How To Find Short Squeeze Stocks

January 2021 kicked off a whole new way of looking at the stock market. Over a dozen failing stocks that were heavily shorted by institutional investors made huge gains as a Reddit group called WallStreetBets fueled retail investor interest in an organized short squeeze.

You saw the headlines in the media, but do you know how to find short squeeze stocks?

It’s not just random – savvy WSB traders are targeting specific investments that have more stocks shorted than available. It opens an infinite money glitch that makes average people millionaires while costing hedge funds billions.

Here we explain what a short squeeze is, how it works, why it’s happening, and which stocks to check out for the next short squeeze mission.

What Is A Short Squeeze?

A short squeeze is a term that brings up the image of squeezing an orange to get juice. It’s a complicated investment strategy that can only work when major money is in play.

Short selling is a bet that the price of a given security will decline. This means you borrow 100 shares from your broker and sell them at today’s price. In time as the stock goes lower you can buy to close the position at a profit.

So, as time goes on, short sellers earn money holding a short option while the stock goes down but you have to pay a borrowing cost for the privilege. It’s commonly used by hedge funds to earn money on failing companies, but it has associated risk of the stock price actually going up against expectations.

What Reddit’s WallStreetBets did is find the companies with the highest short interest as a percentage of the float (or shares available to trade). Some of these companies have more shares shorted than even exists. This opened the door for a monumental short squeeze, where investors pump money into a stock to raise its price.

As the price of the stock goes up, short sellers are forced to buy shares at a higher price to cover their short positions. Because there’s no upper limit to how a stock price can go, it becomes highly risky for those short because buyers can continue driving a price higher while squeezing money out of the short sellers.

This coordinated strategy is what caused all the media hype in January 2021, and it spread across over nearly two dozen investments. Here are six stocks that fit the bill for a short squeeze.

GameStop Short Squeeze Was Historic

GameStop Corp (NYSE:GME) is a long-standing new and used video game retailer that sparked the Reddit vs hedge funds short squeeze on January 12, 2021. At the time, shares were trading under $20.00 per share, with over 150 percent of existing shares shorted.

By January 14th, they doubled to $40.00, and on January 27, shares peaked at $483.00 before Robinhood shut down trading on the 28th. Things soon picked back up as an epic battle between the collective buyers and institutional short sellers took place.

The U.S. Securities and Exchange Commission (SEC) announced on January 29 it was watching the market closely because of the situation. It’s not the first time that Robinhood had to deal with the SEC; it was charged with misleading customers in December 2020.

Now, it’s the company’s relationship with Citadel Capital that is under the microscope. The firm is one of three that executes trades for the platform and also contributed to the $3 billion bailout of major GME short seller Melvin Capital two days prior to the trading shutdown.

GameStop will remain the mascot for this run on Wall Street, but it’s not the only one. There are a lot of struggling businesses that got shorted by major funds.

AMC Networks Or AMC Entertainment?

Theater chain AMC Entertainment Holdings (NYSE:AMC) got caught up in the frenzy and went from $2 per share to $20.00 per share in a two-week period. From there, it became the new entry-level battleground for the short squeeze.

Major trading platforms like Fidelity and TD Ameritrade joined Robinhood by January 29 to halt fractional trading in GME and other short-squeezed stocks to prevent further retail buy-in. However, AMC’s comparably low share price and $1.58 billion of short interest made it a popular short squeeze stock.

Meanwhile, AMC Networks Inc (NASDAQ:AMCX) also had short sellers target it. But the unrelated company is affected primarily because it shares a common name with its theater namesake company.

Koss Blew Up 12x On Speculative Short Squeeze

Koss Corporation (NASDAQ:KOSS) was not short squeezed in the same way as others companies.

In fact, it only had a relatively shares shorted at the start of 2021. KOSS share price is simply caught up in the frenzy, and there’s little data to support its rising price beyond speculative trading.

The stock traded for under $5.00 in the lead-up to the short squeeze but popped to over $60.00 per share.

Dillard’s Popped Higher For Almost 100% Gain

Dillard’s, Inc. (NYSE:DDS) is a struggling clothing retailer attached to the dying mall industry.

It was trading around $20.00 during the pandemic, before rising to the $50.00 range by the 2020 holiday season. It had a 6 percent short ratio as many investors believed it would fail to meet holiday season earnings expectations.

The stock doubled to $100.00 before settling just under in the $80.00-$90.00 range in the last week of January.

Bed Bath & Beyond, BlackBerry Short Stock Targets

Bed Bath & Beyond Inc (NASDAQ:BBBY) and BlackBerry LTD (NYSE:BB) have similar stock symbols and a similar effect from the so-called “Reddit mob”. BBBY traded under $20 per share, while BB traded under $10 per share heading into the short squeeze mania.

Both reached highs on January 27 but failed to eclipse those levels thereafter. This could make them prime targets for new shorts or another squeeze.

Nokia Popped Until Robinhood Restricted Buyers

Nokia Oyj (NYSE:NOK) lost its shine to the iPhone, and it’s nowhere near its 1990s and 2000s heyday when it was the belle of the ball. But the company did jump from $4.00 to $6.00 during the initial short squeeze blitz as buyers went on the hunt for “the next Gamestop”.

Robinhood’s temporary ban stopped the momentum, but this struggling retailer could get another surprise boost if this movement gains momentum.

These stocks represent just a small portion of the bigger market. A struggling stock should only theoretically have its entire float shorted. Anything above 40-50% short interest is a sign that something troubling may be going on.

The Reddit crowd may move on to a new target, and they may stay in GameStop. Even Dogecoin experienced exponential gains in January. It’s a whole new economy, and we all need to learn to adjust.

The bottom line is a company with positive fundamentals but vast short interest as a % of float is a prime short squeeze stock.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.