meat Inc. (BYND) has over 37% of its float shorted, an increase of 1% over last month. The short interest ratio is 7.8, which means that it would take the short sellers over seven days to cover their position, based on recent average volume. As you can see here, it looks like BYND may have been squeezed.

The last stock on the list, Blink Charging Co. (BLNK) has over 32% of its float shorted, an decrease of 1% over last month. The short interest ratio is 2.3, which means that it would take the short sellers over two days to cover their positions, based on recent average volume. 

Although a stock may exhibit favorable ratios and attract significant short interest, it’s crucial to recognize that these factors alone do not guarantee an upward movement in its price, particularly in a bear market. Additionally, high levels of short interest in a stock could signal underlying issues or concerns that have prompted investors to bet against its performance.

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Disclosure: Author had no positions in any of the above at the time the article was written.

5 Stocks with Short Interest Over 40%: Possible Short Squeeze Plays

by Fred Fuld III

Did you know that at one point, GameStop (GME), the high flying meme stock, had 140% of its total outstanding shares shorted, according to the book, The Antisocial Network (now republished as Dumb Money).

It is possible for a stock to have a short interest exceeding 100% of its outstanding shares. However, this is relatively rare and can occur due to several factors:

1. Naked Short Selling: This illegal practice involves selling borrowed shares without first locating them. While most brokers have safeguards to prevent naked short selling, it can still happen, especially with less-regulated stocks. In such cases, the number of shorted shares can temporarily exceed the number of outstanding shares.

2. Share Lending and Relending: When shares are borrowed for short selling, they can be re-lent to other short sellers multiple times. This can create a situation where the total number of shorted shares appears to be more than the number of outstanding shares, even though no naked short selling has occurred.

3. Synthetic Short Positions: These positions involve using derivatives like options or futures contracts to mimic the effect of short selling. While not directly borrowing shares, these positions can still contribute to the overall short interest and push it above 100%.

It is probably the lending and relending that contributed the most to GameStop short interest going over 100%.

A short squeeze is a phenomenon that occurs in financial markets when investors who have sold shares of a stock short (i.e., betting that the stock price will fall) are forced to buy those shares back at a higher price than they expected. This can happen when the stock’s price rises sharply, causing losses for short sellers who need to buy the stock to cover their position and limit their losses.

As more and more short sellers try to buy the stock to close out their positions, this increased buying activity can drive the stock price even higher, creating a feedback loop that can lead to a rapid and dramatic increase in price. This can create a challenging situation for short sellers, who may be forced to buy back the stock at a loss, or risk even greater losses if the stock continues to rise. A short squeeze can also create opportunities for long investors who have purchased the stock, as they may be able to sell their shares at a higher price to short sellers looking to cover their positions.

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 sellers can be profitable, but sometimes when the stock moves against them, 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/Decrease ~ This is the percentage increase in in the number of short sellers from the previous month.

The following are some heavily shorted stocks that have short interest above 40%.

CompanySymbolShort InterestFloatOutstdS. I. Ratio% chg from prev month
Fisker IncFSR47.28%199.17M218.20M4.54%
Novavax IncNVAX43.94%111.96M118.79M6.58%
Upstart Holdings IncUPST41.91%72.37M85.06M3.5-1%
Beyond Meat IncBYND40.09%60.86M64.54M8.2-5%
Carvana CoCVNA40.04%94.11M106.54M4.38%

The second stock on the list, Novavax (NVAX) has almost 44% of its float shorted, with an 8% increase in short interest over last month.

The short interest ratio is 6.5, which means that it would take the short sellers over six days to cover their position, based on recent average volume.

Just keep in mind that just because a stock has good short interest ratios and is heavily shorted, doesn’t mean that the stock will go up, especially in a bear market.

In addition, the short positions and other data can change at any time.

Also, stocks that are significantly shorted may up being just lemons.

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

Top 6 NASDAQ Short Squeeze Play Stocks

by Fred Fuld III

On May 11 of this year, I posted an article about NYSE short squeeze stocks, and pointed out Carvana (CVNA). In less than a month after the article was posted, the stock doubled. The stock is still up over 145% since then.

Another stock that was mentioned was Wayfair (W), which increased by almost 43% in one month.

A short squeeze is a phenomenon that occurs in financial markets when investors who have sold shares of a stock short (i.e., betting that the stock price will fall) are forced to buy those shares back at a higher price than they expected. This can happen when the stock’s price rises sharply, causing losses for short sellers who need to buy the stock to cover their position and limit their losses.

As more and more short sellers try to buy the stock to close out their positions, this increased buying activity can drive the stock price even higher, creating a feedback loop that can lead to a rapid and dramatic increase in price. This can create a challenging situation for short sellers, who may be forced to buy back the stock at a loss, or risk even greater losses if the stock continues to rise. A short squeeze can also create opportunities for long investors who have purchased the stock, as they may be able to sell their shares at a higher price to short sellers looking to cover their positions.

The stock with the biggest short ratio (days to cover), at 14.3 back then, was Heron Therapeutics, Inc. (HRTX). It rose by 9.5% in three days.

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 sellers can be profitable, but sometimes when the stock moves against them, 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/Decrease ~ This is the percentage increase in in the number of short sellers from the previous month.

