If you haven’t heard, Gamestop is back running the retail world again. Well, not really, but the stock has crossed all time highs, mostly due to a favorable short squeeze. A short squeeze is when people that have been shorting a stock are suffering a loss, and are now forced to buy the shares they borrowed when shorting. If you are unfamiliar with shorting stocks, Investopedia provides a very good video and explanation of it if you click here*. In turn, this drives the sorted stock higher, in the opposite direction of what the short seller wanted. When this is combined with some positive news, heavily shorted stocks can pump out 20% days very easily, and even more the day after.
How to find these stocks you may ask? It is best to look for stocks with a large amount of short interest and a high float. This information can be found on various sites such as Yahoo Finance and others, however the site below lists out the best short interest stocks, all you have to do is research one and pick which is the best to play!
Often times stocks that are heavily shorted do not have a lot going for them in a positive direction. Investing in these stocks long term may not be the best idea, as the squeeze could be the stocks last chance. Catch the squeeze and get out, unless you believe the stock has begun a complete reversal, which is not very unlikely in today’s market.
.*Click the gray skip button in the top right to access the links