ANATOMY OF A SHORT SQUEEZE

What causes stocks to go squeeze higher? I can enlighten you into the sentiment of money managers and how they are scared to death of being caught in an epic run, like NFLX or more recently TSLA. Valuation is unimportant in the immediate term. All that matters is fear and greed.

Are the shorts fearful of the stock going higher and are the longs greedy? If so, that stock might be setting up for a monstrous run.

I’ve been studying correlations all of my life. I like to know why things happen. Sometimes they’re random: but most of the time they’re by design. There are certain traits that are common in all short squeezes, none more than shares in the float. If the stock doesn’t have full institutional interest, like NFLX, CMG or GMCR, there must be a small amount of shares in the float in order to get the stock going–preferably under 20 million.

Of those shares, I like to monitor stocks that have at least 10% of its shares sold short. Due to liquidity concerns, I am looking for stocks that trade at least 100k shares per day. And, one of the most important factors is the “pain threshold.” If the stock hasn’t been moving higher, there is little incentive for the shorts to cover. You want to look for names that are up more than 10% over the past month.

Now we get to the proprietary stuff.

Since hundreds of you are now under a free trial membership of The PPT, you can view the screen I am about to reveal. It finds stocks that have jumped by more than 10% in its “Daily Hybrid” score, which is a ranking mechanism that combines both technicals and fundamentals to get a daily read out. When the technicals explode during a given day, which is decidedly different from the prior day, the Daily Hybrid score will spike.

I’ve studied thousands of short squeezes and none of them start without a large jump in daily hybrid.

A perfect example of what I just described lies in the share price action in ESI. Here is a recent history of the Daily Hybrid.

Had you bought the stock based on the upgrade to buy on that 40%+ hybrid change, you would’ve been long under $19 with the stock now trading above $25.

The last part of the puzzle is technical ranking. The technical scores must reach a minimum of 2 on a scale of 5, with 5 being the strongest.

Here are the results:

Since tomorrow is the last day of your trial, take advantage of what I am giving to you now and view this screen for more results tomorrow. Since it’s dependent on daily hybrid movers, the population of stocks will change daily.

This is what The PPT is all about, finding an edge in the market by taking all of the data available to us and deciphering it via the power of a predictive algorithm. There are many aspects to the tool. In no way is it one dimensional. But if I had to isolate just one aspect of the tool that I find to be most useful, this is it.

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