EB Monthly Short Report - February 2023
Short Squeeze ChartList
Our Short Squeeze ChartList (SSCL), consisting of the most heavily-shorted stocks, has just been updated and should be available on our website later today. 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.
Generally, 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 hadn't been a whole lot of this over the past year, but as investors turned to a "risk-on" mode in January, the flood gates opened and short squeezes have been everywhere the past week or two.
At the time of our last Monthly Short Report, I was expecting that we could soon see the stock market in "risk on" mode, which no doubt would benefit stocks on our SSCL. Well, as we've seen money rotate much more aggressively over the past month, our Short Squeeze stocks have absolutely exploded. Check out the 1-month returns below:
Trading stocks on this ChartList ANY TIME requires significant risk taking. But one of the biggest mistakes with trading or accumulating shares of stocks on this ChartList is doing so while anticipating a rally. That can be particularly dangerous. I normally do not buy SSCL stocks on weakness or before breakouts occur. These technical developments, or lack thereof, do NOT trigger short squeezes. Shorts need to be losing money before they'll panic and cover. So I look for breakouts and a significant increase in volume. Please understand the risks you're taking before entering any potential short squeeze trading candidates.
December-January Report Card
I published a Short Report for December and simply pointed out three stocks to watch if breakouts occurred and volume increased. Here they were, with key annotated levels to watch:
W:
Discussion: I had pointed out that W was starting to rise in late November, but it wasn't until January that we finally saw a closing breakout above the 43.00-43.50 level. Once that happened, however, WOW! It's been a fun short squeeze ride, except for those shorting, of course.
Results: This trade never executed in December, but the wild squeeze in January shows how patience pays off when these stocks finally get their time in the sun.
Grade: A+
IBRX:
Discussion: I wanted to see a breakout here above 6.50 with a big increase in volume. I also pointed out that IBRX was one of the few SSCL stocks, at the time, that had a fairly bullish PPO.
Results: IBRX finally did make the breakout above 6.50 with increasing volume (well above average), but failed rather quickly at extending those initial gains, making it difficult to make money.
Grade: D
AMC:
Discussion: AMC was attempting a breakout at the time of publishing the last Monthly Short Report. I indicated that the intraday breakout needed to confirm end of day. It never did.
Results: The failed breakout proved to be the defining moment on the AMC chart as it fell rapidly following the false breakout. Ensuring the closing breakout turned out to be a very good decision. Sometimes a "no trade" is the best trade.
Grade: A
A Look Ahead At February
I just updated the latest Short Squeeze ChartList (SSCL) this morning based on the latest short figures. I looked at every SSCL stock on this updated list. Most have improved considerably given the more bullish stock market action of late. These short squeeze stocks tend to see many more buyers during a risk-on market advance. Their continuing strength will likely be very reliant on the overall market behavior. Many stocks have already broken out and chasing short squeeze stocks can be extremely painful when the surge ends. Like with musical chairs, we don't want to be the person without a seat when the music stops. PLEASE understand that these stocks are INCREDIBLY RISKY and VOLATILE, because of the huge supply and demand imbalances.
Just remember that the higher the short % of float, the more potential demand on a true short squeeze. And if there's true PANIC, then we should see volume move exponentially above average. Given all of this, here are 3 stocks that still have my interest as of this morning:
CVNA:
Despite the huge surge in CVNA shares over the past few weeks, CVNA's short % of float has actually increased from 58.01% to 59.65%, which I find amazing. Apparently, there are some professional shorts digging their heels in, while many retail shorts panic and exit. I have no idea who wins this battle ultimately, but I know if CVNA breaks to new highs, we could see an absolute avalanche of buyers. The question for each of us is......is it worth the risk. If CVNA fails, it could quickly return to single digits. My suggestion would simply be to keep position sizes fairly small. Don't allow short squeeze failures to ruin your portfolio.
BYND:
This one doesn't seem to be giving up, breaking out again yesterday on a closing basis. I first mentioned this one as volume began soaring during our LIVE trading session last Friday. After a quick trip back to test its rising 20-day EMA, BYND has surged again. Volume has slowed a bit today, so a sudden surge in price AND volume could be your clue for the next squeeze and upside move.
PXMD:
At the time of the last Short Squeeze ChartList, PXMD was the most-heavily shorted stock, with 63% of its float short. It dropped to 38.93% in the latest SSCL, showing that many shorts have covered on recent strength. But at 38.93%, there are still plenty more likely to exit soon if price surges again. Today, volume has really spiked and PXMD opened above key price resistance at 3.69. Another end-of-day run back above 3.50, but especially the 3.69 open, could trigger a slew of covers into the close.
There are plenty of others on the SSCL to watch and, if they make key breakouts with accelerating volume, could absolutely be the next big short squeeze stock. I review this list every morning around 10am, looking specifically at the first 30 minutes of volume. If the volume is there, then I watch for potential breakouts.
Happy trading!
Tom