The best short squeezes happen when sentiment is thoroughly washed out, and it's difficult to picture a scenario where things can get worse.
This is the playbook we've followed for some of our best trades this cycle. Just look at how we nailed the bottoms in Carvana and Coinbase in late 2022.
We think Walgreens Boots Alliance is setting up for a similar face-ripping rally like those mentioned above, and here's why:
Walgreens Boots Alliance was added to the Dow Jones Industrial Average (DJIA) in 2018 and replaced General Electric. Less than 6 years later and over 60% lower, the eggheads at S&P Dow Jones Indices decided to give WBA the boot.
This removal coincided with the resolution of a multi-decade distribution pattern and an additional 60% downside in the following months.
Last week, the WSJ reported that Walgreens is in talks to sell itself to a private equity shop. With over 14% short interest and a 4x days-to-cover ratio, we're betting this news was the catalyst to spark a short squeeze, and it's just getting started.
Here's how we're playing it:
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