The Short Squeeze

[CanOz]

I'm having one system coded up at the moment and i have a little time to play with a discretionary system that I've been wanting to research. I though it might be interesting to post a few simulated trades here and see what we can discover.

The theory behind this system is too look for stocks (US) with high short interest and patterns that are setting up for breakouts. I have a subscription for a site that ranks stocks by the potential for a short squeeze.

I have to step out for the arvo but when i come back i will out line the basics of the system and then post a few charts of some US Stocks with patterns setting up.

I'll watch them for a week or so and we can see if we can develop a rule based system for trading short squeezes.

Cheers,


CanOz

 

[Starcraftmazter]

What's the correlation between high short-interest and patterns which predict a breakout (I'm assuming you're talking T/A)? Would they not be contradictory signals?

Or would it be along the lines of, if such a stock breaks out, and all the short-sellers have to panic buy to cover their shorts thus propelling the stock upwards violently?

 

[sammy84]

Or would it be along the lines of, if such a stock breaks out, and all the short-sellers have to panic buy to cover their shorts thus propelling the stock upwards violently?

That is generally what a short squeeze is.

Canaussieuck- like the idea. Should capture some nice short term strong swings. I imagine divergence patterns would work best to cause the squeeze. Watching with interest.

 

[CanOz]

What's the correlation between high short-interest and patterns which predict a breakout (I'm assuming you're talking T/A)? Would they not be contradictory signals?

Or would it be along the lines of, if such a stock breaks out, and all the short-sellers have to panic buy to cover their shorts thus propelling the stock upwards violently?

Not looking to predict anything at all, just looking to anticipate a possibility and be in a position to benefit from the 'run for exits'. That's the whole point of trading a short squeeze. The patterns will only offer a place to get in and place an an order, with a corresponding bracket order.

CanOz

 

[Starcraftmazter]

Definitely sounds interesting. Are you doing this for US because you can easily get data about the short positions on every stock?

 

[CanOz]

Definitely sounds interesting. Are you doing this for US because you can easily get data about the short positions on every stock?

That, and a larger selection of stocks that can be shorted. Realistically the US is the only market covered by my data provider.

CanOz

 

[CanOz]

Ok, so here are a few stocks that are ranked the highest in terms of squeeze potential. This takes into account the days to cover as well as the short interest. They claim to use a proprietary algorithm to come up with the candidates. All we want to know is if there is enough volume to get us in and out with a relatively small position, and where to get in and out.

I'll post a bunch to watch and then we'll have to weed a few out as they're a bit thin to trade...although one would think a squeeze is going to generate some activity and perhaps a bigger jump in the price if its quite illiquid...we'll see.

Anyway all we can do for now is post the charts and see what happens...if anything.

Its an open experiment...

The website, for those interested is here.

Cheers,


CanOz

 

[CanOz]

Here are the last four.

 

[CanOz]

Not allot of action on our squeeze candidates. I guess these things may take a while to develop.

Here's a few that have moved.

CanOz

 

[CanOz]

Seems this is the only stock we were watching that got caught in a short squeeze. The declining market has certainly favored the shorts lately. Perhaps I'll revisit in a ranging or rising market to see if the short squeeze theory can be applied with better results.

You would only want to hold these a short time, but notice how the candle were big and closed on their highs, the shorts running to cover, the 'squeeze'.

Cheers,


CanOz