Equity short squeezes can come from an accumulation of mark-to-market losses and\or high stock borrow costs which eat up an unacceptable amount of expected Alpha. Looking primarily at the mark-to-market losses I have combed over the nearly 15 thousand domestic stocks with short interest to see which stocks are short squeeze candidates. In my analysis I am looking at stocks with over $100 million of total short interest to include only stocks where the short covering from a squeeze can materially affect stock prices. Below are the top ten stocks by market cap with the largest weekly mark-to-market % losses coupled with mark-to-market monthly % losses over -20%.
- Cloudflare Inc (NET) short selling has been active this month as 3.3 million shares were shorted as its stock price rose +142%. Shorts were looking for a pullback but are starting to lose steam as we saw 201 thousand shares of short covering over the last week, a -18% drop as its stock price rose 31%.
- Nio Inc ADR (NIO) shorts have been covering in size during the recent continuation of its rally. We saw 14 million shares covered over the last month, worth $394 million, most of the buy-to-covers occurred over the last week with 10.6 million shares covered as NIO’s stock price rose +31%.
- Peloton Interactive (PTON) short sellers have reversed course with 2 million shares shorted over the first three weeks of the last month but 885 thousand shares worth of short covering over the last week. With the stock up +60% over the last month it looks like the short squeeze has begun.
- Zoom Video Communications (ZM) short sellers have also reversed their sentiment with 3.4 million shares shorted over the first three weeks of the last month but 614 thousand shares worth of short covering over the last week. ZM shorts have been bloodied in 2020, down $4.5 billion in year-o-date mark-to-market losses. It looks like the squeeze is starting.
- Datadog Inc (DDOG) are taking a hit to the bottom line, down $797 million in year-to-date mark-to-market losses but are not curtailing their short selling activity yet. Shares shorted increased by 6.1 million shares, worth $687 million, over the last 30 days with 1.3 million executed over the last week. No squeeze yet, but with large losses shorts may start to re-evaluate their short thesis.
- Twilio Inc (TWLO) shorts had been covering some of their exposure but have been short selling recently. 340 thousand shares covered over the first three weeks of the last month have been partially offset with 83 thousand shares worth of short selling over the last week. Shorts must be looking for upcoming stock price weakness after its +44% gain over the last month. Shorts are down -$2.9 billion in year-to-date mark-to-market losses for the year so if TWLO’s stock price surges we should see a return to the short covering we saw earlier in the month.
- Avalara Inc (AVLR) shorts sellers have been shorting into its rally with no short squeeze in sight. Shares shorted has increased by +9.23% over the last 30 days and +75 thousand shares, or +2% over the last week as its stock price jumped +9%.
- Slack Technologies (WORK) is starting to see short covering in size after short selling earlier this month. Shorts have covered 2.0 million shares, worth $64 million over the last week, a decrease of shares shorted by -2.6% as its stock price rose +8.6%. Losses are once again starting to accumulate after shorts made back $342 million of their year-to-date losses in September. Shorts may be covering to realize some of their recent mark-to-market gains and exit this trade.
- Mercadolibre Inc (MELI) shorts have been squeezed for the last month with 265 thousand shares covered over the last 30 days, worth $333 million. Over the last 30 days shorts have cut their exposure by -12% as MELI’s stock price rose +22%. As long as MELI’s stock price continues to climb we should see the squeeze continuing and short interest to be range bound between $2.1 billion and $2.4 billion.
- Etsy Inc (ETSY) short sellers have incurred a third of their year-to-date mark-to-market losses over the last 30 days and short sellers have been trimming their exposure recently. Shorts have covered 1% of their shares shorted and if the rally since mid-September continues, we should see the squeeze tighten and more shorts buying-to-cover.
- JinkoSolar Holding Co (JKS) short covering has trailed off recently, they had bought-to-cover 1.4 million shares, worth $193 million, over the first three weeks of the last month but turned around and shorted 48 thousand shares over the last week. JKS’s stock price is up +186% over the last month, including +22% last week, and short sellers have been burned badly. We expect more of the $543 million of short interest to be covered if the stock continues its upward trajectory.
- Chart Industries (GTLS) has seen recent short selling as the +17% move over the last weeks has squeezed out some short sellers. Only 26 thousand shares have been covered, but the sudden price spike above its pre-Covid highs should drive out more shorts as they are now down $55 million in mark-to-market losses for the year and given up all of their March profits.
- Turning Point Therapeutics (TPTX) shorts had been shorting into TPTX’s two month rally, but the mounting short side mark-to-market losses are starting to squeeze out shorts with less conviction. Over the last week we saw 108 thousand shares covered, shares shorted decreased by -3% as its stock price rose +17%.
- Big Commerce Holding (BIGC) shorts are now in the red after being down -$197 million in mark-to-market losses over the last 30 days. Shorts are now down -$32 million in mark-to-market losses for the year and shorts will be looking to exit their trades as losses accumulate.
