Short Interest Stock Short Selling Data, Shorts, Stocks: Short Squeeze

Short Squeeze

I’m playing the long-term game and will continue buying in anticipation of a major turnaround in 2025 once interest rates begin to fall and consumers aren’t getting crushed by inflation. It’s important to understand that Lucid is not just an electric car company. Lucid Group has everything it needs to compete with the best in big tech since management has experience working at big tech companies such as Tesla, Microsoft, and Apple. There is an addressable market for both standard and luxury EVs that can fulfill both consumer segments. Even American sports celebrities are feeling the pinch of out-of-control gas prices for ICE vehicles. It’s obvious that Saudi Arabia understands more consumers will switch to electric vehicles in droves as high gas prices create pain at the gas pump.

It has to do with the specific requirements for opening short positions, and how aggressive long traders weaponize these requirements to their advantage. The price action in a short squeeze can look as if the company just announced the cure for cancer. But really, short squeezes are caused by a pretty basic market mechanic. Technical traders monitor certain indicators that may reveal that a stock is ripe for a short squeeze to occur if substantial buying pressure begins to enter the market. In general terms, when the short float ratio is more than 40%, the market sentiment is bearish. However, it is not uncommon to see the short float rate even higher at 50%.

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Hydrogen fuel cells combine hydrogen with oxygen to create energy and water. But Plug Power has had difficulty expanding the niche beyond utility backup systems (which usually don’t need hydrogen) and warehouse forklifts (not a huge market). Short positions entered between $250 and $270 would have certainly felt the pain.

  • Another technical indicator that traders monitor is what is known as “days to cover.” It is a metric derived from comparing the total short-selling interest in a stock to its average daily trading volume.
  • Every buying transaction by a short seller sends the price higher, forcing another short seller to buy.
  • In early March 2020, Tesla’s stock finally fell, along with most others, during a market downturn.
  • The relative strength index is also an important metric to look at because it shows whether a stock is oversold or overbought.
  • Short interest signifies the number of shares that have been sold short but are yet to be covered or closed out.
  • One big risk is when a bullish catalyst (earnings, news, technical event, etc.) pushes the stock price higher, prompting short sellers to “head for the exits” all at once.

It’s a good idea for investors who want to bet on a short squeeze to have other reasons for buying the stock. For example, if they disagree with the reasoning behind the short-sellers’ bet, they might buy the stock because they think it will rise despite the high short interest. You can calculate the ratio by dividing the number of shares sold short by the number of shares outstanding. But it’s arguably one of the best short-squeeze opportunities. The stock price goes from single digits to $100+/share in just days (or hours).

Risks of Trading Short Squeezes

Block is just one of the many traders out there who make a profit by simply going short on stocks. Working at Muddy Waters, Carson Block specializes in shorting stocks, not just on the American stocks but world-wide as well. Even in a best-case scenario, a Short Squeeze is a quick occurrence — not a long-term strategy. Buying into a company in the hope of lassoing a rocketing price is speculative at best.

Short Squeeze

The most recent press release from the company involves charges that it misstated its results in 2019 and 2020. A short squeeze occurs when you have a crowded trade on the short side. When you find a perfect combination of a fundamentally driven short squeeze alongside the technical indicators pointing to an oversold market and that is where money can be made. You can start by looking at the short interest filter and also add some other technical indicators such as price trading below a 200-day moving average.

What Is Days to Cover, and Is It Useful for Identifying Short Squeeze Targets?

Due to the risks of short selling, it is a safer bet to trade the upside when a short squeeze occurs. For example, Carson Block who earned a reputation of being a short seller in stocks. In a recent interview with CNBC he shares his view on short selling in this article. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

  • The major problem with short-squeeze stocks is the added risk.
  • The stock price swiftly escalated from roughly $20 to over $480 in mere days due to collective action by a group of retail investors on Reddit, causing monumental market fluctuations.
  • Exchanges such as the New York Stock Exchange and the Nasdaq also publish short interest data for the exchanges as a whole.
  • Small-scale short squeezes may happen any time, for example, after a company reports earrings.

If the stock’s price has dropped, the short seller makes money due to the difference between the price of the stock sold on margin and the reduced stock price paid later. However, if the price goes up, the buyback price could rise beyond the original sale price, and the short seller will have to sell it quickly to avoid even greater losses. When a stock’s price starts to rise rapidly, short sellers want out, because they only profit when the stock goes down.