How Will We Know When Shorts Cover AMC?

How Will We Know When Shorts Cover AMC

AMC stock is showing major resistance in the high $30-$40 levels. The short interest has gone down by 3.5% since it peaked, did shorts cover?

And if they did, shouldn’t the price have gone up?

This is a very interesting topic indeed. Let’s discuss it.

franknez.com

Welcome to Franknez.com – the blog that gives retail investors a platform. Today I want to discuss some key attributes that will let us know when shorts cover AMC.

Let’s get started!

But before I continue, I want to thank every single one of you who continues to share the content and who’s been supporting the blog all these months.

Identifying Short Covering

Short covering is what’s going to ultimately get you astronauts to the moon.

It’s a battle of tug-a-war if you ask me.

Except it’s not physical, it’s a mental game of strategy. And the first to cave in, loses.

Now, it’s worth mentioning that the domino effect may fall upon either side of the spectrum.

This means both long shorts and long retailers are susceptible to influencing one another.

The difference is whether we lend strength to one another, or doubts and fear.

In my list of 6 things retail investors should know about AMC, shunning negativity is one of them.

And for great reason.

The same way we can pull each other up, we can also pull one another down.

Short Interest Data

To the best of my knowledge, there are two major factors that will allow us to identify when shorts cover.

The first is through the short interest data.

What does short interest data tell us?

The short interest helps us understand how much of a stock’s float is being shorted.

It’s the number of shares that have been sold short but have not yet been covered or closed out.

short interest calculation

For example, a heavily shorted such as AMC has a short interest of 16.56% (currently).

Apple on the other hand has an SI of 0.62%.

Apple has almost no shorts to squeeze from their positions where AMC has 16.56% of the float shorting the stock.

That’s approximately 106.82 million shares out on loan that have yet to be covered.

So in theory, as shorts begin to cover their positions, AMC’s short interest data should begin to decrease.

Price Action Change

Another common way to identify whether shorts cover their positions is through sudden price movements.

Short covering adds momentum to the buying pressure of a stock which results in a spike or bullish run.

What makes identifying when shorts cover is that the price action and short interest data don’t align at the same exact moment.

The reported short interest doesn’t happen right away.

It’s actually released a week and a half.

However, when we look at AMC’s runup back in June, we see that AMC peaked two days after it’s last report high short interest.

See below.

It took two business days for AMC’s small short covering to take AMC from $31.81 to an all-time high of $72.62 per share.

The chart from Ortex below shows us a drop in short interest between the dates of May 28th and June 9th where the stock began to cool down from it’s runup.

We saw the short interest drop from 20% to 14.76% by mid July before shorts began taking new positions, further driving the short interest up past 19%.

And I know what some of you might be thinking. Shorts haven’t covered! They never did!

Community, I’m presenting you with data that shows how price fluctuated based on the short interest updates.

Strangely enough, when the short seller, not hedge fund, Iceberg Research announced they closed their short position in AMC, two days later we saw a very small increase in price action though retail volume was low.

People were quick to dismiss Iceberg simply because it’s one analyst publicly shorting AMC but I though the news was super bullish.

In fact, I hoped other short sellers would follow in closing too.

Will AMC Squeeze Based On The Current SI?

AMC Short Interest October

AMC’s current short interest as of the date of this publication is 16.39%.

You can keep tabs on the short interest update here where I update it daily from Ortex so you don’t have to buy it.

AMC’s current short interest by definition is considered to be extremely high.

There is more than enough juice to get some serious price action out of AMC with this data.

And of course, if more shorts begin taking positions in AMC then the short interest percentage will continue to go up.

Otherwise, we can expect it to stay the same if they continue to hold, or decrease even if very small short positions are indeed being closed.

With AMC’s short interest slowly going down and an incredible amount of short shares being borrowed, I’m curious whether their exit strategy is to heavily short the stock while closing smaller short positions.

You can see how many short shares are being borrowed daily via. StonkOTracker.

Tinfoil hat on but I can see a strategy where the amount of overleveraged shorting is countering any small short covering.

Even then, this scenario is just speculation to be quite frank.

If you have any idea why the short interest is slowly going down I’d love to hear your thoughts in the comment section below.

I’m confident others would like to as well.

A Short Squeeze Requires Apes To Play Offense

I just published an article on what will trigger AMC to short squeeze.

If you have not read it I strongly suggest you do so.

In short, heavy volume and buying pressure is what initiated strong price movement back in January and this past June.

The community has set a new bottom for AMC in the mid to high $30 levels.

Holding will merely sustain the stock there, and low volume will not create momentum.

If the AMC community is to squeeze shorts from their positions, momentum will be the number one factor to creating another runup before the end of this year.

Could an even bigger third wave shake bigger short sellers?

I absolutely think so.

The next runup would force new shorts to close at a higher price then the previous wave of short sellers did.

Again, this is based on what the short interest data and price action have reflected.

We’ve raised the bottom during every runup, we’ve raised the market cap, and we’ve raised the all-time high.

There’s no doubt in my mind we can finish the mission through continuous buying pressure.

What About Synthetic Share Covering?

Unfortunately, there’s no way of identifying the process of synthetic share covering.

The safest way to track this short squeeze play is through the data that is provided, such as the short interest data.

And although at times it may be skewed due to being self-reported, it’s one way of tracking the information.

Synthetics shares are one of those things that regulators have been turning their heads on.

While the community is aware of them and acknowledges the use of synthetics, I find it’s counterintuitive for us to rely on information that is not being publicized as precisely.

Especially if we are to make big money from this short squeeze trade.

Be open to it, dig deeper to fuel your conviction, but also have a plan and be prepared for anything.

Stay true to your conviction, and make sure you make an awesome trade as shorts begin to cover.

How High Will AMC Go?

At this point, the short interest percentage is our fuel.

We cannot predict exact numbers based on the data available.

However, the data does show us that with enough applied pressure, AMC’s share price will skyrocket.

Ladies and gentlemen, there’s no way you cannot make money from this play.

It will be up to the community as a whole to be engaged, and continue playing offense.

In a war of mental tug-a-war, this third wave could be our grand win.

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4 Comments

  1. ZZZman

    Not sure if you have addressed Cohodes Plan and if not, have you looked into it? It seems like it worked to expose the fuckery and the sysths instantly. Any thoughts?

  2. Felix

    “There’s no way you cannot make money from this play.” … that’s a bold statement in the stock game (I like it). I figured this myself but also wonder what’s the worst case scenario? No squeeze? Or if you theoretically miss the squeeze the stock will most likely only fall back to a healthy mid $30 range, no? Would love to hear your take on this.

  3. Max Power

    My concern with the “as shorts begin to cover, buying pressure will increase the price” belief is the dark pool abuse effect on price. We’ve all watched on many days as where the buy side far outweighed the sell side yet the price went down. That would be an odd day on most stocks but it’s become the norm with AMC. Without the SEC ending the flagrant abuse of dark pools, they may be able to slip in and out of short positions without moving the price too much indefinitely.

    • Garrett Bauman

      Frank can you explain how on Friday AMC was down about 8% however, all of the AMC out of the money calls were up including the 11/19 $95 call that was up 54% How is this possible??

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