Before Reddit, This Indicator Predicted 20 Years of Short-Squeeze Rallies

You can profit off of short squeezes without using Reddit.

For the past 20 years, I’ve been using short interest in all of my investment models because it’s one of the best ways to predict a bullish rally.

Short interest is revolutionizing the trading world as we know it. You can take advantage with up to three short squeeze trade recommendations per week – learn how right here.

You see, GameStop wasn’t the first short squeeze to rock the market. But it was the first time ever that short squeezes became public knowledge. And now, those of us “in the know” are smiling because the rest of the world has figured out this trick.

Like I said, I’ve been leveraging short interest for the past two decades. And I haven’t done it by spending hours scrolling through Reddit forums.

During that time, I’ve developed a short squeeze system that finds these opportunities every single week. Over my entire career, the short squeeze has proven itself one of the most reliable indicators in my entire trading arsenal.

That’s why I say that short-sellers are a bull’s best friend.

And right now, my data shows me that three specific stocks are about to experience a short squeeze rally…

Combine These Two Commandments for Exponential Short Squeeze Profits

Short squeezes have been such an effective, predictable way to double my money that they are my Sixth Commandment of Trading. Let’s take a look at how it all works.

Short selling is an investment or trading strategy that bets on a decline in a security’s price. An investor or trader opens a position by borrowing shares of a stock and then selling them.

Before the short seller returns the shares to their owner, they expect the shares to drop. That way, they can purchase them at a lower cost, keeping the difference and making a profit.

These brokers don’t care if you want to borrow the stock and sell it to your Uncle Lou of all people. If you’ve got the margin, they’ll give you the shares. They just care about getting the shares back and making some money of their own.

My point? Short sellers can turn into a bull’s best friend. If you’re using the counterintuitive approach, you’re buying a stock that’s fundamentally and technically sound.

Short interest is only a bullish trader’s friend when the technicals and fundamentals of the underlying stock are bullish. Put another way, it is natural for a stock with poor fundamentals and technicals to have high short interest readings. Buying a stock just because it has high short interest is a fool’s game over the long run.

You must consider how the stock is doing technically and fundamentally when using short interest as an indicator, otherwise you will likely get stuck holding a failing stock that will lose you money. Not a great outcome.

The best way to play a short squeeze is to combine my sixth commandment with my first.

My first Commandment of Trading states one of the simplest rules on Wall Street, “The Trend is Your Friend.” The simple act of combining that with a stock that has high short interest will result in market-beating returns more than 85% of the time.

Stocks that are in bullish technical trends will usually continue to edge higher.

When this happens, it starts to pressure the short sellers that hold positions against the stock.

This works its way into what we call a “short covering rally” or a “short squeeze,” which is the boiling point where the shorts are forced to start coming back into the market as buyers, thus forcing the price of the stock even higher as they close their losing positions.

It’s really an evil type of twist. The stock that you bet against is moving higher and you must buy it to close out your short position. So, you end up making it go even higher.

Here are the simple guidelines for nailing the short squeeze trade without the help of Reddit.

  1. Look for companies with short interest of 1,000,000 shares or higher.
  2. Narrow that list of companies down to stocks with a short interest ratio of 6.0 or higher.
  3. Filter the remaining companies for only those with 50-day moving averages that are trending higher, remembering that the trend is not the friend of short sellers.
  4. Identify a “trigger price” for the short squeeze. This is normally a “new high” or “breakout price.” Short sellers react to technical events as their signals to get out.

Or….

You can just check in with me every other week, when I provide a list of short squeeze candidates like I’m doing right now.

Your short squeeze candidates for the week are listed in the table below…

And now, check out a few of my favorites…

  • International Flavors & Fragrances Inc. (NYSE:IFF)
    • Recent mergers and acquisitions activity has the stock moving towards a break above the $140 level that my system is indicating as the “trigger price” for another leg in the short covering rally. IFF shares are on their way to $150.

  • Kadmon Holdings, Inc. (Nasdaq:KDMN)
    • KDMN shares have been flirting with support at $5 and pressing towards another run to $6. A break back above $5.25 will put more pressure on the shorts that didn’t close their positions out last week on its rush above $5. Target a move above $6 for 20% profits.

  • The Western Union Company (NYSE:WU)
    • Analyst price targets are moving higher on WU shares, which is pressuring the shorts into a covering rally that will get triggered by a move above its trigger price of $25. I’m targeting a move above $30 over the next 30 days.

 

Now, there’s one name that isn’t on this list. It’s a home fitness company that’s seen a surge in revenue during the pandemic – but it’s also a stock that institutional investors continue to short, giving folks the opportunity for a super squeeze profit.

Learn how you can get the details of this recommendation – and many more like it – by clicking here.

Until next time,


Chris Johnson

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