AMC’s high short interest is one of the biggest confirmations AMC Entertainment stock can squeeze again.
Of course, there’s the second component which will trigger it, and that’s volume.
We’ve seen spikes in AMC’s share price during heavy volume days, something we saw on a weekly basis before AMC reached its all-time high of $72 per share last year.
Retail investors bombarded the stock market and fueled massive rallies through heavy buying pressure.
AMC might have the short interest it needs to rip again, but does it have the liquidity it needs from retail investors?
It certainly has the investors.
Let’s discuss it.
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AMC Short Interest Today
Fintel is reporting AMC’s short interest today at 19.76%.
Other platforms are reporting AMC’s short interest at 20%; so, we have an idea of where it’s rounded at.
This high short interest is quite risky for short sellers as any major rebound could put bets against the movie theatre chain in significant losses.
While it made sense for institutions to go short when AMC’s share price began dropping after its peak, AMC has hit strong levels of support today, making it ideal for buyers to step in.
Institutions may also begin to buy back in at current levels, very well knowing an AMC short squeeze is possible.
AMC’s short interest today is around the same as it was prior to the massive surge from $14 to $72 per share.
This means those betting on AMC to squeeze this year already have one major component checked off.
Big players closing their short positions in AMC may trigger big price runup at any moment.
They just have to decide the tide is turning against their position for retail to see this.
Volume Forced Big Price Action Last Year
Average volume this year for AMC Entertainment stock has come down significantly from last year’s bull market.
But this is expected as massive selloffs occur in a bear market and investor confidence subsides momentarily.
Soon institutions along with retail investors combined will begin to pick the markets back up.
And with it, turn the tide against short sellers.
The market will experience major squeezes, not just from AMC, but from various shorted stocks too.
Heavy buying pressure is the key to successfully trigger a short squeeze in the market.
AMC and GameStop proved that last year when massive crowds of retail investors began to buy shares of both companies in heavy volumes over a period of months.
If you missed last year’s momentum waive, it’s possible very soon we may see what could be the last time an event like this occurs again.
But of course, this will all depend on investor sentiment.
Because if there are no investors in AMC, then there is no volume.
And if there is no volume, there’s no tide to turn against short sellers.
Short Borrow Fee Rises
AMC’s short borrow fee rate has risen substantially compared to earlier this year.
The short borrow fee rate is currently at 44.30% compared to 1% in early 2022.
This is the fee hedge funds pay annually to borrow shares to short AMC stock.
Last week the short borrow fee had increased to 96.30%!
This means it’s becoming less convenient to borrow shares at the moment; a risk headstrong short sellers must currently face.
Now it’s costing more than ever to short AMC stock and it’s also riskier than it was prior to this year’s bear market.
Bear markets usually only last about a year compared to bull markets who tend to make it to almost 4 years.
At some point, a reversal is imminent, and short sellers who fail to close their positions while they still can, will be caught in a massive tide.
An AMC short squeeze is a ticking timebomb, and unless stocks can drop forever, it’s one you cannot disarm.
It’s bound to go off.
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