How to Profit From Reckless Short Sellers

Different market environments are conducive to certain scans and less so to others.

Coming off this perilous winter, strategies identifying short opportunities have been greatly rewarded. And, throughout the pandemic, it was the complete opposite.

Like we said in yesterday's note, half the battle is in understanding how to directionally position in the underlying trend. The simple fact of that matter is that many have been caught offside betting against names in substantial drawdowns.

Names like Coinbase, Marathon Digital, and, most recently, Silvergate have all sported notable short interest coming off this bear market.

Identifying this skew, we reintroduced our Freshly Squeezed scan. The idea is rather intuitive; we're simply looking for stocks that people are betting against. When a stock is heavily shorted, we know there are incremental buyers waiting in the wings.

As Strazza said in the latest Freshly Squeezed report,

We love this as new buyers are the one true catalyst for higher prices. When shorts are proven wrong, they have to buy their shares back to close out their positions. And when they do, and momentum starts moving higher in these shorted names, it is not uncommon for massive rallies to occur.  

ASC Premium Members can read the full report here.

One of the names we've monitored in recent weeks is Silvergate Capital $SI.