Potential Earnings Short Squeeze…

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:

Wingstop (WING)

Wingstop is reporting earnings on Wednesday morning. This stock fits my criteria for a potential earnings-driven short squeeze.

Why?

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.

 

Up Next...

NFLX: Taking Profits (A Follow Up)

Hey traders! Last week, I posted a bullish Netflix (NFLX) setup at Five Star Trader. At this point, this trade is making targets, and I’m taking profits. What does that look like? Well, Netflix has hit just below my price target of $730. My put credit spread, and my butterfly has two days remaining. One could … Read more

Read More

A Bullish Trade in Netflix (NFLX)

Relative Strength, Squeezes, and Earnings Netflix has been at the top of my radar for the past few months due to its trend and relative strength. This is primarily for trading only versus investments because I don’t invest in stocks at new all-time highs. With this ticker, I added some put credit spreads and bullish … Read more

Read More

The Post-Fed Break Out Continues…

Relative strength stocks continue to break out after the Fed cut rates. When semiconductors (SMH) break higher, along with Microsoft (MSFT), Amazon (AMZN), Netflix (NFLX), Meta (META), Tesla (TSLA), and Broadcom (AVGO), this relative strength is a bullish sign for continued upside price action. There’s also a difference between where traders and investors should focus. … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now
all-as-seen-on-logos