Recently, I've done pretty well trading other highly shorted names such as CROX, NTRI and VMW.
On Thursday, Briefing.com released its list of stocks with a high short interest at the end of March. I've taken that list and filtered out candidates:
- trading under 300,000 shares on an average day (you need liquidity)
- with less than 30% of the float short (you only want heavily shorted stocks - 30% is an arbitrary number, it could have been 40, 35, whatever you'd like)
- and trading under $9.00 a share (I personally prefer not to trade stocks under $10 a share. The reason I used $9 in this case, is that there are stocks that maybe setting up just above the $10 level, but are currently trading below $10. Again, I could have used $8, $7.50, etc... but I don't want the majority of the short squeeze to be over and done with by the time it reaches a level I'd buy it at.)
I then added them to a watch list on my Stockcharts.com account, and visually filtered through the remaining 26 candidates for stocks I believe that could setup for a decent short squeeze rally.
In addition, by visually filtering through this list, it is possible to find ideas that may work towards the short side as well.
My main objective is finding stocks that can quickly move towards the upside after they cross certain levels where quite a few buy stop orders would be taken out. This can quickly bid up the price as those that are short a stock are essentially fighting with each other in order to cover their position and get out. That usually adds up to a quick, profitable trade.
Before I get to the charts, I want to point out that just because a stock has a high short interest, it doesn't mean it can't keep dropping. There are stocks can, do and will go to $0 (or close to it).
Let me also share a few other great resources (& free too!) regarding heavily shorted stocks (These all can be found under" Helpful Links" to the right):
Now the charts...
I'll be keeping an eye on the rest of that filtered list as well. If something presents itself as a high quality setup, I will post it on my blog. Just another reason to subscribe to my feed. :)
