EarningsBeats.com Digest for August 7, 2020
|
This Is What You Want To See In A Short Squeeze
When investors place bets against a company, they sell shares short. They borrow shares held by a broker and sell them, but must buy them back at some later date and return those "borrowed" shares. So it's really just doing everything backwards. Normally, we buy stock and hopefully cash in at a higher price at some future date. When you short, you're selling first and hopefully cashing in when you buy
that stock later at a lower price. But when shorts get it wrong, they have unlimited liability because, in theory, a stock price can climb indefinitely. So a short seller's buy price keeps increasing and increasing and increasing. Here's an example - Ontrak, Inc. (OTRK). More than 50% of its float is currently short. In other words, short sellers are making a huge bet against OTRK. Right now, they're getting it very wrong and it's getting costly. Look at
this chart:
If you sold 100 shares a month ago at $25, it cost you $2500. At some point you have to buy those shares back. Currently, OTRK is trading at $56.47. That short seller would have to pay $5647 for 100 shares to return them to the broker. What happens if the stock goes to $75? $100?
$300? This is an important concept to understand, because OTRK has guaranteed buyers in the form of short sellers. So not only do you get technical buyers jumping in, but now you have the shorts that are scrambling for the exits. That's the power of a short squeeze. For me, the best candidates for a true short squeeze are stocks that are breaking out above key price resistance AND are also breaking out relative to their peers. That's the case with
OTRK.
One of our six ChartLists is our Short Squeeze ChartList. We track stocks that have at least 20% of their float short and we organize them in order, starting with the most heavily shorted stocks first. It's a great tool for our members in order to gain an advantage among other traders. Consider
starting a fully-refundable $7 30-day trial today and put our research to work for you!
EarningsBeats.com
Better Timing. Better Trades.
|
|
|
