How to Predict a Stock Short Squeeze (UPDATED 2021) (2024)

Our strategy for predicting this is relatively simple. It won't find every short squeeze on the market, but it will help you find some with good odds of success.

Step 1: Find a stock with high short interest

Short interest is the number of shares that are currently short in the market. If a stock has 1 million shares in its float and 150,000 shares short, its short interest % would be 15% of the float. For us, a stock with a short interest of over 10% is considered to be a good candidate for a squeeze. Some people also refer to short interest as a percentage of the amount of shares outstanding, but we prefer to use the float.

You can find short interest data on various websites such as finviz.com, Yahoo Finance, shortsqueeze.com, ortex.com, and others.

Another good site for finding highly shorted stocks ishighshortinterest.com.

Here's an example of what short interest would look like on Yahoo Finance under the "statistics" of a particular stock.

Above is a picture of a screener you can use to find stocks with high short interest. Clicking on the picture will take you directly to the screener. But if you want to set it yourself, all you have to do is go to go Finviz's screener, and screen for "Float short over 10%" as shown in the picture. You can also set it above 10%, or combine it with other criteria such as relative volume, but this is just an example.

Sometimes Finviz will be missing a few stocks though, which is why it's a good idea to check multiple websites like the other ones we mentioned above.

How to find LIVE short interest data:

If you're a serious trader and need LIVE short interest data as well as lots of other useful stock info, you can use ortex.com. Ortex is not free, but if you want good data, you can't always get it for free (We are NOT affiliated with Ortex).

Below is an example of how Ortex shows live short interest data. As of May 27, 2021, AMC's live short interest as a percentage of free float is 17.16%. You can also screen stocks by short interest. This is just a small portion of available data on Ortex and we think the platform is worth checking out!

Step 2: Identify a Good Chart Pattern

This step is sometimes easier said than done. What one person thinks is a good chart, another person may think the opposite. We look for classic candlestick chart patterns such as triangles (descending, ascending, symmetrical), bull flags/pennants, cup & handles, inverse head & shoulders,engulfing candles, and more. Here's an example of what we look for.

Above is a chart of Virgin Galactic Holdings Stock (Ticker: SPCE). The pattern that we drew there via the two trend lines is an example of an ascending triangle pattern. An ascending triangle is when the top line of the resistance is relatively flat, and the support line is coming up diagonally. This creates a range for the stock that gets tighter and tighter until it breaks out again.

​There was also a bullish engulfing candle just before the move. Click

hereto read about how we trade engulfing candles.Note: Chart patterns should be combined with volume analysis for confirmation.

Step 3: Combine Volume Analysis With Chart Analysis For Confirmation

We wrote an article explaining volume analysis in detail, which you can read about

here, but we'll briefly explain anyways.

As you can see in the chart above, the range was getting tighter before breaking out. We also noted the volume patterns prior to the breakout. The stock was on a nice uptrend prior to consolidating into the triangle. As the stock was running up before the triangle formed, the volume was relatively high, rising, all on green days.

When it started to pull back, the volume began to drop off as you can see indicated in the chart. The consolidation period was on low volume which is exactly what you want. A low volume pull back/consolidation shows that the selling pressure is most likely some profit taking rather than the beginning of a big sell off.

As the consolidation was coming to an end, the volume on green days was increasing, which is a sign of accumulation. The first buy signal here was a bullish engulfing candle that formed right at the ascending trend line, combined with slightly higher volume that day. Buying on that day would be buying on anticipation of a short squeeze.

​The next day, the stock actually broke out of the range confirming the short squeeze. This was combined with even higher volume than the previous day AND the stock closed near the high of day which shows strength going into the close. That would have been another buying point.

Luckin Coffee (LK): On June 2, we tweeted a short squeeze prediction for Luckin Coffee's stock.

​Here's the tweet prediction:

​The stock blew past our initial target very quickly. This was a result of high short interest, and a breakout of a tightening range that was displaying higher volume on up days.

Tupperware Brands (TUP): Another stock we predicted a short squeeze in was TUP.

Here's the tweet prediction:

​TUP formed an inverse head & shoulders pattern which is another classic bullish candlestick pattern. What made it a high odds trade was how the volume since around March had almost always been higher on up days (the black volume bars). The red volume bars were generally lower. This showed big accumulation in the stock, combined with a bullish candlestick pattern, it was ready to go.

Here's the result:

​TUP hit $4 that same day. Then, a few days passed and we tweeted our new target of $4.40, which also proceeded to be reached the very next day. The $4.40 prediction in the follow up tweet was made because of the consolidation on low relative volume, followed by a big up candle with bigger volume (the most recent candle in the picture).

Overstock (OSTK): One more stock just to prove a point. We predicted that OSTK would hit $21.

Here's the tweet prediction:

Why we longed OSTK: Again, good short interest, good volume patterns, and a good chart pattern. OSTK bounced off the 20EMA with a big engulfing candle on heavier volume than the few days prior. The 20EMA was an important support zone in this scenario as OSTK was a stock with lots of momentum. For more info about why we used the 20EMA, check out this comprehensive blog post we wrote about swing trading momentum stocks, or our moving average article as it may help you understand this trade better.

In terms of the chart pattern itself, OSTK was a symmetrical triangle breakout. Here's a chart with notes in it below:

​A charting platform that we would recommend for serious traders isTrendSpider(we use it often, along with a few other platforms).

TrendSpider is a top-tier charting platform where traders can put their technical analysis skills to work. It offers automated technical analysis tools, dynamic price alerts, back testing, 1-on-1 training sessions for those who need extra help, and more. A very unique tool that TrendSpider has is ​​Raindrop Charts, which can give you a great edge with your trading.

Sign up through this link and use the coupon code​ TS10 to get 10% off ANY TrendSpider plan for 12 months.

Read more: