EB Monthly Short Report - November 2021
Short Squeeze ChartList
Our Short Squeeze ChartList (SSCL), consisting of the most heavily-shorted stocks, can be found on our website and it was updated at the end of October. 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 4 stocks. Here they were at that time:
Let's review both stocks. DVAX quickly fell to 15.86 on October 1st, but then rebounded nearly all month long, closing the month at 19.97, slightly above where it closed September. Outside of that first trading day, however, the bulls were mostly in control here. GOGO had soared to close September. After a quick spike to open October, it fell more than 20% over the next 3 days to approach its 20-day EMA. From there, like DVAX, GOGO built upward momentum the balance of October, but still closed lower for the month. The potential short squeeze for both these stocks remain perfectly in play for November.
The top October performers from the September 30th Short Squeeze ChartList included the following stocks:
- BLNK
- ICPT
- OCGN
- SKLZ
- GEO
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 (as of November 3rd close). Here are the stocks returned from that scan:
Every one of these stocks are capable of short squeezes, but may or may not actually achieve it. If they do, prices will SOAR. Trying to decide which stocks to consider for a short squeeze varies by individual. I tend to gravitate to stocks that belong to sectors or industries that are really strong. So, for instance, I might be more interested in consumer discretionary stocks, simply because I know money is rotating heavily towards that sector right now. BGFV is in that sector and also happens to have the highest short % of float at just over 43%. That's a big number and could trigger quite a squeeze. Watch the volume closely as it quickly expanded yesterday and is gapping higher this morning:
BGFV:
It appears a short squeeze may already be underway given the massive volume yesterday. But keep in mind this stock has 43% of its float short. That's a really, REALLY big number. It could potentially drive BGFV much, much higher. Also keep in mind the volatility on stocks like this are UNCONTROLLABLE. The volatility is CRAZY at times. We'll see huge swings back and forth so please make sure you're comfortable with this type of SIGNIFICANT risk.
Just PLEASE remember that trading short squeeze stocks is VERY RISKY. It's not for everyone. We could see an explosion higher, but there's a very significant chance the entire rally fizzles. You MUST be prepared for potentially significant losses. I'd consider short squeeze stocks much like being at a casino. You might hit it big or you might lose much of what you've got. You need that kind of mindset to trade these stocks. To keep risks low, trade small position sizes.
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 Big 5 Sporting Goods (BGFV), which had a short % of float of 41.05% at the time. Here's what I had to say last month:
"As I look to October for a possible short squeeze candidate, there's only one other stock on our SSCL besides DVAX and GOGO to have a PPO > 0 and a SCTR above 50 and that's BGFV. I don't currently see a great trading opportunity here, but I'd watch for one of two levels in deciding whether to trade it."
Here was what BGFV looked like last month:
I further stated that "one piece of positive technical news here is that BGFV's peer group, specialty retailers ($DJUSRS), has been in favor off of its June relative low. That means the group is attracting more than its fair share of new money, which could help BGFV in its effort to trigger a short squeeze."
BGFV mostly traded sideways throughout October, but came to life in late-October and early-November as you can see below. I featured BGFV earlier in this report, but it didn't include today's action. Things have changed quite a bit, so here's an update:
4 million shares have already traded in the first hour today. A strong finish this afternoon would put incredible pressure on shorts as they'd all be underwater with losses mounting.
As I look at our list, I wanted to feature a stock not mentioned in the 15 with PPOs > 1 and SCTRs > 70. Here's one that I believe, with a bit more buying pressure, could become a short squeeze stock later this month:
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 a price breakout, however, to begin to force short sellers to think about covering. I don't think 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.
Happy trading!
Tom