These lousy-sentiment stocks ripe for a short squeeze, Barclays says

While it has attempted to revive itself on physical console sales and ridiculous merchandise, I can’t see these generating a growth story for decades to come. In 2020, the market agreed with me, selling and shorting GameStop’s stock right into the ground. Before the short squeeze really kicked off, nearly 85% of GameStop’s shares had been shorted. Experienced investors can take a look at the short interest rate and determine a lot of information, such as whether there has been a change in sentiment positive or negative and also whether it is ripe for a short squeeze. It bears mentioning that heavily shorted stocks are usually shorted for a reason. This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy.

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“There really can’t be another GME.” Michael Burry, hedge fund manager

“Bed Bath & Beyond is identical to GameStop before it had a parabolic short squeeze. Both have Ryan Cohen involved, both are old school retail brand names, both were highly shorted.” said Meade. However, investors have missed the additional alpha which would have been generated by BBBY’s meteoric rise. BBBY isn’t currently in the ETF’s top 15 holdings, which include AMC Entertainment, Coinbase, Roku, Peloton Interactive, Shopify, and GameStop.

A short squeeze can end up driving stock prices up, sometimes significantly, though this upward shift in pricing may not be sustainable for the long term. A short squeeze occurs because short sellers get skittish when it looks like their short bets may prove wrong. Short sellers face unlimited risk if they turn out to be wrong and a stock’s price rises. Not only that, but short sellers will also start getting margin calls from their brokers as their short goes bad. A short squeeze is when a heavily shorted stock or other asset rises sharply, forcing short-sellers to buy back the shares to avoid heavy losses. This buying pressure can cause the asset price to rise, leading to even more short covering and a short squeeze.

Net-bullish bets by money managers rose to a three-week high in the week to Jan. 26, according to CFTC data compiled by Bloomberg. But that narrative isn’t as straightforward as the one surrounding GameStop, one of the most-shorted stocks in the U.S. before it began surging this month. Like the buying stampede in GameStop Corp. and other small-cap stocks that has captivated the financial world in recent weeks, silver’s advance can be traced to Reddit’s WallStreetBetsforum. One post last week declared the metal “THE BIGGEST SHORT IN THE WORLD” and encouraged traders to pile into the iShares trust as a way to stick it to big banks. The other useful metric is the short ratio, or days to cover, which Kiplinger says is the number of days of normal trading it would take to generate enough trading volume to buy back all the shares sold short. Panic buying sets off more panic buying, sometimes pushed by speculators who know the predicament the short sellers are in and want to make them suffer for their lack of confidence in a company.

Short Squeeze 1: Porsche Volkswagen: “The Mother of All Short Squeezes”

But, when the paperwork for the deal showed up on Buffett’s desk it was only for $11.38 a share. This angered the oracle so much he bought out Berkshire Hathaway and fired Stanton. Over the years, he adapted Berkshire into the conglomerate we know today but it took longer and cost more.

• To see all exchange delays and terms of use please see Barchart’s disclaimer.
• While Q2 earnings missed expectations, revenue beat and we see compelling value in shares trading at just a 15x earnings multiple on the 2023 consensus EPS.
• If the number of shorts is continuing to increase even as it would take five days or more to cover all of the short positions, that’s a good sign that a short squeeze may be looming.
• Short sellers could be looking to close out their position and can face a loss if they have to buy back the shares they initially borrowed at a higher price.

There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest. An author, teacher & investing expert with nearly two decades experience as an investment portfolio 40 different types of arbitrage trading strategies manager and chief financial officer for a real estate holding company. Options trading in general is riskier than trading stocks, mutual funds or ETFs simply because there’s a certain amount of guessing that goes on about what will happen with a stock’s price.

Ignore the Meme Chatter and Stay Away From AVCT Stock

Short sellers could be looking to close out their position and can face a loss if they have to buy back the shares they initially borrowed at a higher price. These trading restrictions caused outrage in the Reddit communities that retail buyers had organised around. But, sometimes there simply aren’t enough shares to go around for all the short sellers who want to buy back the stock. That drives up demand, which in turn creates a lot of buying pressure and a sudden jump in the price of a stock.

This backdrop hasn’t prevented SunPower shares from steadily losing ground since peaking at $57.52 in February 2021. The current price of just over $15 per share translates into a slide of more than 70%, exacerbated by the short sellers that have piled onto this falling stock. As of the latest tally, more than 13% of the company’s outstanding shares are shorted, while nearly 29% of the float itself has been sold short.

Our views on the market themes to watch.

The cancellation of trades specifically made to reduce and manage risk, made in accordance with Exchange rules, has raised several significant issues, most importantly that of proper governance – the “G” in “ESG” . It is crucial that investors have confidence that a regulated exchange will always act as an impartial counterparty to both buyers and sellers in a market. While the final verdict on the governance of the LME is still to be decided, it highlights the importance of dealing with trusted counterparties that do not act to benefit one side of a market relative to others. Faith that an exchange will operate impartially is crucial to its long-term viability in attracting liquidity and participation. Short squeezes have been an impactful feature in financial markets over the last two centuries, often occurring at times of broader market dislocation.

Investments in stocks, options, ETFs and other instruments are subject to risks, including possible loss of the amount invested. The value of investments may fluctuate and as a result, clients may lose the value of their investment. Past performance should not be viewed as an indicator of future results.

Burry scooped up shares in GameStop in early 2019 and began sending letters to management to pressure them to right the ship. At the time, sales were declining, stores were closing, and management had taken a pay increase. However, these reactions can also be hasty and leave short-term value sitting on the table. Identifying these companies, wringing out the last few ounces of potential, and then laying them gently to rest has long been a favorite pastime of the Oracle of Omaha. It’s so volatile that, on any given day, the stock could be up 50 to 100%, but because you bought at the wrong point in the day, you could potentially lose up to 30, 40, or 50% in one day.

• So far, 7,913 puts have crossed the tape, which is double the intraday average, compared to 31,000 calls.
• The upside here is that as macro conditions improve, shares are ready to sustain a rebound higher.
• The company reported top-line growth of 417.65%, with total revenue reaching $1.55 million.
• You need to be ready to take advantage of the situation as soon as a bullish catalyst sets off the squeeze.
• Don’t get lost in the herd, remember your investing thesis and return to financial fundamentals.

This makes them far riskier investment ventures than, say, traditional automakers. Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at fxpro review 2019 S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. The result is something of a shakeup in the list of stocks with highest short interest, as measured by the percentage of shares outstanding sold short.

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Its stock has been very popular among retail investors since last September, when it reached a short interest of more than 23% of its float. The other thing to consider is whether the number of shares being shorted is increasing or decreasing. If shorts are being covered before a squeeze develops, the situation can defuse itself without a sudden spike in demand. If the number of shorts is continuing to increase even as it would take five days or more to cover all of the short positions, that’s a good sign that a short squeeze may be looming. Rising interest rates amid expectations for tighter monetary policy have hit growth stocks as a whole in 2022. But it has really clamped down on pricey high-short-interest meme stocks from last year.

On the short side, as the price rises, the position gets larger and the problem also grows, dangerously so if the price rise is big or fast, as it is in a short squeeze. This, along with the technical complications of borrowing securities and managing margin calls, makes short selling a complicated undertaking, far from being just ‘longs with a negative holding’. The opinions and views expressed are as of the date published and are subject to change. They are for information purposes only and should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation to buy, sell or hold any security, investment strategy or market sector. Opinions and examples are meant as an illustration of broader themes, are not an indication of trading intent and may not reflect the views of others in the organization.