A Short Squeeze Request
This week, I received a request on Twitter to discuss a potential short squeeze ticker on earnings. I took a look at my Earnings Watchlist and checked out these tickers one by one, looking for my favorite short squeeze criteria.
Check out the list below:
Get ready for a busy #earnings week!$ANET $NXPI $MAR $UBER $LDOS $PFE $AMD $F $CZR $SBUX $CLX $SPWR $GNRC $WING $Z $PSTG $UPWK $ZTS $SHAk $DASH $CVNA $DKNG $SQ $AMC
Which ones do you most want to trade?#stockmarket #trading #options pic.twitter.com/s1vlmDo3Hf
— Danielle Shay (@traderDanielle) April 30, 2023
Wingstop is reporting earnings on Wednesday morning. This stock fits my criteria for a potential earnings-driven short squeeze.
It has a bullish technical pattern, near all-time highs, plus explosive EPS reactions several quarters in a row. The expected market maker move over earnings would also bring it to a new high.
Short sellers hate when stocks break to a new, recent high or a new all-time high. Those are the spots where they throw in the towel. This is especially true if this occurs over an earnings report, where the move may be a major gap higher that really stings.
Check out the video to learn more about this setup:
Control Your Risk
Now, I was also asked why I haven’t been doing short squeezes very often lately. There are a few reasons.
First of all, there are many more of them when the market is near all-time highs. Of course, that is not the current situation.
There are also a lot more of them when expectations are terrible, but the macroeconomic situation for the specific ticker(s) in question is strong. This is not really the case, either.
However, right now, we do have a ‘better than feared’ earnings season on our hands, and we also have pockets of strength.
The fast food stocks have been on fire lately, so even though they are a bit unique (and also, not normally the kind of stocks I look for for short squeezes), they do fit my criteria!
So, I haven’t taken many short squeezes lately because the market conditions aren’t ripe for them. But there are still a few here and there! The most important thing traders can do when taking on these very risky setups is control risk.
As mentioned in the video, the best way to control risk in these situations is to wait until after earnings and only jump on and ride the squeeze if it happens. That way, if it doesn’t trigger because earnings don’t impress, you don’t have capital at risk. Of course, that also means if it does work, you’ll be late. Pick your poison! But, live to trade another day.
One Final Pick
Another major short-squeeze candidate for this week is AMC. This doesn’t fit all of my other criteria, but it is AMC, and it has 26% short float! And, I know my friend Charles Payne is a big fan! Maybe we’ll discuss it next week.
So, are you watching or trading any short squeezes this week? Let me know on Twitter. If you have any other requests, send them my way, and maybe I’ll make them into a video!
Which trades am I taking this earnings season? Get access to my ongoing market analysis and trade alerts in the Simpler Options Gold room! Start a 30-day $7 trial here.