EB Monthly Short Squeeze Report - December 2020
Short Squeeze ChartList
The Short Squeeze ChartList (SSCL) can be found on our website. Under "Members", 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
To determine "hot stocks" on the SSCL, I ran a scan against the entire ChartList, looking for stocks with daily PPOs > 5 and with SCTR scores > 90. This combination reflects strong momentum and excellent relative strength. There were 10 returned as follows, in order of highest to lowest SCTR score:
I would consider these 10 to be among the best short squeeze candidates as short sellers are already under tremendous pressure, given the recent absolute and relative strength.
AWH is a biotech, so understand the higher inherent risk involved because of that, but I like the chart pattern here. After a lengthy consolidation throughout the second half of 2020, AWH recently broke out on increasing volume. 23.5% of its float remains short. If those short sellers begin throwing in the towel, we could just be starting a significant trend higher. Here's the chart:
Please keep in mind that while short squeeze candidates present tremendous short-term upside, they also can fall apart quickly. Many are heavily short for a reason. Therefore, understand that the risks of trading these stocks are high and not for everyone.
Recent Winners
In learning to spot potential short squeezes, it's always helpful to review the signs of stocks that have worked in the past. Here are three recent short squeeze stocks that have exploded:
SPWR:
Take a look at those two channels that I've highlighted. In the first one, SPWR printed a higher daily low for 10 consecutive sessions. In the second uptrend, SPWR printed a higher daily low for 9 consecutive sessions. Heavy volume and day-after-day gains are hallmarks of a short squeeze. Therefore, one possible way to mitigate your downside risk is to keep an intraday stop just below the prior day's low. If you catch one of these "waves" to the upside, such a strategy can bank a big profit in a very short period of time.
BLNK:
BLNK's gains came in the "blink" of an eye. The first channel took place over just 6 days (higher lows every day). The second channel covered 8 days of higher lows. Even if you don't catch one of these until they break above prior resistance, there can still be outrageous gains to be had. In my opinion, these stocks are NOT long-term buy and holds. You make your money and EXIT. Their nature is that of a very short-term trading vehicle. It's very important to stay disciplined. If the trend breaks, take your profit. If it's a false breakout and a reversal occurs, take your fairly small loss.
In hindsight, these trades look like a very easy way to get rich quick. In reality, and while you're trading them, your emotions will run wild. For that reason, I tend to take smaller positions than normal when I'm trading a possible short squeeze. That will help allow you to make rational decisions about your position.
Watch These Recent Breakouts/Setups
Here are a couple short squeeze candidates that I have my eyes focused on right now:
MIK:
MIK could be on the verge of a significant upside move. Volume was fairly decent last week, especially when you consider that volume during the holidays tends to be very light. If you decide to take a position, simply watch the prior day's low. Again, I use this as a stop in order to remain disciplined and not lose a huge %. Normally, with this strategy, you can keep losses fairly moderate, perhaps in the 3% to 5% range.
DDS:
If you're a subscriber to our EB Digest newsletter, then you may remember me featuring DDS on November 30th. I was asking the question (out loud) whether DDS could be the next big short squeeze stock. Well, it's up close to 30% in a month and currently on a heater to the upside. It's now printed higher intraday lows for 7 straight days. Shockingly, however, volume hasn't accelerated. It's difficult for shorts to truly be squeezed if volume is light to moderate. Should the volume begin to accelerate, we could just be seeing the start of a major squeeze higher.
Well, that's it for The Short Report's first publication. I hope you enjoyed it and, as always....
Happy trading!
Tom