- Bed, Bath & Beyond (BBBY) shorts are getting squeezed harder than the oranges in the juicers you can find in aisle 3 in their stores. Shorts are down -$848 million in mark-to-market losses over the last 30 days and have covered 4.7 million shares, worth $117 million, over the that time period and 779 thousand shares over the last week. Shorts are now in the red for the year, down -$672 million in mark-to-market losses. Expect shorts to keep buying to cover and avoid more losses.
- Twist Bioscience (TWST) are getting squeezed out of their positions as the stock has rallied +62% over the last 30 days. Shorts have covered 232 thousand shares over the last 30 days, worth $23 million for a decrease of 5.25% in shares shorted.
- Amicus Therapeutics (FOLD) shorts have been covering their exposure steadily since February with 489 thousand shares covered over the last 30 days as its stock price rose +22%. Shares shorted are nearing their one year low of 29.69 million shares.
- Pacific Biosciences of California (PACB) stock price is up +96% over the last 30 days and less than 1% or 130 shares were covered over that period. Short covering accelerated over the last week with 245 thousand shares covered. Expect short covering to continue in size if PACB’s stock price keeps increasing at this accelerated rate.
- Livanova PLC (LIVN) shares shorted spiked in June and after two and a half months of gradual short covering we had seen a trend of short selling since mid-September. LIVN’s stock price rose +12.5% over the last week and shorts covered 8 thousand shares as they incurred $16 million in mark-to-market losses. Price strength should bring shares shorted levels back down to the 2.4 million share level.
- Springworks Therapeutics (SWTX) saw heavy short selling in the first three weeks of last month with shares shorted increasing by 734 thousand shares or +32%, worth $150 million, but last week we saw 198 thousand shares bought-to-cover as its stock price rose +13%. If SWTX’s share price continues to strengthen we should see continued short covering with total shares shorted dipping back down to the 2.0 to 2.2 million share mark we last saw in July\ August.
- Allscripts Healthcare Solutions (MDRX) short covering has slowed down recently with less than a $ million worth of buy-to-covers over the last week after three weeks when shares shorted decreased by -5%. Expect short covering to pick up if mark-to-market losses continue to increase and shorts start getting squeezed out of their positions.
- Jumia Technologies ADR (JMIA) short sellers had shorts over 1 million shares in the first three weeks of the last 30 days but we have seen 350 thousand shares worth of short covering over the last week as short sellers begin to exit their positions before they incur larger losses.
- Sleep Number Corp (SNBR) short sellers had been covering all year long but have paused in October. We may have reached the core level of short interest in the name and have shaken out most of the shorts with less conviction. Upward price pressure may be dependent on long buying and not short covering over the near term.
- At Home Group (HOME) short sellers have been covering in earnest since late May but since mid-September that trend has reversed with shares shorted up +41% over the last 30 days and +4 over the last week even as its stock price has been rising. It looks like shorts are looking for the stock to dip below the $20 level and back to the 15$ level we saw in late September.
- CEL-SCI Corp (CVM) short selling began to plateau in July after two months of strong short selling. Over the last 30 days we saw 437 thousand shares worth of short selling which may indicates some weary short sellers beginning to exit their positions as downside price pressure in the name has not materialized.
- Purple Innovation Inc (PRPL) shorts continue to be active with 859 thousand worth of short selling over the last 30 days and 374 thousand shares of short selling over the last week. We are seeing some of the 4.4 million shares shorted in 2020 starting to be unwound after incurring -$80 million of year-to-date mark-to-market losses.
- Dillards Inc (DDS) short sellers are still up +$138 million in year-to-date mark-to-market profits, +54% return, but have lost over -$120 million in mark-to-market losses since late September. Shorts are beginning to trim their positions and realize some of their mark-to-market profits with 189 thousand shares bought-to-cover over the last 30 days. If DDS’s stock price keeps increasing expect more shorts to get squeezed out of their position as they rush to realize profits before they evaporate.
- 1-800-Flowers.com (FLWS) shorts have been aggressively short selling since June but only have a +5.5% return to show for their actions. There has been slight short selling, 49 thousand shares covered, over the last week but the recent trend is still strong short selling, 706 thousand shares sold short, into price strength (+26%). FLWS shorts are down -76% in mark-to-market losses for the year, if FLWS’s stock price continues to rise and mark-to-market losses grow we expect more shorts to get squeezed out of their positions.
- Nautilus Inc (NTLS) short sellers have been crushed this year with the stock up +1237% for the year. But short selling has surprisingly been strong into the rally with 3.7 million shares shorted since the beginning of June. Shorts are down -$80 million in mark-to-market losses for the year but are not being shaken out of their positions. Additional short selling has flattened out over the last month and although there was a slight bit of net short covering over the last week, 97 thousand shares, short seem to be squeeze proof at the moment.
- WW International Inc (WW) short sellers were in cover-mode for the first three months of the year with 3.9 million shares covered, but since then there has been a slow and steady increase in short selling with 2.2 million shares shorted. The stock’s recent rally has squeezed some shorts out, with 132 thousand shares covered, and if the stock keeps moving upward the squeeze should shake out even more short sellers as they to realize some of the +34% of positive returns they have earned so far in 2020.
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The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.