The economy is reopening and showing strong signs of growth – and its shooting the market to new all-time highs with every passing day.
Plus, earnings season is finally here, which should give the market a catalyst for another rally higher.
Things are looking good for the average investor, but for short sellers – the world is burning.
Short sellers have been busy adding to their positions over the past month, hoping and praying that stocks will fall off the cliff they’ve built.
And every time they add a new short to their portfolio, our trade candidates grow.
In fact, there are now over 150 stocks about to enter a short-squeeze – that’s up from 127 just two weeks ago.
Why should you care about these short squeezes?
Well, you remember GameStop Inc. (NYSE:GME), don’t you?
This infamous short-squeeze ignited a movement that has led to over $11 million being up for grabs in the market every second of every day – and this cutting-edge, predictive platform can help you take advantage of the phenomenon.
Although GME’s 1,700% jump is an extremely rare case, it’s the quintessential example of a short squeeze – and the profit opportunities that come along with it.
And my data shows three stocks you can squeeze right now…
How A Short Squeeze Works
You might be wondering how “squeezing a stock” can give you big profits.
It’s all thanks to the shorts.
Shorting a stock can be a dangerous undertaking.
You’re betting that the stock will decline and using margin accounts to do it, which means that you’re leveraged. If the stock goes down, the shorts are happy, and they pocket their profits.
It’s a totally different story when a stock goes up though. When this happens, the short sellers start feeling the pain as their leveraged losses start to add up quickly.
At some point, they have to call it quits and cover their positions to limit losses.
When a whole bunch of bearish pros on a particular stock start to cover all at once – meaning they’re elbowing one another and stampeding through the narrowest of doorways and grabbing shares at every and any price – that stock can go parabolic. That’s a “short squeeze.”
Going through those 150+ stocks I uncovered several strong candidates for short squeezes.
Historically, a short squeeze will play out over a 4-6 week period, so these are stocks that you may want to look at right now.
Here’s how we’re going to squeeze our own profits.
CJ’s Spring Squeeze #1
The Carlyle Group Inc. (NASDAQ:CG)
CG is one of the largest and best-known private equity companies around. The company’s mission, simply to create value. CG‘s ventures stretch around the world and include everything from energy to real estate, even donuts (they were key in the expansion of the Dunkin’ brands.)
A short squeeze is triggered by strong technical trends so certain criteria have to be met and CG has hit the marks.
Year-to-date, CG stock has returned 24% compared to S&P 500 gains of about 10%. The stock has spent the last year continuing a strong long-term bullish trend as it trades above its 20-month moving average.
Looking at the shorter-term, CG‘s stock is trading above two key trendlines, its 20- and 50-day moving averages. This indicates that the stock is trading with a strong trend and momentum. This is the kind of trend that increases the pain on short sellers.
Finally, the stock just broke through a “double top” pattern on its chart at the $38 price. Breaking to new highs is good. Breaking through a double top is better.
CG will report their quarterly earnings results on April 27. Last quarter the company beat analyst expectations by $1.00) expectations were set at $0.44 per share.) The combination of short interest and an earnings beat propelled the stock to a 15% gain in just two weeks. Another better-than-expected performance on the earnings front will start turning the short sellers into buyers.
CJ’s Spring Squeeze #2
The Western Union Company (NYSE:WU)
WU was the original P2P payment system having transacted money transfers for individuals and companies dating back to the 1800s. The company was supposed to go the way of the cart-and-buggy 10 years ago when Bitcoin (BTC) hit the scene, but its model continues to generate shareholder wealth despite the myriad of payment apps in the fintech sector.
Let’s face it, WU deals with a different customer profile, one that will be slow to switch to crypto payment methods or apps to transfer cash.
Short sellers are looking for the company to hit the skids soon as the stock’s short interest ratio is registering a reading of 6.4. My studies show that a short interest ratio above 6 is indicative of a short squeeze.
In an interesting twist, short interest declined 4% over the last two weeks, a sign that the shorts are getting nervous as the stock prepares to break through the $26 level and then $28. That $28 price is a potential “trigger” for a squeeze as it would lead to more buyers grabbing WU shares as the stock breaks into new all-time high territory.
Looking close at the price activity, intermediate-term trends are leading to higher prices as WU stock’s 20-day moving average is supporting the stock above its bullish 50-day moving average. Volume has been light on the stock lately, along with the rest of the market, which means that when volume returns WU shares may see a bullish push above $26.
The company reports their earnings in early May, and it will be interesting to see the effect of the recent Coinbase (COIN) listing effect on the company’s corporate guidance or outlook. If history in an indication, were still far away from BTC or COIN digging too deeply into WU‘s model and profits for now.
CJ’s Spring Squeeze #3
Exelixis, Inc. (NASDAQ:EXEL)
For those looking for an interesting fact, short interest usually runs higher in the biotech sector than any other place in the market. The reason is fundamentally clear, short sellers are betting against clinical trials not going a company’s way. It also makes for some great short squeezes.
The biotech sector has been in a technical tailspin since February as the SPDR S&P Biotech ETF (XBI) is down 22% from its highs and has lost 6% year-to-date. This is one of those sectors that is clearly a “stock pickers market,” which is one reason I like this potential short squeeze.
Based in California, EXEL is an oncology biotechnology company that focuses on the discovery, development, and commercialization of medicines to treat cancers in the United States. They already have one FDA approved thyroid treatment in use and several in development as is usual with biotech companies.
Shares of EXEL are a running bull among bears as the stock is trading 20% higher in 2021 making it one of the relative strength leaders in the biotech arena. This is one key identifier that I like to see on potential short squeezes.
Shares are trading above the technical trinity of support as the key 20-, 50- and 200-day moving averages create a confluence of support at $22.50-$23.00. In addition, the 20- and 50-day moving averages are trading in that familiar bullish trend and momentum pattern as both are trending higher.
The stock is once again approaching $26, which has been a point of resistance that will have the short sellers on the edge of their seats. The difference between the current run to $26 and the shot to that price in January is momentum as we’ve seen both a silver and gold cross pattern on the shares in the last few weeks. Those patterns often proceed breakouts.
A final positive point for EXEL is the recent trend in analyst upgrades to the stock. Two analysts, including Credit Suisse (NYSE:CS), have initiated coverage on the stock with target prices of $30 and $35. Upgrades like this often bring positive attention to the stock along with new buyers to drive prices higher.
Earnings hit the tape on May 5 and the company hasn’t missed analyst expectations once in the last 2 years. Another beat might give the stock what it needs to hit that $35 target quickly as the shorts scramble for cover.
I’ll keep you updated if any of the other 150+ names on my short squeeze list enter the buy zone.
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