How will we know when a short squeeze is over?
There’s going to be signs traders will want to keep an eye out for.
In this article, I’m going to be going over them in detail and will be using AMC and GameStop as examples.
Be sure to read to the end so you don’t miss a thing.
Let’s get started.
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#1. Short interest
The short interest of a stock shows us the percent of a company’s float that is being shorted.
The reason AMC and GameStop were able to see price surges last year is because a small percent of short sellers closed out their positions in these stocks.
AMC’s short interest dropped from 20% to 14% when it had skyrocketed to $72 per share last year.
Today, AMC’s short interest is: 22.05%
GameStop’s current short interest is: 24.99%
You will know a short squeeze is over when there is no more short interest in an underlying stock.
You cannot have a short squeeze play if there is no short interest.
For example, HYMC stock’s short interest had surged prior to AMC’s acquisition.
The stock’s price surged and days later we saw the short interest plummet, and it continues to plummet.
HYMC’s short interest today is: 2.85%
A short squeeze for HYMC seems unlikely at this low of a percentage – there are simply not enough short sellers to squeeze and create a big price runup.
SI goes up and goes down
If HYMC’s SI was to surge, then it increases the possibility to squeeze shorts at a high enough short interest percentage.
However, it’s important to look at how short interest moves.
I update AMC’s, GameStop’s, HYMC’s and many other stocks’ short interest daily here.
If HYMC’s short interest keeps going down, don’t expect a short squeeze from Hycroft any time soon.
Hypothetically speaking, if AMC or GameStop’s short interest drops by 5%, then you know there’s still ‘squeeze’ juice, leaving AMC and GME at 17% and 19%, respectively.
Keep an eye on the short interest, it’s important to identify how many shorts are still in the game as AMC and GME begin to move up again.
#2. Utilization falls
AMC’s and GameStop’s current utilization are both at 100.
The utilization is the number of all outstanding loans available for lending.
You will know a short squeeze is over when AMC’s or GameStop’s utilization falls extremely low, when there are almost no shares available to loan.
For example, Ford (F) has a utilization of 1.14.
Apple (AAPL) has a utilization of 0.06 and Tesla (TSLA) has a utilization of 3.76.
The utilization tells us how much lending is happening in a security to short it.
And as long as AMC and GameStop are being heavily shorted, both are a short squeeze play.
Keep an eye out on the utilization, updated every trading-day here.
I hope this article was easy to digest and the information was straight to the point.
Have any questions, thoughts, or opinions?
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