EarningsBeats.com Digest for December 22, 2021
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When Might This Heavily-Shorted Stock See A Squeeze?
On Tuesday, I wrote a Trading Places blog article that discussed the most heavily shorted stock on our Short Squeeze ChartList (SSCL) - Biofrontera (BFRI). You can CLICK HERE to see the article, if you haven't already read it. Short
squeeze stocks require a couple of things before I'd ever consider buying them. First, you need volume to accelerate very quickly, because a short squeeze requires panic buying. The second thing you need is a stock that's breaking above recent price resistance. Short sellers will not panic if they're not losing money. When a stock breaks out, that's when shorts must become more aware of their unlimited losses as a stock moves higher and higher. With this in mind,
let's look at our second most heavily-shorted stock on our SSCL - Cortexyme (CRTX):
The PPO is soaring higher. Does that make this trade more enticing? Not really, at least not for me. The PPO had reached an incredible -40, which is almost never seen on a chart. Its PPO had to move higher! It was almost a certainty because it's fall was so rapid and severe. The rising PPO simply tells us that selling momentum is slowing, not that buying momentum was accelerating. That's a
major difference. Most short sellers are still making a ton of money on CRTX. I don't see sellers even thinking about covering until both recent price resistance AND the 20-day EMA are cleared. That's near the $14 level. Should that break, then there's a better chance of seeing $20 on CRTX. I don't believe a true short squeeze would take place until that $20 gap resistance was broken. Then we could see shorts begin to panic. Therefore, for me, I don't
really view CRTX as much of a short squeeze candidate for now, though alls it might take to get things started would be favorable fundamental news. There are others on our SSCL that present better short-term opportunities, in my opinion.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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