AMC and GameStop seemed to begin squeezing in late March before being halted.
Both these stock’s short interest has not changed which means shorts have not closed their positions.
AMC and GameStop are both down 10%-20% on the five-day chart.
Volume has also significantly dropped during this bear market, which is normal.
Let’s break it down together.
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AMC and GameStop are overdue for massive price action
If there’s one thing we’ve learned from both AMC and GameStop over the last year, it’s that they move in very similar ways.
Both these momentum stock have very similar short interest data as well.
AMC SI: 20.59% | Utilization: 100 | Shares on loan: 136.54m
GME SI: 21.63% | Utilization: 100 | Shares on loan: 20.14m
The biggest and most notable difference here being the number of shares on loan.
The short interest essentially shows us the percentage of the float that is being shorted.
We can see that millions of shares have been on loan.
These shares have to be bought back or returned at some point.
And when they are, it’s going to cause AMC and GME to squeeze.
Because we are in a bear market, it’s more likely we will see shorts close as we transition towards a bull market.
But more on that below.
AMC and GameStop began squeezing after trading volume surged more than 3-4 times their average volume.
The trading halt, which lasted no more than a few minutes became a lifeline for short sellers who would have been squeezed from their positions.
The two stocks saw massive price surges in late March when the market opened.
That same week we saw dark pool trading volume surge as momentum skyrocketed in both AMC and GME stock.
Since the halt, AMC and GameStop’s share price and volume has dropped, essentially erasing gains from the previous moves.
Was this market manipulation?
Several retail investors seem to think so.
The halts prevented both AMC and GameStop from squeezing shorts out of their positions.
AMC topped $34; GameStop topped $199 only moments before trading was halted.
But this halt was only meant to keep these stocks in line with the rest of the market.
Things are going to change very drastically as we re-enter a bull market.
Squeezing shorts is only a matter of time
The best approach to squeezing shorts from their positions seems to be more of a long-term strategy now than it was back in January of last year.
Both AMC and GameStop have established new grounds to work with.
We saw this happen with Tesla as it too was heavily attacked by short sellers at some point.
Tesla’s growth accumulated over time despite the heavy short selling.
Its highly likely we see a similar trend occur with AMC and GameStop.
Is there a short-term scenario where shorts get squeezed from their positions?
I believe that as we re-enter a bull market, small and midcap companies will surge, enabling current shorts to close their positions.
And as traders begin to shift to call options, I expect massive price runups to go into full effect.
Institutions and traders are currently hedging against their positions in the market with puts.
This is just something bulls will have to weather out for now until the market becomes bullish again.
And you’ll see that these switches are very common in the market.
Bear markets don’t tend to last as long as bull markets.
The average bull market lasts anywhere between 973 days to 2.7 years according to Forbes.
They’ve also occurred for 78% of the time in the past 91 years.