November 2021

Short Squeeze ChartList

Our Short Squeeze ChartList (SSCL), consisting of the most heavily-shorted stocks, was just updated tonight. You should be able to find it on our website on Wednesday. Under "Stocks", click on "ChartLists". Then simply scroll down until you see this ChartList. Click on the link provided and type in the password that's provided next to the ChartList link. You can then view the ChartList, or download it into your StockCharts.com account, provided that you are either an "Extra" or "Pro" member at StockCharts.com.

Hot Stocks

I try to narrow down the list of potential trades on the SSCL by looking only at stocks with solid relative strength (SCTR > 70) and some bullish momentum (PPO > 1). Last month, I ran a scan against the SSCL looking for daily PPOs > 1 and SCTR scores > 70 and it yielded 15 stocks. Here they were at that time:

This represented the largest number of Short Squeeze stocks with positive momentum since January. Surprisingly, it didn't matter. After a bit of strength in early November, every one of these stocks finished the month well off their intra-month highs.

The top November performers from the October 31st Short Squeeze ChartList were as follows:

After these four stocks, the next best November performer was GEO Group (GEO), which gained just 2.69% for the month. Only 6 stocks on this ChartList had PPOs over 1 when we ended the month (down from 15 at the beginning of the month).

I believe the best way to trade Short Squeeze stocks is to combine both current momentum (rising PPO) and relative strength (SCTR > 70, at a minimum). Of course, we want to watch the volume as well. In recent Short Squeeze ChartLists, I've added a 50-day SMA line to the volume so that you can visualize quickly whether volume is heavy or not each day.

So let's run that "SCTR > 70, PPO > 1" scan against our new Short Squeeze ChartList, which was just updated tonight. Here are the only 2 stocks returned from that scan:

While anything can happen, short squeezes usually don't appear out of thin air. We need to see a period of rising prices that potentially subjects short sellers to big losses. It's that fear that triggers the panic buying to create a short squeeze. Of these two stocks, BLNK looks the most capable of making a run:

BLNK:

It certainly seems as though BLNK already saw a short squeeze. Rising from 28 to 49, or 75% higher, in just three weeks - and on massive volume - looks like panic buying to me. Could we see another huge move higher? Sure, but I'd view BLNK as having a very wide trading range. While a trip back to 47 is possible, and maybe we'll even see a breakout to carry the stock higher, a trip down to its 50-day SMA or below is just as likely.

Short Squeeze Trade Candidate

Each month, I feature one stock from our Short Squeeze ChartList that I believe could potentially become a short squeeze stock. Last month, I featured Beyond Meat (BYND), which had a short % of float of 27.65% at the time. Here's a look at the chart a month ago and what I had to say at that time:

BYND:

"Make no mistake, buying at this point is a definite stretch, especially after the latest rally. BYND is a downtrending stock, but there are subtle signs that things could be changing. First, its peer group has started trending higher and its relative strength vs. its peers just printed a double bottom and we've seen recent relative strength. Also, it's unusual to see a heavily-shorted stock's AD line nearing multi-month highs in the midst of a lengthy downtrend. We still need a price breakout, however, to begin to force short sellers to think about covering. I don't think that happens until 110. That would put BYND at roughly a 7-week high, putting recent short sellers at much greater risk. That could, in turn, lead to more buying pressure. But as I said, we need to more technical strength to put pressure on those short sellers."

BYND was a perfect example of why you don't buy a potential short squeeze stock and HOPE it goes higher. It can get quite expensive. Take a look at what happened to BYND after it failed to clear 110 price resistance:

BYND is now at 70 bucks, a far cry from 110. Many stocks are shorted for good reason. A short squeeze only takes place if a stock can break out. Clearly, BYND never did that and remains in lengthy downtrend. The shorts are winning on this one right now.

As I look at our current Short Squeeze ChartList, I wanted to feature a stock not mentioned above. Here's one that I believe, with a bit more buying pressure, could become a short squeeze stock later this month:

ICPT:

After a few really bad months for biotechs ($DJUSBT), we finally saw the group turn higher vs. the S&P 500 the past two weeks. If that continues, that might help to launch ICPT, which has shown better volume trends of late and is currently residing near key price support. If that breaks, I'd be extremely careful as the overall downtrend could accelerate. However, if that support holds and ICPT clears 20-day EMA resistance, the potential for an advance increases. I doubt that shorts would grow overly concerned unless major price resistance at 20 is pierced.

There don't appear to be many stocks on our Short Squeeze ChartList scaring the short sellers at this moment in time.

Happy trading!

Tom