EB Monthly Short Report - August 2022
Short Squeeze ChartList
Our Short Squeeze ChartList (SSCL), consisting of the most heavily-shorted stocks, was just updated again earlier today. It'll likely be updated on our website by early tomorrow morning. 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.
I would not trade a stock on this ChartList unless (1) price momentum is bullish (PPO should be > 1), (2) we're setting a new high for at least the last month, but preferably the past 2-3 months, or longer, (3) relative strength vs. peers is improving, (4) volume is WAY above its normal 50-day SMA, and (5) a final wish would be to have a strong industry group support the stock. There hasn't been a whole lot of this in 2022, because investors have been in a risk-off mode. However, I believe the tide is turning and we'll see much more "risk on" trading in the second half of the year.
July Report Card
Last month, I provided 4 potential setups off our Short Squeeze ChartList (SSCL), so I thought I'd evaluate the actual July performance vs. the potential I discussed one month ago:
ICPT:
I wasn't overly positive on ICPT's short squeeze prospects, but I did provide a short-term target of 15.50. ICPT was trading at 14.13 at the time of the July Short Report. Two days after providing the July report, ICPT hit 16.02 intraday, though it never closed above the 15.50 resistance level discussed in the month of July. It provided almost exactly the amount of upside as projected.
Grade: A+
SWTX:
SWTX was trading at 26.52 at the time of last month's report. I pointed out overhead gap resistance and the declining 50-day SMA, suggesting that SWTX could make a run for 31-32. On July 20th, SWTX hit an intraday high of 32.48, but it never closed above 30.87, before rolling back over. This one was nailed.
Grade: A++
DNMR:
I pointed out that 6.50 was ultimate short-term price resistance. DNMR traded mostly range-bound in July with closes ranging from 4.33 to 5.37. The intraday high was 5.45. While it never reached the 6.50 level that I had mentioned, DNMR did provide solid profit opportunities on a few occasions.
Grade: B
OMER:
When I pointed out OMER, it had just risen nearly 70% IN ONE DAY! So the volatility was on the verge of getting out of control. I pointed out that I still saw key price resistance in the 5.00-5.60 range. If OMER could break through that range of resistance, then many shorts were likely going to be forced out of their position. Well, OMER consolidated much of July, before resuming its upward trajectory late in the month. It did move up to 5.27 on July 29th before pulling back. The possible short squeeze is still lingering.
Grade: A-
A Look At August
Let me be clear. I am NOT a fan of holding short squeeze stocks long-term. I wait until I believe they have a chance to EXPLODE, and then I take SMALL positions. Some of you may want to swing for the fences and that's fine. It's your money and deciding how much risk you're willing to take is your decision 100%. Just keep in mind that these stocks are generally shorted for very good reason and many times drift lower and lower over time. Developing and maintaining the Short Squeeze ChartList (SSCL) is just one part of our research and our goal is to simply provide you the knowledge to make better investing/trading decisions.
Having said all of this, I have taken small positions in several of our SSCL stocks. Why? Because the entire list is beginning to show strength, so a possible squeeze could be in the very early stages.
Here are five stocks from this list that are all showing signs of increasing volume and are threatening key short-term price breakouts. Reversing candles will likely take me out of these positions. One thing to keep in mind with respect to SSCL stocks: The odds of them working are relatively low, but when they do, the returns can be very substantial. Because the odds are low, however, that's why I choose to take smaller positions. If you take big positions, you can be forced to accept very large losses and I really want to avoid that. Back to those 5 positions:
BLNK:
Volume has been heavier of late and money is rotating into specialized consumer services ($DJUSCS). Could we see quick squeeze to 30 bucks? Maybe....
WKHS:
Is today a breakout? Well, we won't know until the close. But note that money is now rotating INTO autos ($DJUSAU). That can't hurt stocks in this space, even those heavily shorted.
NKLA:
This is another from the auto space. In addition, that PPO is showing accelerating bullish momentum and volume has been mostly above its 50-day average the past few days.
SKLZ:
This one is probably the biggest stretch, because volume doesn't yet confirm much of anything. But I like the way this chart is shaping up. Rising neckline (solid black line). Rising shoulders (dotted black line). Watch the volume and also the upcoming $2 price resistance. If resistance is cleared and volume moves above that moving average, odds of a squeeze would increase significantly.
SPCE:
SPCE is in the strengthening aerospace group ($DJUSAS). Boeing (BA) has been on fire, climbing 50% the past seven weeks or so. That could bolster a stock like SPCE. Can we make this breakout today on the close? If so, volume is likely to be above average and the highest we've seen July 7-8.
Obviously, the overall market will have some impact on the performance of these 5 stocks and our entire Short Squeeze ChartList (SSCL). But the entire ChartList seems to be gaining strength, so taking a chance with small positions probably isn't the worst thing.
Happy trading!
Tom