The following are some heavily shorted tech stock that may be worth considering.

CompanySymbolShort InterestFloatShort Interest RatioShort % change from previous month
Novavax Inc NVAX49.10%87.57M3.3-3%
Beyond Meat Inc BYND40.70%60.71M12.4-2%
Upstart Holdings Inc UPST38.35%71.13M3.73%
Ebix Inc EBIX35.71%24.25M7.718%
Faraday Future Intelligent Elec. FFIE34.21%17.27M2.242%
Groupon Inc GRPN33.82%16.17M3.60%2%

The second stock on the list, Beyond Meat (BYND) has over 40% of its float shorted, with not much change in short interest over last month.

The short interest ratio is 12.4, which means that it would take the short sellers over 12 days to cover their position, based on recent average volume.

Just keep in mind that just because a stock has good short interest ratios and is heavily shorted, doesn’t mean that the stock will go up, especially in a bear market. Also, stocks that are significantly shorted may be shorted for a reason.

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

Are You Looking for a Squeeze? Top Short Squeeze Stocks

by Fred Fuld III

Since the beginning of this year, the S&P 500 has dropped by over 20%. Many stocks are approaching bargain levels and some of them are heavily shorted, creating possible short squeeze opportunities.

Why should you care?

What happens when stocks get squeezed?

On August 22, 2022, I posted an article about meme related short squeeze stocks, and pointed out how Bed Bath and Beyond (BBBY) spiked by more than 43% in exactly one week after the article was posted.

Another stock that was described was Intercept Pharmaceuticals, Inc. (ICPT), which increased by almost 5% in just two days.

The stock with the biggest short ratio (days to cover), at 14.3, was Heron Therapeutics, Inc. (HRTX). It rose by 9.5% in three days.

So what are the latest short squeeze candidates? Keep reading.

What Does Shorting Stocks Mean?

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.

What is a Short Squeeze?

Short sellers can be profitable, but sometimes when the stock moves against them, 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.

The following are some heavily shorted tech stock that may be worth considering.

CompanySymbolShort % of FloatShort % ChangeShort Interest Ratio
EVgo, Inc.EVGO31%-1%8.4
Rocket Companies, Inc.RKT33%7%10.3
Revolve Group, Inc.RVLV31%0%7.8
Switch, Inc.SWCH31%16%9.1
Upstart Holdings, Inc.UPST38%0%3.4

The second stock on the list, Rocket (RKT), which has a price to earnings ratio of 4.16, has 33% of its float shorted, an increase of 7% over last month, a daily substantial amount.

The short interest ratio is 10.3, which means that it would take the short sellers more that ten days to cover their position, based on recent average volume.

Just keep in mind that just because a stock has good earnings ratios and is heavily shorted, doesn’t mean that the stock will go up, especially in a bear market. Also, stocks that are significantly shorted may be shorted for a reason.

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

Top 10 Short Squeeze Plays: Will One of Them Become a Meme Stock?

by Fred Fuld III

There is a way that traders and investors can make money on the long side from short squeezes. One strategy that stock traders use is buying short squeeze stocks, companies have been heavily shorted. Here is a more extensive explanation of short squeeze stocks.

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 sellers can be profitable, but sometimes when the stock moves against them, 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.

So what stocks are heavily shorted that may be worth a closer examination? Check out the following list, but be aware, that have reasons for shorting these stocks.

CompanySymbolExchangeShort InterestShort % ChangeShort RatioFloat
Bed Bath & Beyond Inc.BBBYNasdaq47.22%2%2.361.56M
Intercept Pharmaceuticals IncICPTNasdaq45.12%4%12.623.63M
Heron Therapeutics IncHRTXNasdaq39.56%1%14.3102.22M
SpringWorks Therapeutics IncSWTXNasdaq38.77%3%9.431.64M
Big Lots, Inc.BIGNYSE37.66%1%6.626.49M
MicroStrategy IncMSTRNasdaq36.51%-7%3.29.32M
Upstart Holdings IncUPSTNasdaq35.73%0%2.472.32M
Big 5 Sporting Goods CorpBGFVNasdaq35.28%2%10.220.85M
Beyond Meat IncBYNDNasdaq35.12%-7%5.556.79M
Evgo IncEVGONasdaq34.98%-2%8.367.74M
Fubotv IncFUBONYSE32.96%10%4.2166.36M

Let’s take a look at two of these stocks and compare them.

Bed Bath & Beyond (BBBY) has been in the news extensively over the last couple weeks, going from 9 to 30 and back down to 9 again. You will notice that it is at the top of the short list. However, notice the Short Ratio, which is also the Days to Cover Ratio, of only 2.3.

This means that it would take the short sellers only a couple days to cover their position, based on current average volume. Plus there has only been a 2% increase in the short positions versus last month.

Now look at number two on the list, Intercept Pharmaceuticals (ICPT), which has a very high short ratio of 12.6, meaning that it would take almost thirteen days for the short sellers to cover. In addition, the percentage increase in short positions went up by 4%.

Just keep in mind that just because a stock has good earnings ratios and is heavily shorted, doesn’t mean that the stock won’t continue to drop, especially in a bear market. Also, stocks that are significantly shorted may be shorted for a reason.

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