This morning, I received the newest short interest data, and it shows 11 stocks that could begin rallying higher.
I’ve been using this data for over 20 years.
It’s one of my favorite bits of data because it has something that I call an “ambidextrous indicator,” which means that it’s good for a stock in both rising and falling markets. And we can use it to determine which companies we can “squeeze” for fast profits.
Short interest shows us the percentage of shares being shorted. A higher percentage means more people are betting against the stock.
But if it rallies higher, these people will be forced to buy back the stock at elevated levels.
That’s how we can make money using this piece of data.
Today, I want to focus on a list of 11 stocks getting ready to breakout as they complete my three-part checklist as bullish squeeze candidates.
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I’ll also dive deep into my three favorite candidates.
These stocks could give you quick short squeeze profits…
I use this three-part checklist to qualify the best short squeeze candidates.
Three Steps to Finding Big Opportunities in the Short Squeeze Market:
- Find companies with high short interest ratios (SIR). These are your short squeeze candidates.
- What’s an SIR? It’s simply the current short interest for a stock divided by its average daily trading volume.
- What’s considered a “high” reading? In my 20-plus years of trading and research on short interest, I’ve nailed it down to one easy number – six or higher.
- Identify candidates that are in a strong bullish trend.
- Remember, higher prices are the short seller’s enemy. Knowing that, we’re only interested in short squeeze candidates that are moving higher.
- The easiest way to filter the candidates down to trades is to look at each candidate’s 50-day moving average. If its trending higher, the shorts are feeling some pain.
- Determine a “trigger price.”
- This is the price where the short sellers are likely to toss in the towel and where the short squeeze begins.
- Typical candidates: New highs (52-week or all-time), round numbers like $20, $50, $100. The more zeros the more potential for it to be a trigger.
- My database calculates a “trigger price,” but you can normally eye the point where the shorts start to squirm on a chart.
Once you’ve got all three covered, it’s time to get into the stocks before the squeeze starts and the short sellers start pumping the stock higher as they fight to buy the shares back to close their losing positions.
Short interest data reveals that these 11 stocks are getting ready to breakout.
Let’s look at three of my favorite short squeeze candidates from today’s short squeeze report.
My Three Favorite Short Squeeze Candidates
- The Carlyle Group Inc. (Nasdaq: CG)
I discussed CG during my Night Trader livestream a few weeks ago, ahead of their earnings.
The shares had just bounced from support at their 20-day moving average, and the same pattern is getting ready to happen now.
CG is best known as a private equity firm that has built a huge portfolio of companies across all sectors and business lines including government contracting, communications, agribusinesses and financial services, just to name a few.
Last quarter’s earnings beat analyst estimates while the company provided positive guidance. Shares rallied a fast 10%. Since then, the stock has pulled back to technical support at its 50-day moving average and now shares are switching back into rally mode.
Recent short interest activity on the stock saw a slight increase which took the short interest ratio to a reading of 6.7. That reading, combined with the bullish 50-day moving average, builds a bullish short squeeze case for CG shares as they begin to rally again.
The shorts should start to unwind their positions by buying the stock as it moves above a trigger price of $38.25 with a short-term target of $43.00.
- Eventbrite, Inc. (Nasdaq: EB)
Consumers are chomping at the bit to get back out and enjoy life again as the reopening trade appears to be in motion. Now, we all know that we’re not going to return to a completely normal life, but now is the time to start investing as if that were the case.
Concert and entertainment events are top on the “to do list” for a lot of people along with movies, sporting events and travel.
EB operates a ticketing and technology system that helps to plan, promote, and execute live entertainment events. Think they might be busy over the next year as the tours and shows hit the road again? Of course they will.
EB shares have spent the last three months in hibernation as they traded in a tight range between $17 and $20. Momentum in the vaccination efforts now has the stock moving from that strong foundational bottom formed at the $20 level.
Two weeks ago, we saw a “silver cross” pattern complete on the stock which indicates that bullish momentum is beginning to build. At the same time, the stock is now moving above its pre-pandemic highs as momentum builds.
Short interest peaked in December, but we’re far from the end of the short squeeze that is likely to rally shares of EB from $23 to $40 as the re-opening trade will add fundamental fuel to the rally.
The stock’s “trigger price” for a short squeeze rally to commence is $25, a price that we should see crossed within the next week.
- Sally Beauty Holdings, Inc. (Nasdaq: SBH)
One of my recent short squeeze candidates, SBH, just shot 20% higher over the last week.
I shared the stock with my Night Trader subscribers in our private chatroom. The responses made me laugh, but the stock is making me happy now as its short squeeze move continues.
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This trade is proof that the world of investing is evolving.
The stock market was once dominated by opinions and rumors, but today it’s almost solely driven by data and the market’s response to data.
And simply reading the data and preparing our positions can yield market-beating returns.