From the Desk of Steve Strazza @Sstrazza
Despite some messy action from the broader market in recent months, risk appetite remains elevated.
How do we know?
The stocks that investors are betting against the most are making big moves… to the upside.
And we know just what to do in these environments.
We look to our freshly squeezed universe and find the most heavily shorted stocks. We wait for momentum to come into these names, and we ride them higher while the shorts get squeezed.
We got new short data recently, so let’s talk about how we’re playing it.
Our scan is quite simple. It is designed to identify stocks with the most aggressive short positions. When a stock is shorted, it means incremental buyers are waiting in the wings to close out their bearish bets.
We love this, as new buyers are the one true catalyst for higher prices.
When shorts are proven wrong, they become buyers of the stock. In many cases, this happens as momentum flows into these names and fuels massive short-covering rallies.
For this reason, we pair short-interest data with short-term momentum overlays, as this combination is needed to spark the moves we’re looking for.
Here’s the latest list:
Our Freshly Squeezed table contains stocks that have a short interest greater than 15% and a market capitalization greater than $500M. The universe is then sorted by 10-day stock price performance.
We also have tables sorted by highest short interest and another sorted by days-to-cover.
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