From the Desk of Steve Strazza @Sstrazza
The animal spirits have returned to equity markets near you!
How do we know?
Take a look around...
Biotechs are putting the finishing touches on a massive base, suggesting a new bull market for these stocks is underway.
Speculative growth indexes like the suite of ARK ETFs are completing (or have already completed) trend reversals.
The Renaissance IPO fund is at its highest level since early 2022.
A growing list of emerging markets countries (outside of China) are making new highs.
Cryptocurrencies are mooning every night while we're sleeping.
Participation is broadening to new groups like materials, and funds are flowing back into energy and financials again.
The most-hated and lowest-quality stocks in the market are catching a serious bid.
So, what do we do?
This is the optimal market environment for our Freshly Squeezed universe.
The idea behind this one is to find the stocks that bears are betting against the most and take the opposite side as they squeeze higher.
We've already witnessed a number of powerful short-covering rallies this year, and we expect plenty more in the coming weeks and months as momentum starts moving into these names.
Our scan is quite simple. It is designed to identify stocks with the highest short positions. When a stock is heavily shorted, incremental buyers are waiting in the wings to close out their bearish bets.
We love this, as new buyers are the one true catalyst for higher prices.
When shorts are proven wrong, they become buyers of the stock. Many times, as this happens, momentum comes into these names and fuels massive short-covering rallies.
For this reason, we pair short-interest data with short-term momentum overlays, as this combination is needed to spark the moves we're looking for.
Let’s take a look at what’s popping up on our radar right now and outline setups in some stocks we think investors can squeeze profits out of in the weeks and months ahead.
Our Freshly Squeezed table contains stocks that have a short interest greater than 15% and a market capitalization greater than $.5B. The universe is then sorted by 1-month change.
We also have tables sorted by highest short interest and another sorted by days-to-cover.
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